Small caps and technology stocks led a rebound on Wall Street that gave the S&P 500 a record high.
Gains were broad after Republicans introduced a tax reform proposal that includes a big reduction in corporate tax rates. Winners beat losers by a 7-3 ratio on the Nasdaq and by 9-to-7 on the NYSE.
X The S&P climbed 0.4%, while the tech-heavy Nasdaq composite rallied 1.2%. The Dow Jones industrial average climbed nearly 0.3%. The Nasdaq is making a good rebound off its 50-day moving average, a positive signal at least in the short term. Volume rose from Tuesday's levels, according to unconfirmed numbers.
But the star of the day was the Russell 2000. The small-cap benchmark surged 1.9% to a new high, extending a rally from its Aug. 18 low and narrowing a performance gap for 2017 vs. the Nasdaq and S&P 500.
Financials are the largest sector of the Russell 2000, accounting for about 18% of the index. Regional banks in the index have accounted for much of the Russell 2000's surge as a rising trend in Treasury yields gives the sector a boost. Banking stocks have been shadowing the yield on the 10-year Treasury note.
Yields on the two-, five-, 10-, and 30-year Treasuries began rising following Fed Chair Janet Yellen's speech Tuesday, Tradeweb noted. The 10-year yield Wednesday rose 8 basis points to 2.31%. Yellen fanned expectations of a December interest-rate increase, saying that raising interest rates gradually is the appropriate strategy considering the uncertainty on inflation, Bloomberg reported. The GOP tax package was another reason financials climbed.
The SPDR Financial ETF (XLF) broke out to new highs Wednesday, while SPDR S&P Regional Bank (KRE) surged 2.1%.
Information technology is the Russell's second-largest sector and also performed well Wednesday. Semiconductor, fiber-optic, data-storage and other technology industry groups led the market.
The shift in interest rates has sent investors fleeing from one of the most popular Treasury alternatives: the Dow utility average, which dropped 1.3%. A provision in the tax plan to limit corporate interest expenses also appears to be hurting utilities.
Dozens of stocks broke out past buy points in Wednesday's trading, including financial leaders Cowen (COWN), Charles Schwab (SCHW), Bank of America (BAC) and E-Trade Financial (ETFC).
Other notables were SolarEdge Technologies (SEDG), Five Below (FIVE), II-VI (IIVI) and Cintas (CTAS). Cintas beat profit views and raised guidance.
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