By Samir Al Khoury

The Russell 2000 index, an index of small and medium-sized stocks in the United States, continued its ascent for the third consecutive day, reaching 2,055 points yesterday, marking its highest level since December 29, 2023.

However, what is particularly noteworthy is the ongoing surge of the three major American stock indices: the Standard & Poor’s 500, the Nasdaq 100, and the Dow Jones, all reaching historic highs yesterday at 5,048, 18,041, and 38,929 points, respectively.

The performance of the Russell 2000 index is heavily influenced by economic conditions, given that most of the businesses represented are concentrated within the United States. With the majority of US economic indicators surpassing analysts’ expectations, including the Consumer Confidence Index, GDP, Non-Farm Payrolls Report, Average Hourly Wages, Unemployment Rate, and the Manufacturing and Non-Manufacturing PMIs issued by the Institute for Supply Management (ISM), they have provided significant upward momentum to the Russell 2000 Index.

But there are many factors that may put pressure on the Russell 2000 index at this stage, the most prominent of which are:

• Statements from US monetary policymakers hinting at prolonged high interest rates, implying a sustained period of elevated borrowing costs. This scenario poses a challenge for small and medium-sized enterprises, given their limited liquidity or even liquidity deficits. Consequently, they may be compelled to borrow at elevated interest rates, adversely affecting their profit and loss accounts (P&L).
• The persistent crisis among American regional banks, exemplified by the challenges faced by New York Community Bank (NYCB) due to losses stemming from its exposure to the commercial real estate market. NYCB’s stock price plummeted from $10.38 on January 30, 2024, to $3.60 on February 7, 2024, representing a staggering 65% decline. Additionally, the KBW index, representing the US Regional Bank Index, reached 94.29 points last week, its lowest level since December 1, 2023.

Analysts are closely awaiting the release of the Consumer Price Index in the United States of America today at 17:30 UAE time, which will have a direct impact on financial markets, specifically stock markets.

From a technical standpoint, the Russell 2000 index has experienced a 1.18% rise since the beginning of the year up to yesterday’s session. The primary obstacle lies in reaching 2,077.8 points, the level recorded on December 28, 2023. Notably, a golden crossover occurred between the 50-day moving average in blue, situated at 1,967 points, and the 200-day moving average in yellow, positioned at 1,861 points, signaling bullish momentum for the Russell 2000.

Furthermore, analyzing the MACD indicator reveals a bullish intersection between the blue MACD line and the orange SIGNAL indicator within the positive zone, indicating upward momentum for the Russell 2000 index.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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