Small caps take the lead in broad stock rotation
Stocks tied to a broader economic reopening led gains on Wednesday amid easing concern the Federal Reserve would boost rates sooner than expected. The dollar climbed.
Energy producers and retailers in the S&P 500 advanced, while tech companies were little changed. The Russell 2000 Index of small caps climbed 2%, outperforming major U.S. equity benchmarks. The Dow Jones industrial average -- which made its debut 125 years ago -- fluctuated throughout most of the session. Banks advanced after the chief executive officers from the largest lenders testified before Congress.
Investors have been weighing prospects for an economic rebound against the threat of price pressures. While there are multiple factors that could prompt jitters as stocks trade near all-time highs, this week's reassurance from Fed officials has bolstered the market. As they look to damp concern that inflation would translate into a bond-buying slowdown, interest-rate volatility has tumbled.
"The market really today is hitting that sweet spot where macro fears are in decline, and simultaneously, microeconomic reality is improving," said Lawrence Creatura, a fund manager at PRSPCTV Capital LLC. "Anything that indicates a less hot environment is positive because it means that the Fed can sit on their hands that much longer. The interesting phenomenon that's occurring simultaneously is that consumer-facing companies are reporting sizzling results."
For Craig Johnson, technical market strategist at Piper Sandler & Co., economic uncertainty and volatility could still remain high as traders await clarity on inflation trends and tapering prospects.
"Investors appear to be giving the Fed the benefit of the doubt with their transitory inflation forecast, but we suspect the window of confidence could close without supporting evidence in coming months," he said.
These are some of the main moves in markets:
- The S&P 500 rose 0.2% as of 4 p.m. EDT
- The Nasdaq 100 rose 0.3%
- The Dow Jones industrial average was little changed
- The MSCI World index rose 0.2%
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.5% to $1.2193
- The British pound fell 0.2% to $1.4122
- The Japanese yen fell 0.3% to 109.15 per dollar
- The yield on 10-year Treasurys advanced two basis points to 1.58%
- Germany's 10-year yield declined four basis points to -0.21%
- Britain's 10-year yield declined three basis points to 0.75%
- West Texas Intermediate crude rose 0.2% to $66 a barrel
- Gold futures were little changed