Small Cap ETF IWM Notches Big Gains

Blue chips, bank, retail and crypto ETFs jump while oil funds dip.

3 Updates 
Sat, February 8, 2025 At 10:10 AM EDT
Sumit Roy | Senior ETF Analyst |

Hopes for interest rate cuts push small cap ETFs higher

Investors have witnessed an eye-popping surge in small cap exchange-traded funds over the past week. 

Since it became clear that the first Fed rate cut is likely on its way in September, the iShares Russell 2000 ETF (IWM) has surged by double digits.

On July 9, the ETF was trading at around 201. A week later, it’s at 224—equal to a gain of more than 11%. Today alone, it jumped 3.4%.

When the rally began a week ago, the fund had a year-to-date gain of just 0.9%; today, it’s 8.8%.

The latest nonfarm payrolls report, released July 5, and the most recent CPI report, released on July 11, have pushed the probability of a September rate hike above 90%, based on the pricing of federal funds futures.

IWM Flows

Source: etf.com

Lower rates benefit smaller companies, many of which have more debt and pay higher interest rates than their larger counterparts.  

Sat, February 8, 2025 At 10:10 AM EDT
Ron Day | Contributing Editor |

DIA, XLF, XLY gain along with small-cap CALF fund.

The blue chip SPDR Dow Jones Industrial Average ETF Trust (DIA) continued its upward march as earnings propelled financial stocks and better-than-expected consumer spending pushed retailers higher.

DIA, which has pulled in a net $1.1 billion over the past five days, rose 1.4%, bringing its year-to-date gains past 7%.  

The Financial Select Sector SPDR Fund (XLF) jumped 0.8% after Bank of America Corp., Citigroup Inc. and Morgan Stanley all reported earnings that topped estimates.

June retail sales were unchanged, outpacing the expectation for a 0.4% decline, according to the Wall Street Journal’s estimate. The Consumer Discretionary Select Sector SPDR Fund (XLY) moved up 1.4%.

The rotation into small caps continued as investors put money to work in companies that will benefit from rate cuts that are expected in September. CALF, the Pacer U.S. Small Cap Cash Cows 100 ETF jumped more than 2%.

Oil investments dipped today, with the United States Oil Fund LP (USO) shedding 1.4%.  

Tue, July 16, 2024 At 10:41 AM EDT
Kristin Myers | SVP Content/EIC |

CALF Rises on Small Cap Trade, Economic Data Boosts Markets

The rotation into small caps continues as investors put money to work in companies that will benefit from rate cuts that are expected in September. CALF, the Pacer U.S. Small Cap Cash Cows 100 ETF jumped nearly 2% in early trading on Tuesday, rising to just under $46. 

The fund is still off from its record highs that it notched over six months ago, but climbing steadily from dips just a month ago.

Year to date, the fund is down over 7%, but has only slid 1.5% in the past month. 

Price chart for the past year of the ETF CALF

RSP, the Invesco S&P 500 Equal Weight ETF also nudged higher amid the rotation. The fund, which serves as a proxy for investor interest in stocks that aren't the big tech names that make up the Magnificent Seven, jumped over 1% in trading on Tuesday. 

In contrast, SPY, the SPDR S&P 500 ETF Trust only rose .15%.

Comparison performance chart of ETFs RSP and SPY

TNA, the Direxion Daily Small Cap Bull 3x Shares was among the most actively traded ETFs on Tuesday, according to etf.com data. The leveraged fund which bets on rising prices in the Russell 2000 index, jumped over 5%, with more than 11M shares of trading volume. It's counterpart fund, the Direxion Daily Small Cap Bear 3X Shares (TZA) which bets on falling prices of small cap funds sank over 5%. 

Broad markets jump on strong economic data

Across the broad market, ETFs jumped on strong retail data released by the Commerce Department on Tuesday. Retail sales was unchanged in June, better than the .4% decline economists polled by Dow Jones were expecting. 

Minus autos, retail sales jumped .1% in June. Roughly 70% of the U.S. economy is based on consumer spending, so the strong numbers defied a narrative of a slowing economy.

DIA, the SPDR Dow Jones Industrial Average ETF Trust jumped nearly 1.5% Tuesday. QQQ, the Invesco QQQ Trust slid by a quarter of a percentage point as investors shied away from major tech names in favor of small cap companies. 

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