Wall Street rises as small caps advance, megacaps recover ground
US economic growth regains steam in Q2; inflation slows
Ford slumps as higher costs, EV unit dent profit growth
IBM gets boost from software, AI demand, as consulting slips
Gains for small-cap indexes Russell 2000 and S&P Small Cap 600
Indexes up: Dow 0.9%, S&P 0.59%, Nasdaq 0.57%
Updated to 2:02 p.m. ET/1802 GMT
By Lisa Pauline Mattackal and David French
July 25 (Reuters) - Wall Street's main indexes climbed on Thursday, a day after a tech-triggered sell-off, with small-cap stocks and stronger-than-expected GDP data providing support.
The small-cap Russell 2000 .RUT jumped 2.3%, on track to fully recoup Wednesday's broad losses. The Dow .DJI led the three main benchmarks in percentage gains as investors reassessedtheir recent flight to underperforming sectors.
Most megacap stocks recovered from a shaky start and were in positive territory at mid-afternoon. Amazon.com<AMZN.O>, AppleAAPL.O and NvidiaNVDA.O all climbed between 0.8% and 1.2%.
While Alphabet's GOOGL.O shares fell0.8%, Tesla TSLA.O rose4.5%. Lackluster earnings from the Google parent and the electric vehicle maker had pummeled the so-called Magnificent Seven group of tech stocks on Wednesday, prompting the Nasdaq .IXIC and S&P 500 .SPX to log their worst day since 2022.
Gross domestic product data provided support, showingthe U.S. economy expanded 2.8% in the second quarter versus an estimate of 2%. Inflation subsided, leaving expectations of a September Federal Reserve interest rate cut intact.
"We've been calling for a Goldilocks recovery, expecting the economy to hold up, and this report shows that the economy is actually quite strong," said Brian Klimke, chief market strategist at Cetera Investment Management. "The Fed doesn't necessarily need to kill growth; they're really looking to just kill inflation."
Bets ona 25-basis-point cut by September stood at 85.8%, from around 78% prior to Thursday's data, CME's FedWatch Tool showed.
Market participants are also pricing in at least two rate cuts by December, according to LSEG data.
Investors now awaitpersonal consumption expenditures price data on Friday to confirm bets of an early start to Fedrate cuts, after the recent trend of easing inflation and some labor market weakness.
While heavyweight stocks havepowered the market to all-time highs this year, Wednesday's sell-off reinforcedfears that these stocks might be over-stretched and are in for more turbulence.
This concern has driven value investors, speeding up their rotation into smaller-cap stocks and other sectors outside megacap technology.
The S&P Small Cap 600 .SPCY rose 2.2% on Thursday.
As of 2:02 p.m. ET, the S&P 500 .SPX gained 31.81 points, or 0.59%, at 5,458.94 points, while the Nasdaq Composite .IXIC rose 103.14 points, or 0.57%, to 17,445.55. The Dow Jones Industrial Average .DJI advanced 357.37 points, or 0.90%, to 40,211.24.
Among earnings-driven moves, IBM IBM.N shares jumped 5.8%, also boosting the blue-chip Dow, after the tech companybeat estimates for second-quarter revenue and raisedthe annual growth forecast for its software business.
American Airlines AAL.O rose 4.1%, reversing premarket losses after cutting its annual profit forecast. Southwest Airlines LUV.N climbed 6.8% after saying it wouldimplement changes including ending open seating and offering seats with extra legroom.
Advances by airlines and logistics firms, of 6% for Old Dominion <ODFL.O> and 6.4% for J B HuntJBHT.O, helped the Dow Jones Transportation Average .DJT gain 2.5%.
FordF.N slumped 17.3% after the automaker's second-quarter adjusted profit missed estimates by a wide margin.Edwards Lifesciences EW.N tumbled 29.6% after it missed second-quarter revenue estimates.
S&P500 breaks calm streak with 2%+ drop https://tmsnrt.rs/3A8anwg
Reporting by Ankika Biswas, Lisa Pauline Mattackal and Medha Singh in Bengaluru and David French in New York; Editing by Savio D'Souza, Saumyadeb Chakrabarty, Pooja Desai and Richard Chang
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