Wall Street Witnesses a Big-to-Small Stock Rotation – US Market Wrap

Wall Street traders drove a rotation out of the tech megacaps that had pushed stocks back from the brink of a bear market. Bond yields rose as an increase in job openings dampened expectations for Federal Reserve rate cuts. The dollar has remained at its lowest since 2022.

While the S&P 500 barely moved after reaching all-time highs, a violent rotation occurred at the beginning of July, with money chasing losers at the expense of new winners. Momentum was unwinding at a rate not seen in more than two years, with the small-cap Russell 2000 index outperforming the tech-heavy Nasdaq 100 by the most since April.

Short-dated Treasuries, which are more vulnerable to future Fed moves, underperformed longer maturities.

Job openings in the United States have reached their highest level since November, boosted primarily by leisure and hospitality, while layoffs have decreased. In recent weeks, Fed policymakers have consistently described the labor market as strong.

Fed Chair Jerome Powell reiterated at a panel in that the central bank would have likely cut interest rates further this year if Trump had not expanded his use of tariffs. Still, when asked if July was too soon for a rate cut, Powell did not rule it out.