NEW YORK — The Russell 2000 Index, which just completed the strongest first half of any year since 1991, closed Thursday with a modest decline of 0.55%, settling at 2,996.11 and finishing just below the psychologically significant 3,000-point level as the broad chip sector selloff that rattled the Nasdaq for a second consecutive session weighed on small-cap technology and semiconductor-adjacent names even as the Dow Jones Industrial Average hit a fresh all-time record.

The day's pullback for small-cap stocks came on the final trading session before the Fourth of July holiday weekend, with U.S. markets closing Friday in observance of Independence Day. The small decline capped a week that itself followed one of the most remarkable six-month stretches for American small-cap equities in a generation.

The Russell 2000 gained 22% in the first half of 2026, its best performance since 1991 and well above the S&P 500's 9.6% first-half advance. The rally also outpaced the Dow Jones Industrial Average's 8.9% gain and the Nasdaq's 12.8% climb, a reversal of the large-cap-heavy pattern that had defined much of the prior three years when megacap technology stocks captured nearly all of the headline performance.

"It's both a valuation catch-up story and a fundamental story," said Amy Zhang, portfolio manager at Alger. "The valuation gap was so wide that a truck can drive through it. At the same time, fundamentals are improving in small-caps and I think that's why it's causing the broadening trade."

Consensus forecasts for Russell 2000 companies' 2026 earnings growth have climbed to 38% from about 23% at the start of the year, according to LPL........

© International Business Times