Stock trader Peter Tuchman, left, works on the floor of the New York Stock Exchange.
Spencer Platt | Getty Images
The Dow Jones Industrial Average advanced to new highs on Tuesday, as the market rally continued broadening out beyond big technology names on hopes of forthcoming interest rate cuts.
The Dow surged by 611 points, or 1.5%, hitting a new intraday record. The S&P 500 added 0.5%, while the Nasdaq Composite flickered around its flatline.
Bank of America and Morgan Stanley jumped more than 5% and 2%, respectively, after earnings came in ahead of analyst forecasts. They’re the latest household names to post quarterly financial results as the new reporting season kicks into gear.
The Dow, 1-day
Investors also continued rotating from mega-cap technology into small-cap stocks. While the former has seen monster gains amid optimism around artificial intelligence, the latter is a group viewed as a beneficiary of lower interest rates.
The small cap-focused Russell 2000 rose almost 2% and was on track for its fifth straight day of gains, while the technology-heavy Nasdaq wavered. Notably, AI darling Nvidia and software giant Microsoft each dropped more than 1%.
“There’s a lot of momentum behind this rotation trade from from big-cap tech into small caps and into the average stock,” said Ross Mayfield, investment strategist at Baird. “It’s a rotation, but it’s much more about the upside in the more cyclical sectors in the market than a referendum on AI’s long-term potential.”
This comes as hopes grow that the Federal Reserve will begin lowering interest rates without substantial weakening in the economy. Traders now see 100% odds of a decrease to the borrowing cost by September, according to the CME FedWatch tool.
Retail sales data offered the latest sign of this scenario, according to Quincy Krosby, chief global strategist for LPL Financial. June sales were unchanged, while economists polled by Dow Jones predicted a decline of 0.4%. Excluding autos, sales rose 0.4%, a larger gain than the 0.1% consensus forecast.
This data “should be positive for markets,” Krosby said. “Investors prefer the launch of a Fed easing cycle to begin with a still solid economic backdrop.”
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