Key Highlights

● The Russell 2000 rose 3.01 points to 2,784.03 while the Nasdaq Composite fell 694 points.

● The 10-year yield fell below a key level for the first time since September 22.

● Valley National, Cathay General and S&T Bancorp rose on solid earnings.

● Biohaven surged after the FDA accepted its resubmitted troriluzole application.

The Russell 2000 crept up 3.01 points on Thursday, October 22, to close at 2,784.03, according to market data. The modest gain contrasted with a 694-point plunge in the Nasdaq Composite and a 93.74-point drop in the S&P 500, as investors fled the largest AI and chip stocks.

The small-cap benchmark tracks about 2,000 smaller US companies, and it carries far less exposure to the mega-cap technology names that dominate the larger indexes. That made it a relative safe spot on a day when the pain was concentrated at the very top of the market.

Falling yields gave small caps a lift

The biggest tailwind came from the bond market. The 10-year Treasury yield closed back below a closely watched threshold for the first time since September 22, and the two-year yield dropped sharply too. Smaller companies tend to rely more on borrowing, so lower yields can ease their financing costs.

Regional banks benefited from the shift and from solid results. Valley National Bancorp (NASDAQ:VLY) rose to about $13.71 after adjusted earnings of 36 cents a share beat estimates. Cathay General Bancorp (NASDAQ:CATY) climbed to $64.18, near its 52-week high, on record net interest income of $211.9 million. S&T Bancorp (NASDAQ:STBA) gained after posting record diluted earnings of $1.09 a share; CEO Chris McComish described "another one of record earnings per share, record revenue, and higher core profitability."

Earnings winners and biotech jumps

Industrial results also helped. Ryder System (NYSE:R) jumped after adjusted earnings of $4.33 a share topped estimates and it raised its full-year outlook to $14.85 to $15.05. Badger Meter (NYSE:BMI) climbed after raising its dividend for a 34th straight year, and Lindsay (NYSE:LNN) advanced on an earnings beat.

Biotech provided some of the most dramatic gains. Biohaven (NYSE:BHVN) surged after the FDA accepted its resubmitted application for troriluzole in spinocerebellar ataxia, setting a decision goal in the first quarter of 2027. MoonLake Immunotherapeutics (NASDAQ:MLTX) soared as rival data from AbbVie (NYSE:ABBV) in hidradenitis suppurativa disappointed, easing competitive fears. Korro Bio (NASDAQ:KRRO) jumped on preclinical data for its alpha-1 antitrypsin deficiency candidate.

Chips and misses held it back

The gain was narrow because small-cap chip names were hit hard. Lam Research (NASDAQ:LRCX)'s warning that supply constraints would linger into 2027 hammered smaller semiconductor equipment and test companies. FormFactor (NASDAQ:FORM) sank to about $95.83, Cohu (NASDAQ:COHU) tumbled to around $46.16 at midday, and Veeco Instruments (NASDAQ:VECO) slid early.

Earnings misses weighed elsewhere. Kaiser Aluminum (NASDAQ:KALU) plunged after earnings of $1.89 a share fell short of the $2.37 consensus, and Stewart Information Services (NYSE:STC) hit a 52-week low after missing estimates. Avalo Therapeutics (NASDAQ:AVTX) plunged on the same AbbVie data that lifted MoonLake, as investors worried about read-through to its own antibody.

Across the broader market, about two of every three S&P 500 stocks rose, showing that the selling was focused on mega-cap tech rather than on stocks in general.

Yields and chips decide small-cap gains

Friday, October 23, brings S&P Global purchasing managers' surveys and the final University of Michigan sentiment reading, both of which could sway the outlook for domestically focused smaller companies. Next week the Federal Reserve announces its decision on October 28, and third-quarter GDP and September PCE inflation data arrive on October 29. Any further drop in Treasury yields would be closely watched by small-cap investors, while another leg lower in chip stocks could again cap the index's gains.