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Stock Market Today: Dow Jones Climbs 700 Points as Bets on Fed Rate Cut Grow
- The Dow Jones climbed more than 700 basis points on Tuesday.
- Small caps were the strongest gainers as bets on lower rates helped spur a rotation into other segments of the market.
- Retail sales also encouraged investors, easing fears of a decline in consumer spending.
U.S. stocks soared on Tuesday as the bull market spread to broader segments of the market.
While the Dow Jones jumped 1.8% to a new record, the Russell 2000, an index focused on small caps, posted an even sharper gain of 3.5%.
The rotation into less-popular parts of the stock market highlights a growing appetite for stocks that investors expect to outperform once the Federal Reserve begins cutting interest rates. Small caps are often more leveraged companies, and the sector has struggled in a higher interest rate environment.
But as the market becomes increasingly confident that a rate cut is possible in September, risk appetite is increasing.
Nor is the Russell 2000's performance an isolated feat: Over the past four trading sessions, the Russell has outperformed the Nasdaq by nearly 11 percentage points. That hasn't happened in 13 years.
Wall Street is increasingly convinced that the Fed will ease rates this fall, after the June inflation report came in weaker than expected.
June retail sales were solid on Tuesday, easing concerns about an imminent pullback in consumption. Excluding autos, sales rose 0.4%, versus estimates for a 0.1% gain.
“The economy is doing pretty well,” said Bill Adams, chief economist at Comerica Bank.
He added: “There are signs of weakness in areas where low- and middle-income consumers are retreating, such as weak spending in food services and beverage outlets in the first half of this year. But generous spending by affluent consumers is keeping the economy as a whole moving forward.”
Meanwhile, the second-quarter earnings season is helping to keep the market moving. On Tuesday, earnings that beat estimates lifted Bank of America and industrial equipment maker Caterpillar.
Here's where the U.S. indices stood at 4 p.m. Tuesday close:
Here's what else happened today:
In commodities, bonds and cryptocurrencies:
- West Texas Intermediate crude oil rose 0.42% to $80.83 a barrel. Brent, the international benchmark, fell 1.23% to $83.83 a barrel.
- Gold rose 1.82% to $2,466.5 an ounce.
- The 10-year Treasury yield fell six basis points to 4.164%.
- Bitcoin remained essentially flat at $64,799.
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