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June retail sales stronger than expected

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BofA profit beats expectations

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UnitedHealth ( UNH ) rises after Q2 profit beats estimates

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Russell 2000 touches multi-year high

(Updates to market close)

By Stephen Culp

NEW YORK, July 16 (Reuters) -

The Dow Jones Industrial Average reached an all-time closing

high on Tuesday after U.S. retail sales data supported the

narrative that the Federal Reserve is approaching its easing

cycle, reining in inflation while avoiding a recession.

The S&P 500 also rose, but weaker megacap growth stocks, led

by Nvidia Corp ( NVDA ) and Microsoft Corp ( MSFT ), capped the

tech-heavy Nasdaq's gains.

Economically sensitive small caps extended their rally. The

Russell 2000 scored a fifth straight day of gains greater

than 1%, its longest winning streak since April 2000.

Dow transportation stocks also outperformed the

broader indexes as investors increasingly focused on undervalued

areas of the market.

Value stocks, which have underperformed their growth

peers and the broader S&P 500 so far this year, ended

sharply higher.

"This rotation underscores the likelihood of interest rate

cuts as early as September," said Greg Bassuk, CEO at AXS

Investments in New York. "Small cap companies are among the

best-positioned to benefit from rate cuts, and today we're

seeing this trifecta of strong earnings, a resilient economy and

high confidence of a rate cut in September."

Economic data on Tuesday included stronger-than-expected

retail sales reported by the Commerce Department. This provided

reassurance that consumers, responsible for about 70% of U.S.

gross domestic product, have stayed resilient despite

restrictive monetary policy, and eased fears that high interest

rates could tip the economy into recession.

"As you look at the economic data, it's slowing down but not

at a concerning pace," said Tom Hainlin, national investment

strategist at U.S. Bank Wealth Management in Minneapolis. "The

Fed is seeing what it wants to see - it's that sweet spot of the

economy slowing down but not too much and not too fast."

"This small cap rally seems predicated on the Fed

cutting rates at the September meeting, where the futures

markets are setting up a 100% probability," Hainlin added.

Second-quarter earnings season is ramping up.

UnitedHealth Group ( UNH ) jumped after reporting

consensus-topping profit, lifting the blue-chip Dow and

the S&P 500 Health Care index to all-time highs.

Bank of America's ( BAC ) second-quarter profit beat

expectations, and underwriting fees rose as capital markets

resurged. The second-largest U.S. bank also provided upbeat net

interest income guidance, sending its shares higher.

Morgan Stanley ( MS ) rose even after the investment bank

posted disappointing wealth management revenue.

Charles Schwab ( SCHW ) slid after reporting a dip in

interest income.

According to preliminary data, the S&P 500

gained 35.98 points, or 0.64%, to end at 5,667.20 points,

while the Nasdaq Composite gained 38.29 points, or

0.21%, to 18,509.34. The Dow Jones Industrial Average

rose 746.60 points, or 1.86%, to 40,958.32.

Tinder parent Match jumped on news that activist

investor Starboard has a stake of over 6.5% in the company.

Interactive Brokers ( IBKR ) and J.B. Hunt Transport

Services were among those due to post earnings shortly.