US STOCKS-Wall Street closes higher, buoyed by banks, small-caps

SGH

16/10/2024 21:00

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      Morgan Stanley rises as Q3 profit jumps; banks buoyant
    

        * 
      Gains for small-cap indexes Russell 2000, S&P Small Cap
600
    

        * 
      Utilities climb; Amazon nuke accord benefits Dominion
    

  
 (Updates to close)
    By David French
       Oct 16 (Reuters) - 
    The Dow Jones Industrial Average rose on Wednesday, as Wall
Street's three benchmark indexes ended higher, weathering
declines in megacap tech shares thanks to small-caps gains and
financial shares buoyed by strong earnings.
  
        The Dow  .DJI  again closed above 43,000 points,
recouping losses in the previous session. The S&P 500  .SPX  was
a whisker away from setting another closing milestone, but
ultimately closed just short.
  
        According to preliminary data, the S&P 500
 .SPX  gained 27.07 points, or 0.47%, to end at 5,842.33 points,
while the Nasdaq Composite  .IXIC  gained 50.92 points, or
0.28%, to 18,366.51. The Dow Jones Industrial Average
 .DJI  rose 338.18 points, or 0.79%, to 43,078.60.
  
        On a broadly positive day for Wall Street, it was
financial stocks which led the way.
  
        "I think investors have rotated a little bit out of some
of the big tech companies and into the big financial companies,"
said Michael Kantrowitz, chief investment strategist at Piper
Sandler.
  
        He said some movement from investors made sense as the
rate environment has become more conducive for bank earnings,
while a lot of optimism around artificial intelligence (AI) is
priced into tech companies.
  
    Morgan Stanley  MS.N  jumped 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  and U.S. Bancorp  USB.N  rose after reporting
third-quarter results.
    The broader Banks  .SPXBK  index was up, as was an index
tracking regional banks  .KRX .
    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  and the S&P Small Cap 600
 .SPCY  climbed.
    While acknowledging some buying in recent days, Piper
Sandler's Kantrowitz said he was yet to be convinced of a wider
rotation into small caps.
        "I think people are broadening out their portfolio
exposure, but still sticking with the same flavor of
fundamentals," adding people were buying high-quality small-caps
but not digging into the kinds of deep-value names you would
expect to attract attention if the full rotation was underway.
  
    Among the big-tech names which dragged, Apple  AAPL.O 
dipped after hitting a record high in the previous session.
Microsoft  MSFT.O  and Meta Platforms  META.O  also fell. 
    Chip heavyweight Nvidia  NVDA.O , however, bucked the
megacap slide, rising 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. 
    Utilities  .SPLRCU  led sectoral gains, with Dominion
Energy's  D.N  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.
    Among the best-performing S&P sectors year to date, Piper
Sandler's Kantrowitz said he remains bullish on utilities as
they benefit from both the higher power demand coming from AI,
but also the lower interest rate environment.
    The economically sensitive Transport index  .DJT  jumped,
lifted by 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.
    Attention now turns to 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.

 (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;))