US close: Dow and S&P 500 hit new record highs

Both the Dow and S&P 500 hit new all-time highs on Tuesday, with the Dow in particular notching for its best daily performance in more than a year, as bellwether stocks put in an impressive performance.

With just four of the 30 Dow constituents finishing in the red, the index rose 1.85% to a new closing high of 40,954.48. This 742.76-point gain was its biggest one-day surge since June 2023. Blue chip names such as Caterpillar, Boeing, Home Depot, Amex and McDonalds were among the index's best performers.

The S&P 500 also finished at a fresh peak, rising 0.64% to 5,667.20 – its 38th record close of the year – while the Nasdaq gained 0.2% to 18,509.34.

"The S&P 500 and Dow hit fresh record highs despite slowing retail sales as the core metric rose the most since April of last year, pointing to robust consumer spending. An around 95% probability of a September Fed rate cut also contributed to the buoyant mood," said Axel Rudolph, senior market analyst at IG.

Small-cap stocks were outperforming again on Tuesday, with the Russell 2000 index up 3.5%.

Economic data flurry

US retail sales were unchanged in June, according to the Census Bureau, in line with economists' expectations. The advance estimate of total monthly sales was $704.3bn last month, more or less flat on May's revised total of $704.5bn, which was 0.3% higher than April. However, underlying sales came in much better than expected.

US import prices remained unchanged at 141.60 in June, according the Bureau of Labor Statistics, while export prices decreased to 148 last month, down from 148.70 in May.

US business inventories, a key component of GDP, rose by 0.5% month-on-month in May, according to the Census Bureau, following a 0.3% increase in April and beating Wall Street expectations for a reading of 0.3%.

Finally, July's housing market index from the National Association of Housebuilders eased by one point to a reading of 41, the lowest reading so far in 2024 and short of the 44 expected by analysts amid expectations that interest rates will now remain higher for longer.

Banks in the spotlight

Morgan Stanley reported better-than-expected quarterly earnings on the back of a strong trading and investment banking performance. Second-quarter revenues rose 12% to $15.02bn, while profits surged 41% to $3.08bn. Earnings per share were $1.82, well ahead of Wall Street estimates of $1.65.

Bank of America jumped 5% after beating analysts' forecasts with its second-quarter profits. The bank announced earnings per share of 83 cents, down from 88 cents a year earlier but ahead of the 80 cents consensus estimate, helped by stronger-than-expected results in investment banking and trading.

Elsewhere in the financial sector, Charles Schwab met analysts' estimates with its second-quarter revenues and profits while total client assets hit an all-time high, but shares dropped 10% as the number of new brokerage accounts came up short.

UnitedHealth was the high riser on the Dow, jumping 6.5% after the health insurer reiterated full-year profit targets despite a bigger-than-anticipated negative impact from a cyber hack in February.

Dow Jones - Risers

Unitedhealth Group Inc. (UNH) $548.69 6.50%
Caterpillar Inc. (CAT) $360.58 4.28%
Boeing Co. (BA) $186.05 3.87%
Home Depot Inc. (HD) $369.12 2.97%
Dow Chemical Co. (DOW) $54.70 2.68%
American Express Co. (AXP) $249.63 2.31%
McDonald's Corp. (MCD) $257.30 2.28%
Goldman Sachs Group Inc. (GS) $503.02 2.19%
Nike Inc. (NKE) $72.81 2.10%
Travelers Company Inc. (TRV) $217.78 2.06%