Small-cap stocks outperformed last week as investors reacted to a dovish interpretation of a hawkish Federal Reserve rate cut. While large-cap tech lagged amid concerns over AI capital intensity, small caps rallied on the Fed’s announcement that it would begin purchasing Treasury bills—an action many viewed as quantitative easing in all but name. Commodity markets diverged, gold surged to record highs, and the yield curve steepened to its highest level since early 2022, signaling improving economic expectations. Markets now turn their focus to key labor, retail sales, and inflation data in the week ahead.

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