Why a bout of small-cap carnage could be a red flag for stock-market bulls

U.S. stocks lost ground for five straight days last week, but the pain dealt to the major benchmarks was nothing compared with those felt by small-cap stocks.While the S&P 500 index SPX, +1.47% and the Dow Jones Industrial AverageDJIA, +0.79% both lost 2.2%, the small-cap tracking Russell 2000 RUT, +1.77%fell by 4.3%, according to Dow Jones Market Data, and this sharp downside divergence between small and large cap performance could spell trouble ahead for the broader market, according to some analysts and investors.“Small-caps are very sensitive to where the economy might be going,” said Dave Lafferty chief market strategist at Natixis Investment Management, in an interview, adding that the “beta-driven market,” or one in which stocks move in tandem based on macroeconomic news rather than company-specific information, has hit the smaller, less-proven companies on the Russell 2000 more than their larger cousins, of late.