Small-cap stocks inched closer toward a correction on Wednesday, marking the latest speculative trade to flash warning signs. The Russell 2000 slid nearly 1% in Wednesday's trading, underlining its weak start to the year. With that, the index widely seen as a bellwether for U.S. small-cap names approached correction territory, which is when an average falls 10% from a recent high. .
Ultimately, the Russell 2000 sharply underperformed the S & P 500 in 2024, which surged 23% in the period. "Capping off a year where rates/the Fed were a key driver of Russell 2000 returns, concerns around small caps' rate sensitivity/refi risk have reemerged in recent months amid a more hawkish FOMC," said Jill Carey Hall, head of U.S. small and midcap strategy at Bank of America, in a recent note to clients.
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