Exchange traded funds (ETFs) that invest in U.S. small-cap stocks are closing in on their 2007 high as the economy gradually improves, although they followed the broader market lower Tuesday.

With nearly $17 billion in assets, iShares Russell 2000 Index Fund (NYSEArca: IWM) is the most popular ETF for U.S. small caps. It was down about 1% in afternoon dealings Tuesday.

iShares Russell 2000

“The small caps have been providing leadership over the past few weeks and that is bullish for the market in general as it implies an offensive rotation,” Investors Intelligence said. [Small Caps Power Stock Bounce.]

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