The Russell 2000 Index

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[RUT  Loading...      ()   ], a gauge of the small-cap sector, officially entered a bear market Thursday, dropping more than 20% from its intraday high reached in late April.

“In an uncertain market, I’m going to stick with allocations to larger cap stocks before the small caps,” said Patty Edwards, founder of Storehouse Partners and a Fast Money trader. “Plus, generally speaking these are the companies that are less established, with smaller war chests and fewer reserves to tap in a bad economy.”

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A jobs report today that showed fewer than expected private jobs created in June added to mounting concerns that the US economy is headed toward a double-dip recession. Weaker-than-expected manufacturing data from China this week compounded fears that the whole global economy may be on a precipice. A further delay in the Senate vote on US financial regulation also added to the uncertain environment this week.

The Russell 2000, which contains companies with a median market value of $436 million, hit an intraday high of 745.95 on April 26 as expectations of a housing recovery increased and as regional banks rebounded on the stabilization of the financial system. It traded as low as 590.55 yesterday before rebounding into the close. The measure was down again today.

Small-cap stocks are considered riskier investments because they are more levered to any changes in the economy, liquidity and consumer credit. As these conditions improved over the last 12 months, the Russell 2000 outperformed the rest of the stock market, jumping more than 30 percent. The Russell 3000 Index

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[RUA  Loading...      ()   ], a broader measure containing the 1,000 largest stocks as well, increased about 20 percent.

The largest holdings in the Russell 2000 include Tupperware

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[TUP  Loading...      ()   ], Domtar

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[UFS  Loading...      ()   ], Polycom

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[PLCM  Loading...      ()   ] and Tempur Pedic

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[TPX  Loading...      ()   ].

Large-cap stocks, as measured by the S&P 500, have the most cash on hand ever right now, with 10% of their assets in short-term instruments, according to Goldman Sachs. They also have easier access to the capital markets if banks pullback on lending.

“It’s the ‘Karate Kid’ trade,” said Edwards. “Risk on. Risk off.”

Russell 2000's Largest Holdings

TUP

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UFS

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PLCM

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TPX

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For the best market insight, catch Fast Money each night at 5pm ET, and the Fast Money Halftime Report each afternoon at 12:30 ET on CNBC.

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John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team.

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Trader disclosure: On July 2, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (FCX), (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova is short gold; Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135  CALLS; Najarian Owns (PFE); Najarian Owns (CELG); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST)

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)

For Patty Edwards
Edwards Owns (PM)
Edwards Owns (AAPL) For Clients
Edwards Owns (AMGN) For Clients
Edwards Owns (AMZN) For Clients
Edwards Owns (BA) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (CELG) For Clients
Edwards Owns (DO) For Clients
Edwards Owns (EBAY) For Clients
Edwards Owns (FCX) For Clients
Edwards Owns (GLD) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (HD) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (MS) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (QQQQ) For Clients
Edwards Owns (SPY) For Clients
Edwards Owns (WFC) For Clients
Edwards Owns (WMT) For Clients
Edwards Owns (YHOO) For Clients
Edwards Owns (VXX) For Clients
Edwards Owns (PM) For Clients

For Brian Kelly
Kelly Is Short (GS)
Accounts Managed By Kanundrum Capital Are Short (FCX)
Accounts Managed By Kanundrum Capital Are Short (USO)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (PCAR)
Accounts Managed By Kanundrum Capital Are Short (WYNN)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (XLI)
Accounts Managed By Kanundrum Capital Are Short (XLK)
Accounts Managed By Kanundrum Capital Are Short (EWI)
Accounts Managed By Kanundrum Capital Are Short (EWO)
Accounts Managed By Kanundrum Capital Are Short (BUCY)
Accounts Managed By Kanundrum Capital Are Short (MCO)
Accounts Managed By Kanundrum Capital Are Short (NATI)
Accounts Managed By Kanundrum Capital Are Short (RSX)
Accounts Managed By Kanundrum Capital Are Long Euro
Accounts Managed By Kanundrum Capital Own (SDS)

For Anthony Scaramucci
Scaramucci Owns (GS), Skybridge Owns (GS)
Scaramucci Owns (C), Skybridge Owns (C)
Scaramucci Owns (BAC), Skybridge Owns (BAC)

Brian Nagel
***No Disclosures On BBBY, WSM, LTM, PIR

Mark Schoenebaum
ISI Does And Seeks To Do Business With (GILD), (CELG), (GENZ), Has Recieved Non-Investment Banking Compensation In Past 12 Months

Mark Chandler
***No Disclosures

Mike Boyd
***No Dislcosures