The Russell 2000 Index entered a technical correction on Wednesday, falling more than 10% from its recent peak. The small-cap gauge slid 1.9% amid broad market selloffs driven by rising inflation and interest rates. Roughly five stocks in the index fell for every one that climbed, reflecting widespread declines across the sector.
The index has dropped 11% from its August high, marking its first correction since March. Wednesday's inflation report showed prices advanced at the fastest pace since April, with core inflation ahead of expectations. Small caps are highly sensitive to rates, and the data raises the risk of higher policy rates acting as a headwind for the sector.
The index has given up leadership positions last month after the Federal Reserve hiked rates and bond yields spiked. It has broken below its 200-day, 100-day, and 50-day moving averages, as well as the 23.6% Fibonacci level around 2,754. Analysts warn that tighter financial conditions will pressure small caps and consumer and transport names.
Earlier this year, a big index rebalance saw Bloom Energy Corp., Credo Technology Group Holding, Sterling Infrastructure Inc., and TTM Technologies Inc. collectively make up two-thirds of the Russell 2000's advance through June 29 before being moved to the Russell 1000 Index.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing