Despite increasing volatility and tariff talks, most of the major stock market indexes have reached or surpassed their pre-correction highs, with the Russell 2000 looking like the next one to join the party.
With small-capitalized, domestic stocks not expected to be affected by the tariffs, the Russell 2000 could be next index to recapture its pre-correction high, according to E*TRADE in a blog post this week. After all, the Russell 2000 ended last week's trading session less than 1% off its Jan. 23 close of 1,610.71, which E*TRADE Financial Corporation (ETFC) noted was its high.
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In an earlier blog, the online brokerage pointed out that the Russell 2000 Index, which is the small-cap benchmark, has outperformed the S&P 500 and the Dow Jones Industrial Average since the tariffs were first announced. President Donald Trump has implemented a policy in which imported steel faces a 25% levy and aluminum imports are subject to a 10% tariff. President Trump did provide exceptions for Canada, Mexico and Australia.
At the same time that the Russell 2000 was gaining, the Nasdaq 100 Index (NDX) set a new record high at the end of last week, erasing the correction seen in February, while the S&P 500 Index neared the peak it saw at the end of February and could test its all-time high set in January, wrote E*TRADE. "The market had to wade through see-sawing updates on the White House tariff initiative, but stocks began the week with a rally on Monday and ended it with an even bigger one on Friday – thanks to some booming numbers from the monthly employment report – which produced the broad market's second-strongest week of the year," wrote the online brokerage. "All the major indexes are now back in the black for 2018. Small-caps continued to show some of the relative strength they exhibited last week, and the NDX pushed its year-to-date gain to double digits."
Helping stocks last week and into trading this week was Friday's employment report, which revealed that the U.S. economy added 313,000 jobs, much higher than the 205,000 jobs economists were looking for. At the same time, wage growth did not reach the same rate, easing concerns that inflation is rising, which could require the Federal Reserve to raise interest rates quicker than expected. If the rally continues, the indexes could soon set new highs.