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The two-year yield shed 11 basis points and the Russell 2000 tacked on 1.8% Wednesday after core CPI came in at 2.4%—a tick below the 2.5% the Street had penciled in—giving the Fed exactly the cover it needed to stay put and let the data do the talking.
The read-through for rate-sensitive names is straightforward.
Small-caps carry heavier floating-rate debt loads than their large-cap counterparts, so any compression in the front end hits their cost-of-capital math faster and harder.
IWM, the liquid proxy for the Russell 2000, outpaced SPY and QQQ on the session, a rotation that tends to front-run actual easing cycles rather than lag them.
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