The Dow Jones Industrial Average advanced to new highs on Tuesday, as the bull market broadened out beyond technology names on hopes of forthcoming interest rate cuts.

The Dow surged by 742.76 points, or 1.85%, to close at 40,954.48. The 30-stock index hit an all-time high and closed at a record, in addition to notching its best session since June 2023. The small cap-focused Russell 2000 rose more than 3% for its fifth straight day of gains.

The S&P 500 added 0.64%, closing at 5,667.20. The Nasdaq Composite ended the day higher by just 0.2% at 18,509.34, lagging as technology names largely sat out of Tuesday's rally.

Industrial bellwether Caterpillar climbed more than 4%, making it the second-biggest gainer in the Dow behind UnitedHealth. The insurer advanced 6.5% on the back of better-than-expected second-quarter results.

Financials — another trailing bull market group — gained after earnings from Bank of America and Morgan Stanley came in ahead of analyst forecasts. Bank of America jumped more than 5%, while Morgan Stanley added nearly 1%.

The rotation from megacap technology shares into small-cap and cyclical stocks began a week ago when June's consumer price index showed the lowest inflation in three years. The reading was seen as a sign that inflation was nearing the Federal Reserve's 2% target, and the central bank might be able to lower interest rates.

Traders now see 100% odds the Fed will lower rates in September, according to the CME FedWatch tool. A rate cut is seen as boosting small caps and industrials more reliant on borrowing costs than cash-rich, megacap technology stocks that have been riding a wave of optimism around artificial intelligence.

In the last one week alone, the Russell 2000 has soared more than 11%, while the blue-chip Dow has gained more than 4%. The Nasdaq is up just 0.4% over the same period.

Notably, AI darling Nvidia and Google parent Alphabet dropped more than 1% each on Tuesday. This extended their losses over the past week as the rest of the market has taken off.

"There's a lot of momentum behind this rotation trade from from big-cap tech into small caps and into the average stock," said Ross Mayfield, investment strategist at Baird. "It's a rotation, but it's much more about the upside in the more cyclical sectors in the market than a referendum on AI's long-term potential."

Retail sales data out Tuesday further validated investors' belief that the Fed had achieved a so-called soft landing with the economy. June sales were unchanged, versus expectations for a decline. Excluding autos, Junes sales rose 0.4%, a larger gain than the 0.1% consensus forecast collected by Dow Jones.

This data "should be positive for markets," said Quincy Krosby, chief global strategist at LPL Financial. "Investors prefer the launch of a Fed easing cycle to begin with a still solid economic backdrop."

Stocks finish higher

Stocks finished Tuesday higher, with the Dow seeing its best session in more than a year.

The Dow rose 1.9%. The S&P 500 and Nasdaq Composite added 0.6% and 0.2%, respectively.

Elsewhere, the Russell 2000 surged more than 3% as small caps outperformed.

— Alex Harring

More than 3/4ths of NYSE stocks are higher Tuesday

Almost 77% of all stocks traded on the New York Stock Exchange are higher on Tuesday, with advancers topping decliners 2197 to 571, according to FactSet data. Advancing volume is stronger still, accounting for nearly 82% of all shares traded. The number of new 52-week highs stood at 399 in late trading against just six new lows.

On the Nasdaq, advancing stocks stood at almost 70% of the total, with advancers outnumbering decliners 3013 to 972. Advancing volume accounted for roughly 79% of the total, while new highs surpassed new lows by 456 to 43.

The total number of shares traded was still light, however, with NYSE Composite volume about 70% of the past 30 days' average, and Nasdaq Composite volume closer to 80% of the recent average.

— Scott Schnipper

IMF forecasts 'bumps' in disinflation path

The International Monetary Fund warned Tuesday that upside risks to inflation have increased, calling into question the prospect of multiple Federal Reserve interest rate cuts this year. 

In its latest World Economic Outlook update, the IMF said "the momentum on global disinflation is slowing, signaling bumps along the path." The rise in sequential inflation in the U.S. earlier in 2024 has put it behind other major economies in the quantitative easing path, the report said. 

The report comes as traders ramp up bets for a Fed rate cut in September. Per the CME Group's FedWatch tool, Wall Street has priced in a 100% chance of lower rates at the Sept. 18 meeting. Traders also expect another rate decrease in November.

The full story can be found here.

