The Nasdaq Composite Index fell nearly 10% from its last high on Thursday, a move that is usually defined as a market correction, reflecting a pullback from historical highs for technology stocks as bond yields rise.
Nasdaq Composite COMP, loaded with technology,
fell 8.5% on Thursday morning after seeing a Feb. 12 peak 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 registered the strongest two-day slip since September 8.
The decline in the Nasdaq reflects an increase in benchmark government debt yields that may make the technology look less attractive compared to fixed income investments and other sectors of the stock market, which did not perform as well as pandemic COVID. Technical stocks are particularly sensitive to rising bond yields, as their value is strongly based on rising future yields, which are more deeply discounted as bond yields rise.
Investors are betting that an additional fiscal stimulus from Congress will stimulate the US economic recovery, but will also increase inflation and force the Federal Reserve to raise interest rates sooner than it would prefer – a general environment that is not conducive to technology stocks.