US STOCKS-Wall St advances as investors favor small caps over Big Tech; banks rally

SGH

16/10/2024 19:16

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      Morgan Stanley rises as Q3 profit jumps; banks buoyant
    

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      Small-cap indexes on course for best finish since Nov 2021
    

        * 
      Utilities rise; Amazon nuke deal benefits Dominion
    

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      Indexes up: Dow 0.62%, S&P 500 0.34%, Nasdaq 0.18%
    

  
 (Updated to 2:00 p.m. ET/1800 GMT)
    By David French and Lisa Pauline Mattackal
       Oct 16 (Reuters) - 
    Wall Street's three benchmark indexes rose on Wednesday, on
track to recoup some of the previous session's losses as gains
in small-cap companies and financial stocks buoyed by strong
earnings outweighed declines in technology megacaps.    
    Morgan Stanley  MS.N  jumped 6.5% to a record high after it
joined peers such as JPMorgan Chase  JPM.N  in reporting strong
profits following a sharp increase in investment banking
revenue.
    Larger regional banks, traditionally less reliant on
investment banking activities, were also higher. First Horizon
 FHN.N  gained 3.8% and U.S. Bancorp  USB.N  rose 4.7% after
reporting third-quarter results.
        The broader Banks  .SPXBK  index was up 1.1% and an
index tracking regional banks  .KRX  rose 2%.
  
        Outside of the banks, investor attention was seen in
small-cap stocks, with some rotation from expensive tech
megacaps to less expensive sectors.
  
        Both the Russell 2000 index  .RUT , which advanced 1.6%,
and the S&P Small Cap 600  .SPCY , which climbed 1.5%, were on
course for their highest finishes since November 2021.
  
    "There has been a broadening out in terms of
participation... in the small caps versus the large caps," said
Zachary Hill, head of portfolio management at Horizon
Investments.
    "That's a positive sign, some of it having to do with
interest rates coming down and some relief on the balance sheet
side for more highly levered smaller-cap companies."
    Among the big-tech names which dragged, Apple  AAPL.O  lost
1.3% after hitting a record high in the previous session.
Meanwhile, Microsoft  MSFT.O  was off 0.9% and Meta Platforms
 META.O  fell 1.9%. 
    Chip heavyweight Nvidia  NVDA.O , however, bucked the
megacap slide, rising 3.4% after slumping nearly 5% in the
previous session.
    Gains in the so-called Magnificent Seven group of tech
stocks have driven most of Wall Street's record-breaking run
this year. However, with valuations increasingly stretched and a
brighter economic outlook, investors have been seeking
opportunities elsewhere. 
    "Valuations for (the largest tech stocks) are somewhat
lofty. When you see the daily gyrations in the market, it's
based primarily on how the earnings situation looks for those
firms," said Scott Welch, chief investment officer at Certuity. 
    Utilities  .SPLRCU  led sectoral gains, up 1.7%, with
Dominion Energy's  D.N  4.2% increase among the catalysts after
it was one of the power companies with which Amazon.com  AMZN.O 
announced agreements for developing nuclear technology to power
data centers.
    The economically sensitive Transport index  .DJT  jumped 2%,
lifted by a 13.4% leap in United Airlines  UAL.O  after it
forecast better-than-expected fourth-quarter profit and
announced a $1.5-billion share buyback program on Tuesday. 
    Delta Air Lines  DAL.N  and American Airlines  AAL.O  also
benefited, gaining 6% and 5.7% respectively.
    At 02:00 p.m. Eastern, the S&P 500  .SPX  was up 20.03
points, or 0.34%, to 5,835.29 points, while the Nasdaq Composite
 .IXIC  had gained 32.07 points, or 0.18%, to 18,347.66. The Dow
Jones Industrial Average  .DJI  rose 266.46 points, or 0.62%, to
43,006.88.
    More corporate earnings are due through the week, along with
key economic data including the retail sales and industrial
production figures for September on Thursday.
    Bets on a 25-basis-point rate cut at the Federal Reserve's
November meeting have risen to 92.8%, according to CME's
FedWatch.
    U.S.-listed shares of chip equipment-maker ASML Holding
 ASML.O   ASML.AS  lost 7% after the company cut its 2025
financial forecast, while Intel  INTC.O  fell 1.3% after the
Cybersecurity Association of China recommended initiating a
review of the chipmaker's products sold in the country.

 (Reporting by Lisa Mattackal and Purvi Agarwal in Bengaluru and
David French in New York; Editing by Pooja Desai and David
Gregorio)
 ((LisaPauline.Mattackal@thomsonreuters.com;))