Wall St advances as investors favor small caps over Big Tech; banks rally
By David French and Lisa Pauline Mattackal
(Reuters) -Wall Street's three benchmark indexes rose on Wednesday, on track to recoup some of the previous session's losses as gains in small-cap companies and financial stocks buoyed by strong earnings outweighed declines in technology megacaps.
Morgan Stanley jumped 6.5% to a record high after it joined peers such as JPMorgan Chase (NYSE:JPM ) in reporting strong profits following a sharp increase in investment banking revenue.
Larger regional banks, traditionally less reliant on investment banking activities, were also higher. First Horizon (NYSE:FHN ) gained 3.8% and U.S. Bancorp rose 4.7% after reporting third-quarter results.
The broader Banks index was up 1.1% and an index tracking regional banks rose 2%.
Outside of the banks, investor attention was seen in small-cap stocks, with some rotation from expensive tech megacaps to less expensive sectors.
Both the Russell 2000 index, which advanced 1.6%, and the S&P Small Cap 600, which climbed 1.5%, were on course for their highest finishes since November 2021.
"There has been a broadening out in terms of participation... in the small caps versus the large caps," said Zachary Hill, head of portfolio management at Horizon Investments.
"That's a positive sign, some of it having to do with interest rates coming down and some relief on the balance sheet side for more highly levered smaller-cap companies."
Among the big-tech names which dragged, Apple (NASDAQ:AAPL ) lost 1.3% after hitting a record high in the previous session. Meanwhile, Microsoft (NASDAQ:MSFT ) was off 0.9% and Meta Platforms (NASDAQ:META ) fell 1.9%.
Chip heavyweight Nvidia (NASDAQ:NVDA ), however, bucked the megacap slide, rising 3.4% after slumping nearly 5% in the previous session.
Gains in the so-called Magnificent Seven group of tech stocks have driven most of Wall Street's record-breaking run this year. However, with valuations increasingly stretched and a brighter economic outlook, investors have been seeking opportunities elsewhere.
"Valuations for (the largest tech stocks) are somewhat lofty. When you see the daily gyrations in the market, it's based primarily on how the earnings situation looks for those firms," said Scott Welch, chief investment officer at Certuity.
Utilities led sectoral gains, up 1.7%, with Dominion Energy (NYSE:D )'s 4.2% increase among the catalysts after it was one of the power companies with which Amazon.com (NASDAQ:AMZN ) announced agreements for developing nuclear technology to power data centers.
The economically sensitive Transport index jumped 2%, lifted by a 13.4% leap in United Airlines after it forecast better-than-expected fourth-quarter profit and announced a $1.5-billion share buyback program on Tuesday.
Delta Air Lines (NYSE:DAL ) and American Airlines (NASDAQ:AAL ) also benefited, gaining 6% and 5.7% respectively.
At 02:00 p.m. Eastern, the S&P 500 was up 20.03 points, or 0.34%, to 5,835.29 points, while the Nasdaq Composite had gained 32.07 points, or 0.18%, to 18,347.66. The Dow Jones Industrial Average rose 266.46 points, or 0.62%, to 43,006.88.
More corporate earnings are due through the week, along with key economic data including the retail sales and industrial production figures for September on Thursday.
Bets on a 25-basis-point rate cut at the Federal Reserve's November meeting have risen to 92.8%, according to CME's FedWatch.
U.S.-listed shares of chip equipment-maker ASML Holding (AS:ASML ) lost 7% after the company cut its 2025 financial forecast, while Intel (NASDAQ:INTC ) fell 1.3% after the Cybersecurity Association of China recommended initiating a review of the chipmaker's products sold in the country.
Source: Investing.com
