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The Dow Jones rose more than 700 basis points on Tuesday.
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Small caps saw a stronger rally as rate cuts triggered a rotation into other parts of the market.
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Retail sales also boosted investors, easing fears of a slump in consumer spending.
US stocks soared on Tuesday as the bull market spread to larger parts of the market.
While the Dow Jones rose 1.8% to a new record, the Russell 2000, an index focused on small caps, posted an even bigger gain of 3.5%.
The rotation into less-favored corners of the stock market highlights growing demand for stocks that investors believe will outperform once the Federal Reserve starts cutting interest rates. Small-cap stocks tend to be more heavily leveraged, and the sector has struggled amid higher interest rates.
But as the market becomes increasingly confident about the possibility of a rate cut in September, risk appetite is increasing.
The Russell 2000’s performance isn’t a one-time feat either: Over the past four sessions, the Russell has outperformed the Nasdaq by nearly 11 percentage points. That hasn’t happened in 13 years.
Wall Street is confident the Fed will cut rates this fall after releasing a lower-than-expected inflation report in June.
Retail sales were strong in June on Tuesday, easing concerns about a looming consumer downturn. Excluding autos, sales rose 0.4%, beating estimates for a 0.1% increase.
“The economy is in pretty good shape,” said Bill Adams, chief economist at Comerica Bank.
He added: “There are signs of softness around the edges where low- and middle-income consumers are pulling back, such as the weakness in spending in the hospitality and food service sectors in the first half of this year. But generous spending by affluent consumers is keeping the economy moving forward as a whole.”
At the same time, the second-quarter earnings season is helping to maintain market momentum. On Tuesday, reports that beat estimates helped Bank of America and industrial equipment company Caterpillar gain upside.
This was the position of the US indices at the closing bell on Tuesday at 4:00 p.m.:
Here’s what else happened today:
In commodities, bonds and crypto:
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West Texas Intermediate crude rose 0.42% to $80.83 a barrel. Brent crude, the international benchmark, fell 1.23% to $83.83 a barrel.
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Gold rose 1.82% to $2,466.5 an ounce.
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The 10-year US Treasury yield fell six basis points to 4.164%.
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Bitcoin remained virtually flat at $64,799.
Read the original article on Business Insider
