Broadening Gains in US Stock Market Underscore Optimism on Economy

• More stocks are participating in the S&P 500’s latest march to record highs, easing concerns over a rally that has been concentrated in a handful of giant technology names for much of 2024.
• The S&P 500 is on track to gain 5.0% in the third quarter, which ends on Monday. This time, however, optimism that the Federal Reserve’s rate cuts will boost U.S. growth is pushing investors into shares of regional banks, industrial companies and other beneficiaries of a strong economy and lower rates, in addition to the tech-focused stocks that have already seen massive gains this year.
• More than 60.0% of S&P 500 components have outperformed the index so far this quarter, compared to around 25.0% in the first half of the year. At the same time, the equal-weight version of the S&P 500 -- a proxy for the average index stock -- has gained 9% in the quarter, outperforming the S&P 500, which is more influenced by the heavily weighted shares of megacaps such as Nvidia and Apple.
• Various corners of the stock market are benefiting from expectations of lower rates and steady growth. The S&P 500’s industrial and financials sectors - seen by investors as among the most economically sensitive areas - are up 10.6% and about 10%, respectively, in the third quarter. Falling rates are also a boon to shares of smaller companies, which disproportionately struggle with elevated borrowing costs.

(Source: Reuters)