The Nasdaq Composite Index fell almost 10% on Thursday from its recent peak, a move that is generally defined as a market correction, reflecting a retreat from the historic highs of technology stocks as bond yields increase .
The Nasdaq Composite COMP, packed with technology,
fell 8.5% on Thursday morning, after seeing a peak on February 12 at 14,095.47.
The last time the Nasdaq Composite fell into a correction, defined as a drop from a recent peak of at least 10%, but no more than 20%, was in early September last year.
On Wednesday, the index saw its biggest drop in two days since September 8.
The drop in Nasdaq reflects an increase in benchmark public debt yields that may make technology investors look less attractive compared to fixed income investments and other sectors of the stock market that have not performed as well, as the economy began to recover from the COVID pandemic. Technology stocks are particularly sensitive to the increase in bond yields because their value depends heavily on the growth of future earnings, which are discounted more deeply when bond yields increase.
Investors are betting that Congressional additional fiscal stimulus will boost the economic recovery in the U.S., but it will also increase inflation and force the Federal Reserve to raise interest rates sooner than they would like – a general environment that is not favorable for stocks. of technology.