August 14, 2025 — SmallCap Network

U.S. stocks pulled back from record levels after July producer prices rose more than expected, cooling enthusiasm for a near-term jumbo Fed cut. At the open, the S&P 500 and Nasdaq were modestly lower while Treasury yields climbed, reflecting stickier inflation pressures than Tuesday’s CPI suggested.

Small caps: taking a breather

After a strong two-day rebound, the Russell 2000 eased as traders recalibrated rate-cut odds and rotated back toward larger, cash-rich names. The move follows a brief spell of small-cap leadership earlier this week. Keep an eye on follow-through: sustained advances typically require falling yields and steady risk appetite.

Canada: TSX dips after record run

North of the border, the S&P/TSX Composite opened lower, tracking Wall Street’s inflation jitters a day after posting another all-time high. Energy and financials were mixed as traders weighed Fed implications for global growth.

Europe: insurers firm, Adyen drags

European equities hovered near two-week highs thanks to strong insurer results (Admiral, Aviva), offset by a sharp drop in Adyen after a guidance cut. The region is also digesting the U.S. PPI surprise and its knock-on effects for global rates.

Asia overnight: risk-off tone

Asian markets skewed lower, with Japan’s Nikkei 225 off ~1.5% and China benchmarks softer as investors de-risked ahead of U.S. data.

What matters for SCN readers

Rates drive risk: A hotter PPI blunts the case for aggressive easing. Small caps historically benefit from falling yields and easier credit—watch the front end of the curve and Fed-speak for confirmation.

Breadth check: This week’s improvement in market breadth is intact but fragile. If yields stabilize and earnings catalysts emerge, small caps can re-assert leadership; otherwise expect chop.

Game plan: Favor names with near-term catalysts (earnings beats, contracts/M&A) and balance sheets that can handle a “rates-higher-for-longer” backdrop. Keep position sizes nimble.

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