U.S. small-capitalisation shares extended a two-day surge on Wednesday, outpacing the broader market as investors rotated out of megacap technology names. The Russell 2000 added more than 1 percent in midday New York trading and is up roughly 5 percent since Tuesday, putting the gauge on track for its strongest week since May. The iShares Russell 2000 ETF rose about 1.2 percent at its session high, marking its best two-day relative performance against large-cap growth names since November 2024, while the higher-quality iShares Core S&P Small-Cap ETF climbed above its 200-day moving average. The move coincided with a pullback in Treasury yields and growing confidence that the Federal Reserve will begin cutting interest rates at its 16-17 September meeting. CME FedWatch data show derivatives markets assigning an almost 100 percent probability that policymakers will lower the benchmark rate from the current 4.35%–4.50% range. Lower borrowing costs typically benefit smaller companies that rely more heavily on debt funding. By contrast, the so-called Magnificent 7 megacap technology index slipped 0.3 percent, underscoring the shift in market leadership. Strategists cite inexpensive valuations—small caps trade at a price-to-earnings multiple roughly five times lower than the S&P 500—and an emerging earnings recovery as tailwinds for the group, though some analysts caution the rally needs follow-through given historically weak seasonality for the segment in August and September.