— Hakyung Kim

Warnings signs for U.S. brands in China, as TD Cowen survey shows souring image

Brands like Apple, Nike and Lululemon take notice. Western brands have become less desirable in China over the past year, according to the findings of a TD Cowen survey. Twenty-five percent of 2,000 Chinese consumers polled by the firm shared this souring sentiment toward the West.

"Nike, Apple, Starbucks, LVMH, Estee Lauder garner leading preferences with Chinese consumers, but macro headwinds, and rising China based competition create secular headwinds," the firm wrote in a research note.

More than 13% of those polled said their view of Western brands had improved over the past year, while nearly 62% said their opinion was unchanged. Younger consumers and high-income consumers tended to find Western brands more appealing, Cowen said.

The survey also found the spending plans for consumers in China were "stable."

— Christina Cheddar Berk

Regional banks continue to rally with earnings, potential rate cut on the horizon

The SPDR S&P Regional Banking ETF (KRE) climbed more than 4% on Tuesday, on track for its seventh-straight positive session and its highest close in more than a year.

The rally for regional banks is coming just as earnings season for the group is about to hit full stride. However, the rally seems to be linked toward the increased likelihood of Federal Reserve rate cuts, which may mean that second-quarter profits are of only minor interest to investors.

— Jesse Pound

Goldman Sachs sees ‘attractive’ growth profile in Quanta Services

Goldman Sachs is bullish on Quanta Services following recent power outage challenges in the country, seeing a need for grid reliability investment.

"While PWR shares have pulled back amidst uncertainty around the IRA and upcoming election results, we reiterate our Buy rating and continue to see an attractive growth profile driven by grid reliability," analyst Neil Mehta said in a Tuesday note.

Mehta cited the power outages in Houston, Texas, where 2.3 million customers lost electricity during Hurricane Beryl earlier this month, as a reason for continued investment in the grid.

"While we understand why there remains investor debate about the growth profile of the Blattner renewables business, we believe the core of the bull case on Quanta is the need for grid reliability," he continued.

While shares were up more than 1% during afternoon trading, the stock is down more than 4.5% in one month.

— Sean Conlon

Market breadth starting to improve in a big way, Societe Generale says

The stock market rally that was concentrated in just a few major tech names is finally broadening out, according to Societe Generale. The bank pointed out that the equal-weighted S&P 500 last week had its biggest one-day outperformance versus its market cap-weighted counterpart since November 2020.

"'Breadth vs bubble' is the number one debate in US equities," strategist Manish Kabra wrote. "Narrow breadth often occurs in a bear market or when a few concentrated stocks drive the market into a 'bubble.'"

"However, we now think improving breadth should be the way for the S&P 500, rather than a recession or concentrated positioning, as our cycle indicators continue to rise over the last five quarters and the profit cycle is broadening beyond Nasdaq-100 stocks," Kabra said.

Over the past week, the equal-weighted S&P 500 is up more than 4%. The market cap-weighted version has gained just 1.5% in that time.

— Fred Imbert

Watch for possible 'wobble' in S&P 500 starting Wednesday, analyst says

Several times the stock market has begun to "wobble" starting on July 17. That's according to Tom Fitzpatrick, managing director for global market insights at R.J. O'Brien & Associates, a Chicago-based independent futures brokerage and clearing firm.

Such events in the past have signaled "a decent pullback" in stocks rather than a decisive turn in the market, Fitzpatrick said in a note to clients Tuesday.

The similarity today to the summer of 2000 in terms of markets, the economy, employment and Federal Reserve policy is notable, he added. In that instance, "an interim peak" on July 17 was followed by an almost 7% decline by July 28. "It was only a correction and the real turn did not materialize until September — but a decent correction nonetheless," Fitzpatrick added.

One of the strategist's favorite indicators, the daily chart of triple momentum divergence, is suggesting "there is finally a danger that a pullback could be close. Maybe time to take a few chips off that table," he said.

— Scott Schnipper

Stocks making the biggest moves midday

Here are some of the stocks on the move midday:

• Charles Schwab – The financial services giant slid close to9% following its second quarter results. The firm reported adjusted earnings of 73 cents per share and revenue of $4.69 billion. These just barely beat estimates, as analysts polled by LSEG were expecting 72 cents earnings per share on $4.68 billion in revenue. The firm also reported a miss on net interest margin, per FactSet.
• Match Group –  The online dating stock added nearly% after activist investor Starboard Value put pressure on Match Group in a Monday letter to either improve its margins and profitability or go private. Starboard Value currently has a roughly 6.5% stake in Match Group.
• Bank of America – The bank popped 5% after reporting better-than-expected financial results. Earnings for the second quarter were 83 cents a share, topping the 80 cents expected from analysts polled by LSEG. Revenue came in at $25.54 billion, versus the $25.22 billion consensus estimate. Bank of America also gave new guidance on net interest income rising in the fourth quarter.

