The Dow Jones Industrial Average continued to set record highs Tuesday, boosted by UnitedHealth’s strong results and growing confidence that the Federal Reserve will cut interest rates in September.
The blue-chip index Jones jumped 566 points, or 1.4%, to 40,782 in morning trading to build off Monday’s momentum.
The Nasdaq was flat, while S&P 500 was up 0.4%.
UnitedHealth Group jumped 4.3% following a second-quarter profit beat, lifting the blue-chip Dow and the S&P 500 Health Care index to all-time highs.
Among other corporate earnings, Bank of America jumped 3.6% after an upbeat net interest-income forecast and better-than-expected second-quarter profit, steering the S&P 500 Financials index to a record high.
Morgan Stanley fell 1% after its wealth management revenue missed estimates, while Charles Schwab slumped 7% after posting lower net income.
A Commerce Department report showed retail sales were unchanged in June, when they were expected to fall 0.3%, while retail sales minus automobiles jumped 0.4%, versus forecasts of a flat reading.
However, traders are fully pricing in a rate reduction by September, with the odds of a 25-basis-point cut standing at 93%, according to the CME’s FedWatch tool.
“Investors, at first, were likely disappointed because it might not assist in helping the Fed make a decision about cutting rates. But at the same time, it’s offering comfort that the US economy is not headed toward recession anytime soon,” said Sam Stovall, chief investment strategist, CFRA Research.
“The momentum trade will likely continue, especially with a broadening into the smaller cap companies within the US investor marketplace.”
The small-cap Russell 2000 index jumped 2% to its highest level since January 2022, as investors continue to move away from heavily weighted tech stocks, which have driven much of Wall Street’s rally this year.
Strong bets on a rate cut by the Federal Reserve in September and a second term for presidential candidate Donald Trump following an assassination attempt had prompted an upbeat start to the week for Wall Street.
However, Trump-linked stocks retreated after Monday’s rally, with Trump Media & Technology Group and software firm Phunware losing between 3% and 8%.
Markets read it as a dovish signal when Fed Chairman Jerome Powell said on Monday that the latest economic data “add(s) somewhat to confidence” that inflation was returning to the central bank’s 2% target.
Among top megacap movers, Nvidia was down 1.6%, while Amazon rose 1%.