U.S. equity markets successfully navigated the kickoff of second-quarter corporate earnings, shifting tech dynamics, and ongoing rotational capital flows in the week ending July 24, 2026.

As Wall Street prepared for the upcoming Federal Reserve policy meeting on July 28-29, 2026, the week showed large-caps attempting to stabilize following the volatility they experienced earlier in the month, with small-caps maintaining their strength relative to broader market benchmarks.

Small-Caps vs. The Broader Market

The multi-month story of small-cap outperformance remained a central theme in the week. Large-cap technology benchmarks experienced uneven performance as investors continued to take a hard line against artificial intelligence capital expenditures, while the S&P SmallCap 600 Index once again showed resilience, building up its lead over the mega-caps.

Across other aspects of the market, the performance divergence between small-caps and large-caps continued. Through late July 2026, small-caps have comfortably led the market. The S&P SmallCap 600 presently sits pretty with a gain of more than 19% for the year, significantly outpacing the single-digit 8.5% to 9% advance of the S&P 500.

Over the past 52 weeks, the rotation out of extreme mega-cap technology stocks into broader value and domestic small-cap equities has propelled the S&P SmallCap 600 to a gain of greater than 33%, nicely outstripping the trailing one-year returns of market-cap-weighted large-cap indexes.

Macroeconomic Indicators and News

Economic and earnings catalysts took center stage during the week

Following mid-July CPI reports showing headline inflation cooling to 3.5% and core CPI easing to 2.59%, the odds for an interest rate hike at the July 29 FOMC meeting remained low, holding expectations in check that Chair Kevin Warsh and the Federal Reserve will maintain current rates.

Early S&P 500 earnings results have proved to be robust, with nearly 88% of companies reporting so far exceeding earnings estimates.

The S&P Dow Jones Indices implemented constituent updates effective prior to the open on July 24, with Krystal Biotech graduating from the S&P SmallCap 600 to the S&P MidCap 400. Construction company Tutor Perini Corp. joined the SmallCap 600.

Sector Movements and Market Movers

Sector performance reflected industrial demand along with semiconductor stabilization. Industrial leader 3M jumped over 7% following stronger-than-expected Q2 financial results, while General Motors gained nearly 5% after topping revenue and profit forecasts.

Semiconductor shares saw renewed buying interest as investors scanned initial earnings reports, though high capex guidance kept valuations restrained.

Industrials, financials, and domestic cyclical sectors led weekly inflows, supported by record active equity ETF inflows. Investors remain hungry for new avenues to build wealth.

Near-Term and Long-Term Investor Sentiment

Data and market behavior seem to reveal several priorities that investors are focusing on.

In the near-term, investors are watching Q2 for continued corporate profitmaking, especially in tech earnings reports (including Alphabet and Tesla), as well as for verification that cooling inflation will allow the Fed to keep rate conditions stable.

Over the long term, investors do seem to be focused on broadening their portfolios beyond mega-cap techs, and are allocating capital toward fundamentally sound cyclical, industrial, and small-cap assets driven by U.S. economic resilience and sustained infrastructure investments.

In the SmallCap Informer

The biggest movers of the week from our SmallCap Informer coverage list were:

• Medpace Holdings (MEDP) + 12.62%
• Fabrinet (FN) + 12.50%
• M-Tron Industries (MPTI) + 11.42%

Exclusive Webinar for SmallCap Informer Subscribers

With small-caps boasting a massive trailing twelve-month gain of more than 30%, the big question for the rest of the year is no longer if small-caps will break out, but how high this fundamental rally can go as cash continues to flow into resilient, undervalued sectors. Join me, Doug Gerlach, Editor-in-Chief of the SmallCap Informer, for this subscribers-only mid-year briefing as I cut through the market churn and help map out your portfolio strategy for the second half of 2026. Whether you are hunting for aggressive growth or stable, long-term winners, this session will arm you with the data, insights, and high-conviction stock ideas you need to maximize your returns in this shifting market. Secure your spot today and ensure your portfolio is positioned to win in the second half of 2026!

This webinar will be held on Wednesday, July 29, 2026, at 1:30 PM EST, only for current SmallCap Informer subscribers. Learn more here.

Stay the course!

— DOUG GERLACH, EDITOR-IN-CHIEF

Get great small company stock ideas in each issue of the SmallCap Informer stock newsletter. Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the ~40 high-quality small company stocks currently covered in the newsletter.