Small Caps Lead as Volatility Breaks Lower
1-22-2026
Markets closed broadly higher yesterday as risk appetite improved and volatility pulled back sharply.
Equity futures led the move, with strength spread across large caps, tech, and small caps.
The Russell 2000 stood out as the top performer, rising nearly 2% on the session and extending its strong year-to-date gains. This points to improving market breadth and growing confidence beyond just the largest names.
The Nasdaq 100 and Dow Jones futures both posted solid gains, supported by renewed optimism around growth and earnings.
Technology continued to benefit from steady interest in AI-related themes, while cyclical stocks showed signs of renewed demand. The S&P 500 followed higher, though gains were more measured, reflecting a market that is advancing but still selective.
Gold was another key winner, rising 1.5% and continuing its strong start to the year. Ongoing inflation concerns and shifting rate expectations kept demand firm for hard assets.
Treasury notes also edged higher, signaling stable bond demand despite ongoing debate about the path of interest rates.
On the losing side, volatility was the clear standout.
The VIX fell nearly 16%, suggesting investors were more comfortable holding risk overnight.
The U.S. dollar moved only slightly higher, while crude oil lagged the broader market with a modest gain and later showed weakness in intraday trade.
Overall, yesterday’s session reflected a market focused on growth, broader participation, and easing fear. While macro risks remain in the background, price action showed that buyers are willing to step in when conditions stabilize.
from the Trading Desk at Stipelis
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