U.S. stock markets are rallying to start the week on news that President Joe Biden has ended his bid for re-election and endorsed Vice-President Kamala Harris as the Democratic nominee.
All three major U.S. stock indices are solidly in the green to begin the trading week, with the technology-laden Nasdaq Composite index up 0.71%.
The rally comes after the benchmark S&P 500 index suffered its worst downturn last week since April of this year as investors rotated out of technology securities and into value and small-cap stocks.
The rotation had been prompted by a noticeable decline in U.S. inflation and growing certainty that the U.S. Federal Reserve will begin cutting interest rates this September.
Futures traders are betting 100% that the American central bank will cut interest rates in September of this year.
Last week, the S&P 500 and Nasdaq Composite indices fell 2% and 3.7%, respectively, marking their worst losses since April.
On the flipside, the Dow Jones Industrial Average comprised of 30 blue-chip stocks rose 0.7% and the small-cap Russell 2000 index gained 1.7%.
It remains to be seen if the rotation out of mega-cap technology stocks will continue and if investors will keep allocating capital to other sectors and small-cap stocks.
Traders and investors are keeping an eye on political developments in the U.S. after President Biden announced Sunday that he is ending his re-election bid.
Following Biden’s disastrous debate performance in June, markets were increasingly pricing in the likelihood that former President Donald Trump would regain the White House in elections scheduled for this November.
Snap polls indicate a much tighter election race should Kamala Harris now become the Democratic Party’s nominee for president.
Also influencing markets this week will be a continuation of second-quarter corporate earnings. Alphabet (GOOG/GOOGL) is set to kick-off the Q2 financial results of big technology companies on July 23.
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