After the Dow Jones Industrial Average closed at a record high, chances are high that the stock markets will trade higher. Small-cap stocks closed near their highs, too, with the Russell 2000 ETF (IWM) trading at $226.74.
The bullish sentiment more than offset negativity in AI-related chip stocks. ASML (ASML), Lam Research (LRCX), and Applied Materials (AMAT), for example, are at risk of re-testing their August lows. Markets are adjusting for ASML’s lower growth rates.
Falling interest rates are a tailwind for the economy. In the last week, big financial firms like Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), and Morgan Stanley (MS) all posted strong results.
Investors should not rotate out of their winning positions into the small-cap or beaten-down AI chip suppliers. The government wants to weaken the dominance of Apple (AAPL) and Alphabet (GOOG). That would hurt the revenue of those firms. In addition, it would pressure those firms to cut costs.
Investors may seek rebound stocks instead of worrying about the index’s all-time highs. In the drugstore sector, Walgreens Boots Alliance (WBA) gained nearly 25% in the last week. The 1,200 store closures will cut costs and potentially preserve the firm’s dividend.