Read the full list here.

— Sean Conlon

Firearms stocks continue their rise after Trump assassination attempt

Firearms manufacturers stocks rose on Tuesday, adding to their Monday gains after former President Donald Trump survived an assassination attempt last Saturday.

Shares of Sturm, Ruger & Company gained 3% by midday, while Smith & Wesson Brands stock added 1%. The stocks respectively closed Monday's session 5% and 11% higher.

American Outdoor Brands, which was spun out from Smith & Wesson to focus on sporting goods and outdoor gear, was up nearly 2% on Tuesday.

— Lisa Kailai Han

Shopify jumps 7%

Shares of e-commerce firm Shopify jumped nearly 7% in midday trading on Tuesday, following an upgrade from Bank of America.

Analyst Brad Sills highlighted the company's "disciplined expense spending" and forecast improved revenue growth and free cash flow moving forward as the company captures further market share.

— Brian Evans

Watch: The Dow trades at all-time highs

The Dow is trading at all-time highs in Tuesday's session. Click here for CNBC's live feed of the moves in real time.

— Alex Harring

More than 1 in 7 stocks in the S&P 500 reach new 52-week highs

During Tuesday's trading session, 76 stocks in the S&P 500 — or more than one out of every seven tickers in the index — were trading at their new 52-week highs.

Names that hit this milestone included:

• Electronic Arts trading at levels not seen since September, 2021
• T-Mobile US trading at all-time highs back to the MetroPCS IPO in April, 2007
• Goldman Sachs trading at all-time high levels back to its IPO in May, 1999
• S&P Global trading at all-time high levels back through our history to 1972
• L3Harris Technologies trading at levels not seen since November, 2022
• Motorola Solutions trading at all-time highs back to its when it began trading as a separate entity post the Motorola Mobility split
• Duke Energy trading at levels not seen since September, 2022
• Fair Isaac trading at all-time highs back to when it was listed at the NYSE in 1986
• Royal Caribbean trading at all-time high levels back to its IPO in April, 1993
• Garmin trading at levels not seen since September, 2021

On the other hand, just four stocks were trading at their 52-week lows: Lululemon, Starbucks, Lamb Weston and Solventum.

— Lisa Kailai Han, Christopher Hayes

Small caps jump 2%, up for 5 days in a row

The small-cap Russell 2000 index jumped 2% Tuesday, headed for its fifth straight up day. Tuesday's gains were led by AngioDynamics, PaySign, Big Lots and Pacific Biosciences of California, which all surged more than 10

Investors are rotating into previously unloved corners of the market as cooling inflation data last week fueled bets that the Federal Reserve could cut interest rates soon and skirt a recession.

Small caps are typically more sensitive to fluctuations in the economy and market sentiment and could see outsized benefit from falling rates.%.

— Yun Li

After a clean sweep for big bank earnings reports, regional banks are up next

Big bank earnings reports are in the books — and it was a clean sweep this round. All six big banks beat on both earnings and revenues for the second quarter.

Still to come, though: all the regional banks. Wall Street will be closely watching loan growth commentary from the other major regional banks in the coming days.

PNC Financial kicked off the regional bank reports this morning. Earnings beat, but revenues were in line. Guidance was a little concerning though. The bank's full year revenue growth outlook of a decline between 1% and 2% is worse than the Street's consensus estimate of down 0.2%.

A key factor to that weakness is PNC's projection for loan growth of down less than 1%, which is poorer than its previous forecast for positive 1% growth.

— Robert Hum

Dow hits new intraday record

The Dow notched a fresh intraday high on Tuesday amid the blue-chip index's outsized rally. At its best, the 30-stock average was up more than 500 points.

— Alex Harring

Small caps are on a tear, up again Tuesday

Small-cap stocks are the hottest trade going in the stock market right now.

The Russell 2000 index, the benchmark for the group, rose 1% Tuesday, after hitting its highest level since January 2022 on Monday. If the index rises another 1% Tuesday, it will be the fifth time since 1979 that it has had a five-day streak of gains north of 1%, according to Bespoke Investment Group.

Small caps took the baton from megacap technology shares last week to lead the bull market on hopes interest rate cuts will broaden out the economic recovery to their benefit.

