Exchange traded funds (ETFs) that invest in U.S. small-cap stocks rallied to new 52-week highs Wednesday as the sector erased the recent pullback.

The iShares Russell 2000 Index Fund (NYSEArca: IWM), Vanguard Small-Cap ETF (NYSEArca: VB) and iShares S&P SmallCap 600 (NYSEArca: IJR) were among the small-cap ETFs setting fresh highs.

The market segment has recouped all the losses it suffered after peaking in February. Rising political tensions in the Middle East and Japan’s catastrophes helped trigger the most serious correction since the latest leg of the rally kicked off in September 2010.

Traders will be watching riskier small-cap ETFs to see if they can build on recent gains after bouncing back.

Mid-cap ETFs such as SPDR S&P MidCap 400 ETF (NYSEArca: MDY) were also setting new 52-week highs on Wednesday. The mid-cap portion of the market has already surpassed its 2007 high.

For full disclosure, Tom Lydon’s clients own IJR and VB.

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