After U.S. strikes over the weekend, the market is now in wait-and-see mode. Meanwhile, a biotech got a boost from an initiation of coverage last week that made it the biggest gainer, while a solar power stock retreated the most amid negative regulatory developments. This is what happened in small caps last week and what to expect in the week ahead.

Sector performance

As of this writing, small-cap indexes have yet to react to the U.S. strikes on Iran on Saturday, June 21. The market's reaction to the weekend escalation of the conflict in the Middle East has been subdued so far as investors remain in wait-and-see mode, writes Reuters. Vinod Nair, head of research at Geojit Financial Services, says «Small-cap stocks are expected to underperform in the short term, given their elevated valuations and lack of immediate triggers.” 

Last week, June 16-20, the small- and mid-cap-tracking Russell 2000 index rose 0.42% to 2,109 points, while the S&P 500 was virtually unchanged over the same period. 

Freedom Finance points out that the gains were led by materials, IT, and consumer goods. The trigger was last week's Fed decision, where the FOMC decided to hold rates steady.

Biggest individual gainers and losers

The biggest gainer last week was biotech Galectin Therapeutics, which develops new therapies for fibrotic, cancer, and other diseases. Shares had risen 76.6% to $2.40 apiece as of the Friday close. Most of the gain came on Tuesday, when H.C. Wainwright initiated on the company with a «buy» recommendation at a $6 per share target price. That day, more than 7 million shares changed hands, about 10 times the average daily trading volume, with the spike seemingly driven mostly by retail investors and lacking large institutional trades. 

Freedom Global, in a note to clients, argues that the growth in the stock was due mainly to speculative activity. Up to Friday, Galectin Therapeutics had added 152% to $3.90 per share, before giving back half the weekly gain.

The biggest loser of last week was Sunrun, a U.S. provider of photovoltaic systems and battery energy storage products, primarily for residential customers. Over the week, the stock lost 37.7% to $6.23 per share. This comes, Freedom Global explained, after the U.S. Senate Finance Committee approved a proposal to accelerate the phase-out of federal tax credits for the solar industry. It would eliminate the 30% tax credit for residential solar installations 180 days after enactment, directly affecting Sunrun's core rooftop segment. Additional pressure on Sunrun has come from the imposition of anti-dumping and countervailing duties on solar panel (and cell) imports from key Southeast Asian countries, which raises costs for the company. This adds to uncertainty and could reduce demand for Sunrun services and products as early as this year, Freedom Global posits.

Outlook for this week

The key macroeconomic events of this week will be a Conference Board consumer confidence reading for June, which is due tomorrow, Tuesday, June 25, as well as May personal income and outlays from the Bureau of Economic Analysis on Friday, June 27. These data points are particularly important for small-cap companies, which are sensitive to domestic demand, consumer spending, and changes in monetary policy.  

The AI translation of this story was reviewed by a human editor.

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