Wall Street closes higher, buoyed by banks, small-caps
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 wasan 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 afterhitting 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, withDominion 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 morecorporate 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
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