Key Takeaways:
- Russell 2000 ETF fell 1.37%, the biggest decliner among US equity ETFs
- Brent oil fund rose 1.99% as energy diverged from the broad selloff
- US dollar index gained 0.36% as investors rotated into safe havens
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Small-cap ETFs fall 1.4% to lead broad market decline on June 3
US stocks fell broadly on Wednesday, with the Russell 2000 sliding 1.37% to lead declines, as investors rotated out of risk assets into the dollar and oil.
"The market is increasingly behaving as though the US-Iran war is ending and the oil market is about to return to normal," Stephen Innes, managing partner at SPI Asset Management, said in a note. "I believe the oil market is entering a far more complicated phase than many investors appreciate."
The selloff was broad-based across equity and fixed-income ETFs. The Dow Jones Industrial Average ETF fell 1.13%, while the S&P 500 ETF dropped 0.70% and the Nasdaq 100 ETF declined 0.70%. Emerging market ETFs lost 1.24%, and Barclays US convertible bond ETFs slid 1.16%. Commodities also weakened, with gold ETFs falling 0.99%, soybean funds dropping 1%, and agricultural product funds declining 0.96%.
The US dollar index rose 0.36%, while the Brent oil fund gained 1.99%, extending a divergence between energy and broader markets. Brent crude had tumbled 20% in May — its worst monthly drop since early 2020 — as hopes grew for an end to the US-Iran war, before staging a partial recovery. West Texas Intermediate crude rose more than 2% on Sunday after dropping 17% over the past month to $87.36 a barrel.
The rotation comes after a record-breaking rally that saw the S&P 500 gain 5.2% in May and rise more than 16% over the past two months, fueled largely by red-hot tech stocks. The Nasdaq Composite jumped 8.4% in May alone. All three major US indexes closed at record highs on Friday for the third consecutive day.
Investors now face a key test this week with the May employment report due Friday, which will shape expectations for the Federal Reserve's next policy move. The divergence between equities and commodities — with oil rising even as stocks fall — suggests markets are recalibrating their positioning after two months of relentless gains.
This article is for informational purposes only and does not constitute investment advice.
