US Market: Dow Jones gains over 740 points, Russell 2000 small-cap index rise on rate cut bets

US Market News: Tuesday's record-breaking closing high for the Dow Jones Industrial Average and Wall Street stocks came from data supporting the belief that the US Federal Reserve is about to embark on its easing cycle, which will control inflation and prevent a recession, as per Reuters news report. In addition, the gold prices also reached a record high.

The Tuesday's advances for all three of the main US stock indexes were positive, although the tech-heavy Nasdaq saw its gains restrained by weaker megacap growth firms, including Nvidia Corp and Microsoft Corp.

As investors shifted their attention to more inexpensive segments of the market, Dow transportation stocks outpaced the overall indices, recording their largest one-day percentage increase since November and ending at its highest level since August 2023, according to a Reuters report.

The Dow Jones Industrial Average climbed 1.85%, or 742.76 points, to 40,954.48, the S&P 500 rose 0.6%, or 35.98 points, to 5,667.2, and the Nasdaq Composite added 0.2%, or 36.77 points, to 18,509.34.

Small caps with a focus on the economy continued to rise. The Russell 2000 is on its longest winning streak since April 2000 after posting gains of more than 1% for the fifth day in a row. According to Reuters news report, the index increased by 3.5% and reached its highest point since January 2022.

Stronger-than-expected retail sales were one of the economic indicators released by the Commerce Department on Tuesday. The fact that consumer spending, which makes up over 70% of the US economy, has remained strong in the face of tight monetary policy allayed concerns that rising interest rates would cause the US to enter a recession.

Moreover, the season for second-quarter results was heating up. Following the release of its earnings that above expectations, UnitedHealth Group surged by 6.5%, causing both the blue-chip Dow and the S&P 500 Health Care index to reach record highs.

According to Reuters news report, underwriting fees increased as the capital markets rebounded, and Bank of America's second-quarter earnings above forecasts. Additionally, the second-biggest American bank raised its net interest income forecast, which caused a 5.3% increase in share price.

Despite the investment bank's dismal wealth management revenue reports, Morgan Stanley saw a 0.9% increase.

Due to recent remarks made by Federal Reserve officials, there is growing expectation that the US will decrease interest rates in September, which caused gold prices to soar to an all-time high on Wednesday.

As of 01:58 GMT, spot gold was up 0.5% at $2,479.75 per ounce, having earlier in the session reached a new high of $2,481.09. To $2,482.00, U.S. gold futures increased by 0.6%.

The Federal Reserve Chair Jerome Powell hinted that rate cut could not be far off when he stated on Monday that recent inflation data "add somewhat to confidence" that the rate of price increases is returning to the Fed's objective in a sustainable way.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.