Risk Appetite Holds on Bets the Fed Will Go Big Next Week – US Market Wrap

Wall Street traders revived hopes for a half-point Federal Reserve rate cut next week, propelling stocks to their best week since 2024 amid a shift towards companies that would benefit the most from policy easing.

Economically sensitive stocks outperformed the tech megacaps that have driven the bull market, while the Russell 2000 index of smaller companies rose 2.5%. An equal-weighted version of the S&P 500, which includes companies such as Nvidia and Dollar Tree, outperformed the US equity benchmark. That gauge is less affected by the largest companies, giving hope that the rally will broaden.

As the S&P 500 continued to set new records in the first half of the year, some investors became concerned that only a few companies were participating in the rally. Corners of the market outside of big tech are now soaring as investors become more confident that the start of the Fed’s cutting cycle will refuel Corporate America.

The S&P 500 rose 0.5% for the fifth day in a row. The equal-weighted version gained 1%. The Dow Jones Industrial Average rose 0.7%. The Nasdaq 100 gained 0.5%. A gauge of the “Magnificent Seven” megacaps rose 0.3%.

Treasury two-year yields fell six basis points, to 3.58%. The likelihood of a 50-basis-point move increased to 40% on Friday, from 4% earlier in the week. The dollar fell. Gold set yet another record.