Despite being top-of-the-line and technically equipped, NASDAQ sees a significant slide!
The Nasdaq Composite Index, known for its tech-heavy composition, experienced a significant drop, sliding into correction territory due to economic and sector-specific concerns
On Friday, the NASDAQ index fell around 3% following a softer-than-expected jobs report, which raised fears that the Federal Reserve might implement substantial rate cuts in its next meeting to stave off a potential recession. This decline follows disappointing earnings from major tech companies like Amazon and Intel, further unsettling investors. Overall, the Nasdaq has plunged 10.4% from its peak of 18,647.45 points on July 10, a decline that marks a correction in market terms. Tom Plumb, CEO and portfolio manager at Plumb Funds described this situation as an “old-fashioned correction,” where the market sentiment has shifted from growth expectations to a reliance on government intervention through lower interest rates. Historical data from Reuters and LSEG indicates that the Nasdaq has entered correction territory 24 times in the past 44 years, typically rebounding within a month in two-thirds of these instances. Despite this recent slump, the Nasdaq remains up 12% year-to-date, mirroring the S&P 500’s performance.
Investor caution towards high-valued tech stocks, driven by artificial intelligence enthusiasm earlier in the year, has contributed to the selloff. Additionally, the market is entering a period typically marked by volatility, with September and October historically being turbulent months for U.S. stocks. The Cboe Volatility Index, a key measure of investor anxiety, averages its highest in October. James St. Aubin, Chief Investment Officer at Ocean Park Asset Management, noted that the current correction continues the expected market adjustments. Weaker-than-expected results from companies like Tesla and Alphabet have increased concerns about overvalued stocks and broader economic weaknesses. JJ Kinahan, CEO of IG North America, emphasized that market focus has shifted from earnings reports to what those earnings indicate about the overall economy, highlighting global economic slowdown concerns as reflected in rising bond prices and falling yields.
