Russell 2000: attempted rebound from major support at 1900 points

The Russell 2000 rebounds but remains threatened by the economic slowdown

The Russell 2000 rebounds but remains threatened by the economic slowdown

The New York Stock Exchange ended higher on Monday after a poor start to the day following the deterioration of the health situation in China. Beijing had announced the closure of a district of the capital to carry out screenings for COVID-19, which naturally raised fears of a tightening of health restrictions and consequently a slowdown in the second world economy.

However, the announcement of an agreement between Elon Musk and the board of directors of Twitter for the acquisition of the social network for 44 billion dollars (or 55.20 dollars / share) in cash, has passed these economic concerns to the second plan. Stock markets rebounded, with technology stocks in particular finishing ahead of the pack.

While the health situation in China will remain one of the most important elements of the market, the numerous corporate earnings releases, including those of GAFAM, should also help shape market sentiment this week. Early estimates of first quarter GDP on both sides of the Atlantic, released later in the week, are also expected to influence sentiment.

In the medium and long term, however, the outlook for the Russell 2000 remains gloomy. As the index is made up of small and mid-caps and has a greater share of cyclical stocks, it is much more sensitive to changes in financing costs and the economy. Funding costs will continue to rise as the Fed tightens monetary policy and the economy will continue to slow as the war in Ukraine persists and health restrictions tighten in China. Inflation is also a headwind that affects small and medium-sized businesses more because their pricing power is generally weaker than that of large businesses.

Russell 2000 daily price chart – key levels

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