Small-cap Russell 2000 enters correction territory | USAEMALL.com

The Russell 2000 has fallen more than 10% off its recent high, becoming the first of the major U.S. benchmarks to fall into correction territory in 2026.

The Nasdaq Composite joined the small cap index later in the afternoon, falling more than 10% off its most recent high.

A correction is defined as a decline of more than 10% and less than 20%.

Small caps actually outperformed to start the year, with the Russell 2000 just 1% off in 2026 as the hope of easier monetary policy and a pivot away from large caps boosted the asset class.

But the benchmark has tumbled this month amid the ongoing war in Iran, which has spurred a more than 50% spike in Brent crude oil futures. The Russell 2000, which has greater exposure to cyclical sectors, is especially sensitive to changes in oil prices and a slowdown in the economic cycle. It’s down more than 6% this month.

“It usually is the smaller companies that take the beating first,” said Sam Stovall, chief investment strategist at CFRA Research. “Questions over a softening in economic growth, stagflation, or even a recession, are more apt to adversely affect small caps than large caps, thus placing them between a rock and a hard place.”

The Russell 2000 and Nasdaq could soon be joined by other of the major averages. The Dow Jones Industrial Average was last a little more than a stone’s throw away, more than 9% off its own record. The S&P 500 was off by more than 6%.