US small-cap and industrial stocks are dropping, typically signals of a recession, but in a year where equities have already beaten expectations some investors are dismissing the moves as little more than noise — for now.
The S&P 500 Industrials index peaked on Aug. 1 and is down about 8% since then, teetering on a correction after several major US carriers cut their profit outlooks for the third quarter on a sudden jump in oil prices. The small-cap Russell 2000 Index has lost more than 11% from its July 31 closing high, roughly twice the decline in the S&P 500 Index over the same time. Steep drops in small-cap and industrial stocks typically occur when the economy is in a recession.
There are other signs of trouble in the stock market. The S&P 500 Index is headed for its first quarterly loss in a year, just had its worst week since March 10, when Silicon Valley Bank collapsed, and has shed 2.8% since Wednesday, the day of the Federal Reserve’s policy announcement that featured the theme of “higher for longer” rates.
Read the full story on Bloomberg here.