Dow jumps 742 points, small caps celebrate USA trade

Investors stepped up pumping money into companies that are considered solid barometers of the U.S. economy as investors eye the 2024 election and a looming rate cut by the Federal Reserve. 

The Dow Jones Industrial Average soared 742 points or 1.85% registering its best day of the year and the 21st record close of 2024, as tracked by Dow Jones Market Data Group. 

Powering the rally; United Health, Caterpillar, Boeing and Home Depot, while Merck, Microsoft and Intel dipped. 

The more standout trade came in U.S. Centric small caps in the Russell 2000. It rose 3.5% and is now at the highest level since January 2022 and has gained 11.7% this year.

"The last time the index closed higher by >1% for five consecutive sessions was in 2020, prior to that this had not happened since 1998" wrote Michael P. Reinking, CFA in the NYSE’s Market Insights. 

These businesses get the bulk of their profits domestically. Super Micro Computer, Microstrategy, Carvana and E.L.F and Comfort Systems USA are the largest holdings, as outlined by FTSE Russell.  

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The momentum comes with the Republican National Convention underway, which kicked off with former President Trump naming Senator JD Vance (R) Ohio as his Vice President pick. 

And also comes after Trump dodged an unprecedented assassination attempt on Saturday, escaping with minor injuries. 

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It also follows comments from Federal Reserve Chairman Jerome Powell on Monday when he signaled that policymakers can cut rates before inflation falls to their 2% target. The market took notice, and 90% of participants now expect a rate cut in September, as tracked by the CME's FedWatch Tool, which tracks probabilities of rate moves. 

The Dow 30, up 8.6% this year, is playing catch-up to the S&P 500’s nearly 19% rise. It also hit a fresh record Tuesday.

As markets shift, the Nasdaq Composite still remains in the lead, up 23% year-to-date powered by AI darlings including Nvidia, Meta, Apple and Microsoft. 

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