US stocks rise as small caps lead and tech takes a breather

David Morrison

SENIOR MARKET ANALYST

16 Oct 2025

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US stock indices were mostly higher by Wednesday’s close. The Dow was the only exception, although it ended the session little changed. The small cap Russell 2000 led the pack, closing up 1.0% and at a fresh record close. The NASDAQ added 0.7% while the S&P 500 tacked on 0.4%. All the majors remain within sight of their all-time highs, having recaptured most of the losses from last Friday’s sell-off, which was triggered by President Trump’s Chinese tariff threat.

Source: TN Trader

Despite yesterday’s overall gains, it was an uneven trading session, which saw early strength fade into mid-session weakness before buyers stepped back in a few hours before the close. Investor sentiment was whipsawed by renewed concerns over US-China trade, along with the ongoing US government shutdown, which is now in its third week.

Despite all this, the underlying market tone remained resilient, supported by a decent round of bank earnings that helped offset lingering macro uncertainty. This added to overall positive sentiment, which continues to be driven by expectations of future productivity gains from the development of artificial intelligence (AI), along with the prospect of looser monetary policy from the Federal Reserve.

As to the former, market leadership remains narrow. According to LPL’s Adam Turnquist, much of the rally in the S&P 500 since July has been concentrated in large-cap tech, with just a handful of AI-driven names - Nvidia, Apple, Alphabet, Broadcom, and Tesla - accounting for around 60% of the market’s gains.

But there are signs that investors are looking for opportunities outside the growthy tech stocks. The Russell has belatedly joined in the party and, as noted above, is trading at all-time highs. Investors are looking for stocks which are more reasonably priced and offer better value outside big tech. But it remains to be seen how loyal they will be to these domestically-focused stocks should the market suffer another sharp sell-off.


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