— Yun Li

Homebuilder ETF rises for a fourth winning session of last five

The iShares U.S. Home Construction ETF (ITB) advanced on Tuesday, putting it on pace for its fourth positive trading day of the last five.

The fund added around 2% in morning trading. It was helped by Dream Finders Homes, Installed Building Products, Toll Brothers and Meritage, which all climbed at least 3%.

With Tuesday's gain, the fund is up nearly 9% on the year.

— Alex Harring, Gina Francolla

Stocks open higher

Stocks kicked off Tuesday's session up.

The Dow added about 0.5% shortly after 9:30 a.m. ET. The S&P 500 and Nasdaq Composite each gained around 0.3%.

— Alex Harring

Retail sales data comes in better than expected

Retail sales data released Tuesday morning came in strong than economists predicted.

Sales were little changed in June, while economists polled by Dow Jones penciled in a decline 0f 0.4%. Excluding autos, sales rose 0.4%, a larger gain than the 0.1% consensus forecast.

— Alex Harring

Stocks making the biggest moves premarket

Check out some of the companies making headlines before the bell:

• Morgan Stanley — The bank stock fell more than 2% in premarket trading even after the firm's second-quarter results beat Wall Street estimates thanks to strong performance in trading and investment banking. The bank said profit surged 41% from the year-earlier period, helped by a rebound in Wall Street activity. Revenue rose 12% to $15.02 billion.
• Bank of America — Shares added nearly 1% after the bank reported second-quarter financial results that topped expectations. Earnings came in at 83 cents a share, versus the 80 cents expected from analysts polled by LSEG. Revenue was $25.54 billion, beating the $25.22 billion consensus estimate.
• UnitedHealth — Shares were rose slightly after the release of better-than-expected results for the second quarter. The health insurance giant earned $6.80 per share, excluding certain items, on revenue of $98.86 billion. Analysts expected a profit of $6.66 per share on revenue of $98.84 billion.

The full list can be found here.

— Hakyung Kim

Morgan Stanley tops expectations for earnings

Morgan Stanley shares slipped despite exceeding Wall Street forecasts in its Tuesday earnings report.

The bank earned $1.82 per share on $15.02 billion in revenue. Analysts polled by LSEG penciled in just $1.65 per share and $14.3 billion.

— Alex Harring

Bank of America earnings beat expectations

Bank of America posted second-quarter earnings and revenue that beat analyst expectations, sending shares up nearly 1%. The bank earned 83 cents per share on revenue of $25.54 billion. Analysts expected a profit of 80 cents per share on revenue of $25.22 billion.

— Fred Imbert

European markets open lower

European stocks opened lower Tuesday as investors assess the economic and political outlook in the region and beyond.

The pan-European Stoxx 600 was down 0.5% as all sectors and major bourses traded in the red. Mining stocks led losses, down 0.97%, while autos also sank 0.9%.

The U.K.'s FTSE index was 0.29% lower at 8,159, Germany's DAX down 0.47% at 18,504, France's CAC 40 0.6% lower at 7,586 and Italy's FTSE MIB down 0.51% at 34,201.

— Karen Gilchrist

Nvidia leads the S&P 500 and Nasdaq Composite higher on Monday

Nvidia was the biggest gainer for both the S&P 500 and the Nasdaq Composite during Monday's trading session.

On the other hand, Meta Platforms was the biggest laggard for both indexes.

UnitedHealth was the most positive stock within the Dow Jones Industrial Average and helped lead the index to a new record closing high on Monday afternoon. JPMorgan marked the 30-stock index's biggest laggard.

— Lisa Kailai Han

Stocks making the biggest moves after the bell: Trump Media, FB Financial

These are the stocks moving the most in extended hours trading:

• Trump Media and Technology — The stock was down nearly 11%. It had previously soared more than 30% during Monday's day trading session after Saturday's attempted assassination of former President Trump, which has increased sentiment of a Trump win in November.
• FB Financial — Shares added nearly 2% after the regional bank posted a second-earnings beat. FB Financial reported adjusted earnings of 84 cents per share, while analysts polled by FactSet had expected 76 cents. The bank also beat consensus estimates on other metrics, such as net interest income and net interest margin.

— Lisa Kailai Han

Stock futures rise slightly

Stock futures were slightly higher on Monday night.

Dow futures added 42 points, or 0.1%, shortly after 6 p.m. ET. S&P 500 futures and Nasdaq 100 futures respectively added 0.1% and 0.2%.

— Lisa Kailai Han