Wells Fargo Sees U.S. Small Caps Under Pressure After 5.5% Drop

Wells Fargo sees an unfavorable backdrop for U.S. small-cap stocks as debt exposure and earnings downgrades weigh on smaller companies, adding to pressure reflected in the Russell 2000's five-week decline. The index lost 5.5% over five consecutive weeks through Oct. 9, its longest weekly losing streak since May 2022. Wells Fargo's concerns include deteriorating profitability and weaker net margins among small-cap companies. Those with more floating-rate debt face greater sensitivity to interest rates because their borrowing costs change as rates move. Earnings downgrades add to the pressure on smaller companies. Large-cap earnings, meanwhile, have improved, widening the contrast in the outlook for the two groups. Enna Lee reports on investing and digital-asset markets for TokenPost. Send corrections or tips to info@tokenpost.com.

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