Wall Street Surges Amid Trump Re-Election Optimism and Rate-Cut Hopes

Wall Street saw significant gains on Monday, spurred by increased likelihood of a second term for Donald Trump following a survived assassination attempt, alongside optimism for interest rate cuts. Markets reacted positively, with peaks in major indices and jumps in Trump-linked and cryptocurrency stocks.

Wall Street jumped in upbeat trading on Monday, driven by heightened optimism for a second term for presidential candidate Donald Trump following his survival of an assassination attempt. Additionally, hopes for interest-rate cuts bolstered market sentiment.

Under Trump's potential re-election, markets anticipate a hawkish trade policy and relaxed regulations on energy policy and cryptocurrency. Both the S&P 500 and the Dow hit intraday record highs, while Treasury yields rose, as investors expect Trump's policies to increase inflationary pressures and government debt.

Online betting site PredictIt showed a spike in Trump's re-election odds, with bets rising to 67 cents after the assassination attempt, compared to Friday's 60 cents. Bob Savage, head of markets strategy and insights at BNY Mellon, commented, "The narrative for the day rests on the 'Trump Trade,' with many investors assuming the weekend's events improve the former President's re-election chances."

Trump-linked stocks soared, including Trump Media & Technology Group, which jumped 26.8%, and software firm Phunware and video-sharing platform Rumble, which rose 4.6% and 5.4%, respectively. Crypto stocks also surged as Bitcoin rose to a two-week high. Coinbase Global, Marathon Digital Holdings, and Riot Platforms advanced between 8.9% and 10.9%.

Other stocks expected to benefit from a second Trump term also climbed, with gunmaker Smith & Wesson and prison operator GEO Group gaining 11.9% and 10.5% respectively. Persistent hopes for Federal Reserve interest rate cuts contributed to the positive market sentiment, with investors pricing in an 88% chance of a 25-basis-point rate cut by September, and two cuts in 2024, according to LSEG data.

Comments from Federal Reserve Chairman Jerome Powell and San Francisco Fed President Mary Daly will be closely monitored for their insights on last week's inflation data. The small-cap Russell 2000 gained 2.2% to reach its highest point since January 2022, indicating continued broad market gains.

As the quarterly corporate earnings season begins this week, the market will be watching to see if megacaps can justify their high valuations and if lagging sectors can sustain their gains. Ben McMillan, chief investment officer at IDX Advisors, noted, "In the near term, the rotation from tech-heavy megacaps to small caps seems set to continue, but this broadening market trend will need good earnings numbers to persist."

At 12:01 a.m. ET, the Dow Jones Industrial Average was up 328.71 points, or 0.82%, at 40,329.61, the S&P 500 increased by 40.53 points, or 0.72%, to 5,655.88, and the Nasdaq Composite rose by 163.54 points, or 0.89%, to 18,561.98. The S&P 500 financials index jumped 1.5%, with Goldman Sachs hitting a record high after its second-quarter profit more than doubled.

However, Macy's shares slumped 12.9% after terminating buyout discussions with Arkhouse Management and Brigade Capital. On the NYSE, advancing issues outnumbered decliners by a 1.93-to-1 ratio, while on the Nasdaq, that ratio was 1.91-to-1.

The S&P index recorded 56 new 52-week highs and 1 new low, while the Nasdaq recorded 179 new highs and 26 new lows.