S&P 500 Overcomes Fading Risk-On Rally to Hit New Record High
(Bloomberg) — US stocks pushed on to fresh record highs Wednesday, gaining steam into the close on growing conviction that the Federal Reserve will start cutting interest rates again next month.
The S&P 500 Index closed with a 0.3% advance, bouncing back after the rally briefly fizzled mid-day. The Nasdaq 100 Index was little changed but managed to find its way into the green to finish at a record. Meanwhile, the small-cap Russell 2000 Index gained 2.0%.
Following a benign inflation data reading on Tuesday, traders fully priced in a quarter-point Fed cut in September. Some bet on a 50-basis-point cut, encouraged by comments from Treasury Secretary Scott Bessent on Bloomberg Television this morning.
As traders price in expectations of looser policy, investors are piling into riskier assets, including small-cap stocks, pushing aside fears that President Donald Trump’s tariff will stall the economy. Easing global trade tensions along with a stronger-than-expected earnings season are adding to the confidence.
“We’re seeing a repeat of yesterday, where the biggest winner is the Russell 2000, the smallest, most leveraged companies, which will get the most relief from lower financing costs,” said Louis Navellier, chief investment officer at Navellier & Associates.
With the Magnificent Seven grouping of mega-cap stocks becoming overbought and the Russell 2000 breaking above July highs, Miller Tabak’s Matt Maley notes that there seems to be some rotation taking place between the two.
“Investors have to be careful, however, because if the tech stocks start to fall in a meaningful way, it will create headwinds for the entire market because they are so highly weighted in the major averages,” Maley said.
President Trump said he may name the successor to Fed Chair Jerome Powell “a little bit early,” adding that he was down to three or four potential candidates. Trump has hammered Powell over the central bank’s decision to hold interest rates steady, going as far as calling for his resignation.
Among single stocks, Brinker International Inc. gained 1.6% after the Chili’s owner said it expected earnings momentum in the fourth quarter to carry into the next fiscal year. Cava Group Inc. plummeted 17% as the fast-casual chain trimmed its annual sales outlook after a sharp deceleration in the second quarter. CoreWeave Inc. slumped 21% after giving a disappointing earnings outlook, which reflected margin pressures from a rapid AI data center expansion.
©2025 Bloomberg L.P.
