Dow, small caps rally as rate-cuts bets hold firm
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June retail sales stronger than expected
BofA profit beats expectations
UnitedHealth rises after Q2 profit beats estimates
Match up on report activist investor Starboard built stake
Indexes: Dow up 1.43%, S&P up 0.24%, Nasdaq down 0.35%
Updated at 12:21 a.m. ET/1621 GMT
By Lisa Pauline Mattackal and Ankika Biswas
July 16 (Reuters) - Rate-sensitive small-cap stocks led Wall Street higher on Tuesday after retail sales data did little to dampen hopes of a September rate cut, while UnitedHealth's results lifted the Dow to a record high.
UnitedHealth Group UNH.N jumped 5.1% following a second-quarter profit beat. The stock was the biggest gainer onthe blue-chip Dow .DJI and lifted the S&P 500 Health Care index .SPXHC to an all-time high.
A Commerce Department report showed retail sales were unchanged in June, when they were expected to fall 0.3%. Retail sales minus automobiles jumped 0.4%, versus forecasts of a flat reading.
However, traders continued to fully price 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.
Those bets helped drive a move away from megacap tech stocks to market sectors that have lagged the benchmark index this year,with the small-cap Russell 2000 index .RUT rising 2.4% to its highest level since January 2022, and the S&P 500 Value index .IVX gaining 1.1%.
"Small caps have had a significant headwind of higher interest rates for quite some time. That's already in the rearview mirror at this point. Now, the U.S. is about to embark on cutting rates, probably at the (Fed's) September meeting," said Jason Pride, chief of investment strategy and research at Glenmede.
The Russell 2000 was on pace for its fifth straight session of gains of 1% or more - its first such streak in more than four years. Other economically sensitive sectors including industrials, materials and real estate also rose.
The move potentially heralds a sustained rotation away from big tech into the market's underperforming sectors, which many participants have called for even as tech stocks drove Wall Street to record highs this year.
Most megacap stocks slipped, with Nvidia NVDA.O, Microsoft MSFT.O and Meta Platforms META.O falling over 1% each. The S&P Information Technology index .SPLRCT led sector declines.
"In the near term, it's a very reasonable expectation that there's going to be volatility between the two sides - the big megacap growth stories and the rest of the market... but we're probably going to move on the average away from the larger-cap companies," Pride said.
Among other corporate earnings, Bank of America BAC.N jumped 5.3% after an upbeat netinterest-income forecast and better-than-expected second-quarter profit, steering the S&P 500 Financials index .SPSY to a record high.
Morgan Stanley MS.N rose 2.7% following results, while Charles Schwab SCHW.N slumped 8.7% after posting lower net income.
At 12:21 a.m. ET, the Dow Jones Industrial Average .DJI was up 575.90 points, or 1.43%, at 40,787.62, the S&P 500 .SPX was up 13.79 points, or 0.24%, at 5,645.01, and the Nasdaq Composite .IXIC was down 64.84 points, or 0.35%, at 18,407.73.
Tinderowner Match MTCH.O jumped 9.1% after a report that activist investor Starboard has a stake of over 6.5% in the company.
Interactive Brokers IBKR.O and J.B. Hunt Transport Services JBHT.O were among those scheduled to report results after markets close.
Advancing issues outnumbered decliners by a 3.80-to-1 ratio on the NYSE, andby a 2.86-to-1 ratio on the Nasdaq.
The S&P index recorded 84 new 52-week highs and three new lows, while the Nasdaq recorded 260 new highs and 24 new lows.
Growth v Value YTD https://reut.rs/4f8a44E
Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Pooja Desai
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