This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Dow scores another record
The Dow Jones Industrial Average rose more than 700 points to close at another record high as the bull run appeared to broaden. The small cap-focused Russell 2000 rose for the fifth straight day, rising 3.5%. The S&P 500 gained 0.64%, while the Nasdaq inched up 0.2% as tech was left out of the rally. The yield on the 10-year Treasury slipped and U.S. oil prices also declined. 

100% certainty 
Traders are now certain that the Federal Reserve will cut interest rates by September, with a 93.3% probability of a quarter percentage point cut and a 6.7% probability of a half percentage point cut. This certainty stems from the recent consumer price index update, which showed annual inflation slowing to 3%, the lowest in three years. A month ago, the odds of a September rate cut were only around 70%.

Gold hits record high
Gold prices surged to a record on rising expectations of an interest rate cut in September. Investors are turning to gold as a safe haven amid softer inflation data and dovish comments from Fed Chair Jerome Powell, boosting the likelihood of rate cuts this year. Gold futures settled up 1.6% higher at an all-time closing high of $2,467.8 per ounce. The precious metal also reached a fresh intraday record high of $2,474.5 during the session. Spot gold mirrored this surge, jumping 1.9% to hit an all-time high of $2,468.68 an ounce, according to LSEG data dating back to 1968. You can read more here as Ray Dalio, the founder of the world's largest hedge fund Bridgewater Associates, explains the appeal of gold. 

Bank of America soars
Shares of Bank of America rose more than 5% after second-quarter revenue and profit topped expectations. Although net interest income fell 3% to $13.86 billion, as expected, the bank said it expects the measure to rise to $14.5 billion in the fourth quarter. NII, a measure closely watched by shareholders, is the difference between what a bank earns on loans and what it pays depositors for their savings. Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday and Morgan Stanley on Tuesday, helped by a rebound in Wall Street activity.

Global inflation threat
A second term for former President Donald Trump could spark global inflation, analysts warn. Trump's America-first policies, characterized by high tariffs and low taxes, may drive up costs worldwide. "Compared to 2016, when inflation had been low forever and inflation expectations were low ... 2024, 2025 is going to be very different," Michael Metcalfe, head of macro strategy at State Street Global Markets, told CNBC's "Squawk Box Europe." "The level of inflation is higher, inflation expectations are higher, and we're still in this inflation mindset."

[PRO] Top AI pick
Bank of America reiterated a buy rating on a leading chipmaker, citing the company's strong position in the AI market. Analyst Vivek Arya expects AI to become a $30 billion to $50 billion opportunity for the company over the next three to five years, driven by strong demand from both cloud vendors and consumer-facing AI platforms.

The bottom line

Small-cap stocks are surging, with the Russell 2000 index reaching its highest level since January 2022 and posting a rare five-day streak of gains. The index is up almost 12% this month, while the S&P 500 has advanced 4% and the Nasdaq a similar amount. The rally is fueled by hopes that interest rates may decline as inflation nears the Fed's target, potentially broadening the economic recovery.

That may come as a relief to seasoned investors concerned by the market's reliance on a handful of tech stocks during the 21-month bull market. 

David Kostin, chief U.S. equity strategist at Goldman Sachs, told CNBC's "Squawk on the Street" that he expects "some broadening in the next six months" because "the market itself as an index is up 20% year to date; typical stock in the S&P 500 is up 7%. So, that gap has largely been driven by the major five companies."

Kostin also explained why interest rate cuts could benefit small caps: "The expectation is the Fed will be cutting interest rates starting in September and probably in December, as well, and that historically has been a benefit for small-cap companies where, basically, 30% of their borrowings are in the floating rate form. And, therefore lower interest rates, lower interest expenses, higher earning estimates would be a consequence of that. That's one area in particular you want to be thinking about from the Russell 2000 or broadening of the market more generally." 

Christopher Harvey, head of equity strategy at Wells Fargo Securities, is more skeptical about the rotation narrative. "We're not against the rotation," Harvey told CNBC on Monday. "We're just waiting for it."

"Until we start to see situations where a Nike, a Delta, a Walgreens doesn't go down on bad news — we're not convinced of the rotation. We want people to believe that numbers are going to be higher, that things are going to get better. But bad news right now is bad news. And that for us, tells us that the rotation is probably not sustainable."

We may be at that inflection point. The big six banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley — have delivered revenue and earnings that exceeded expectations, boosting their stock prices after being overlooked during the bull run. While the unloved regional banks have struggled in the post-pandemic rate-hike cycle, CNBC's Jesse Pound writes that their stocks may rise further even if second-quarter earnings are modest.

— CNBC's Brian Evans, Alex Harring, Lisa Kailai Han, Yun Li, Jesse Pound, Sarah Min, Karen Gilchrist, John Melloy and Hugh Son contributed to this report.