Due to the worsening situation of the equity sell-off, the tech-heavy Nasdaq has plunged into the correction territory.
By Saqib Iqbal Ahmed and Ankika Biswas (Reuters) – Concerns over tech earnings and a slowing U.S. economy slowed down the Nasdaq Composite Index on Friday, putting it on track for a 10% decline from its early July record highs, a drop commonly referred to as a “correction” by market participants.
On Friday, the tech-heavy index was down nearly 3%, raising concerns after a weaker-than-expected jobs report about whether the Federal Reserve would need to make a substantial rate cut in its next meeting to prevent the economy from slipping into a recession. Disappointing earnings from Amazon and Intel also spooked investors.
The Nasdaq has dropped 10.4% from its record close of 18,647.45 points on July 10. An index or stock is widely considered to be in a correction when it closes 10% or more below its previous record closing high.
This is an old-fashioned correction,” said Tom Plumb, CEO and portfolio manager of Plumb Funds. “We have shifted the economic torch from the notion of growth to the idea that government intervention with low interest rates is needed to stabilize the economy.”
Over the last 44 years, the index has slipped into correction territory after hitting a new high 24 times, or about once every two years, according to a Reuters analysis of LSEG data.
The Nasdaq is still up 12% year-to-date. The S&P 500, which has lost about 6% from its high, is also up 12% this year.
The Nasdaq’s tumble comes as investors turn more wary of the highly valued tech stocks that have led the charge higher for most of the year, driven by excitement over the potential of artificial intelligence.
Last month, weak results from Tesla and Alphabet raised concerns about elevated valuations. Additionally, there is worry that the weaker-than-expected results might indicate broader economic softening.
The focus of the market is no longer simply about earnings, but instead, what earnings are saying about the economy overall,” JJ Kinahan, CEO IG North America & President of tastytrade, said in a note.
“Surging bond prices and falling yields are signs investors are seeking safe havens. All of that is an indication that the economy is slowing globally and it’s giving investors cause for concern,” he said.
(Reporting by Saqib Iqbal Ahmed in New York and Ankika Biswas in Bengaluru; Editing by Ira Iosebashvili, Toby Chopra and Shinjini Ganguli, Kirsten Donovan)
Disclaimer: This report is automatically generated from the Reuters news service. khabarzone24 no responsibility for its content.
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