Wall St Week Ahead-US small caps struggle as elevated interest rates take a toll

The prospect of interest rates remaining elevated as the Federal Reserve battles inflation is further clouding the outlook for shares of smaller U.S. companies, which have lagged broader markets this year.

Small cap stocks surged at the end of 2023, as expectations grew that the Fed was done raising interest rates and would soon begin easing monetary policy. That would be a welcome change for smaller companies, which rely more heavily on debt financing and consumer spending.