Small Caps Falling

Year to date the Russell 2000 has outperformed its large cap counterparts, the Dow and S&P 500 . Is the tide turning? This week, the index whose constituents have a median market value that is less than 5% of the median value of an S&P 500 company is down nearly twice as much as the large cap indices. Perhaps the market is suggesting that the current financial crisis will have a greater impact on the smaller companies.

On a YTD basis, the Dow, S&P and NASDAQ are all down nearly 20%, while the Russell 2000 is down less than 10% (see chart). As the global economy weakened, there were expectations that the small caps, with less exposure, might be protected from the softening demand overseas.

Now looking at the past five days, the story is reversed. The Russell 2000 is down nearly twice as much as the other major indices. As of the open this morning, the Russell 200 is down over 8% for the week.

Companies leading the slide this week include

  • Fedral Agricultural Mortgage Company down 77% for the week
  • Pilgrims Pride down 70% for the week
  • Dollar Thrifty Automotive down 53% for the week
  • CORUS Bankshares down 49% for the week
  • Cache down 42% for the week

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