Russell 2000 Outperforms Big Tech in Early Market Shift

Small-cap stocks are staging a remarkable comeback, with the Russell 2000 outperforming both the S&P 500 and Dow Jones for seven consecutive trading days—a pattern unseen since January 2019. Capital is rotating into cyclical sectors like banking, materials, and consumer goods, signaling renewed confidence in traditional economic activity.

This rotation arrives amid contradictory earnings forecasts. While tech remains the S&P 500's profit growth leader (projected +20% YoY), non-tech sectors face a steep decline from 9% to 1% earnings growth. The burden now falls on industrial bellwethers like Caterpillar and JPMorgan to validate economic expansion narratives.

Piper Sandler's Michael Kantrowitz notes this marks the first year since 2019 with broad-based fiscal tailwinds, favoring transportation and manufacturing plays. Yet the tech-growth dichotomy persists—Bloomberg Intelligence data suggests growth stocks retain earnings momentum even as capital migrates to value-oriented small caps.