Why Wall Street Suddenly Turned to Small Stocks as Fed Cut Hopes Rise
US markets rose as traders bet on a Fed rate cut after new job data showed a drop in private hiring. Small caps led, Bitcoin climbed, and the dollar weakened.
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U.S. stocks rose on Wednesday, with small-cap equities leading the way in the market’s late-year rally as traders anticipated a possible cut in interest rates next week.
The Dow Jones Industrial Average marked the end of the day with an increase of 408 points, or 0.9%, which is the third day of its weeklong upswing, all resulting from the hopes about the reduction of the borrowing costs.
The monthly labor data from ADP revealed that U.S. private employers let go of 32,000 workers in November. According to Stephen Brown from Capital Economics, the resulting lower hiring trend would, however, allow Fed officials to have one more reason to cut rates in their coming meeting.
Though large-cap tech stocks were the ones that slowed down the market’s general momentum, small companies continued their progress. The Russell 2000 index soared 1.9%, which means that investors are confident that cheaper credit will benefit smaller firms quicker than it will their larger counterparts. The Nasdaq composite gained only 0.2%, whereas the technology sector of the S&P 500 recorded a slight loss.
The currency markets also saw some shifts. The WSJ Dollar Index registered its seventh consecutive decline, with the dollar losing most of its value against the pound sterling.
Bitcoin got another boost, gaining 2.1% and ending the day just below $93,000, thus continuing its recovery from Tuesday.
The preliminary figures from the big retailers caused major movements in the prices of consumer stocks.
Macy’s share price decreased initially after the company had reported its quarterly figures but recovered as Macy’s raised its annual guidance and reported stronger sales.
Dollar Tree announced adjusted earnings that were above the consensus estimates.
The share price of American Eagle Outfitters skyrocketed as the clothing retailer attributed recent collaborations with Sydney Sweeney and Travis Kelce for its sales performance boost.
In foreign exchange market, the Indian rupee went down to the lowest point that it had ever reached against the U.S. dollar, according to official data dating back to 1957. Analysts pointed out hesitation around a possible U.S.-India trade agreement as the main reason for the decline.
The commodities market experienced insignificant upsides.
World oil prices increased approximately 0.4% along with traders who followed the news about possible Ukraine-Russia peace talks.
Copper prices in London hit yet another peak, which is a signal of continuing supply problems and high demand expectations.
