Stock Market Update

[BRIEFING.COM] The small-cap shortfall has widened this afternoon. The Russell 2000 (-0.5%) had been down only 0.2% earlier, so the latest action marks a further departure from the large-cap advance.

Interest rates offer some context for the divergence. The 10-year note yield is at 5.27%, down four basis points today, but it has still climbed 110 basis points since the start of the year. Today’s decline provides some near-term relief, yet the persistently elevated rate level remains a bigger hurdle for smaller companies, which tend to have greater exposure to floating-rate debt and refinancing costs than their large-cap counterparts.

The Russell 2000 is still up 14.2% year-to-date after a robust start to the year; however, at its high in mid-August, when the 10-yr note yield stood at 4.69% and the 2-yr note yield stood at 4.17%, the Russell 2000 was up 23.7%.