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The Dow Jones rose more than 700 basis points on Tuesday.
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Small-cap stocks saw the biggest gain as bets on lower interest rates helped drive rotation to other parts of the market.
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Retail sales also encouraged investors, easing concerns about a decline in consumer spending.
U.S. stocks rose Tuesday as a bull market swept across broader corners of the market.
While the Dow Jones jumped 1.8% to a new record high, the Russell 2000, a gauge that focuses on small-cap companies, gained even more, up 3.5%.
The pivot to less popular corners of the stock market highlights a growing appetite for stocks that investors believe will outperform the market once the Federal Reserve starts cutting interest rates. Small-cap companies are often burdened with debt, and the sector has suffered amid rising interest rates.
But as the market grows more confident that interest rates will be cut in September, risk appetite is rising.
The Russell 2000’s performance is not unique: The past four sessions have seen the Russell outperform the Nasdaq by about 11 percentage points, something it hasn’t done in 13 years.
Wall Street is convinced that the Federal Reserve will ease interest rates this fall, after a weaker-than-expected inflation report in June.
On Tuesday, retail sales in June came in strong, easing concerns about an imminent decline in consumer demand. Excluding autos, sales rose 0.4%, versus estimates for a 0.1% increase.
“The economy is in very good shape,” said Bill Adams, chief economist at Comerica Bank.
“There are signs of weakness at the edges of the economy as lower- and middle-income consumers pull back, such as weaker spending on food services and places to drink in the first half of this year. But generous spending by wealthy consumers is keeping the economy as a whole moving forward,” he added.
Meanwhile, the second-quarter earnings season is helping to keep the market’s momentum going. On Tuesday, better-than-expected reports from Bank of America Corp. and industrial equipment maker Caterpillar Inc. helped post gains.
Here’s where U.S. stock indexes were at the close at 4 p.m. Tuesday:
Here’s what else happened today:
In commodities, bonds and cryptocurrencies:
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West Texas Intermediate Crude oil prices rose 0.42% to $80.83 a barrel. Brent crudeBrent crude, the global benchmark, fell 1.23% to $83.83 a barrel.
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gold Gold rose 1.82% to $2,466.5 an ounce.
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The yield on the 10-year US Treasury note fell six basis points to 4.164%.
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Bitcoin It remained essentially flat at $64,799.
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