Nasdaq enters correction territory as recession fears slam stocks

By William Watts

Friday's stock-market pullback saw the tech-heavy Nasdaq Composite and even more megacap-tech-concentrated Nasdaq-100 enter correction territory, according to Dow Jones Market Data.

A market correction occurs when an asset falls at least 10%, but not more than 20%, from a recent high. A bear market comes after a pullback of at least 20%.

The Nasdaq Composite COMP dropped 2.4% Friday and 4.7% over the last two trading sessions, finishing the week at 16,776.16. The 16,782.70 level marked a 10% pullback from its record close of 18,647.45 set on July 10.

Stocks have tumbled sharply to begin August, with Friday's decline following a softer-than-expected July jobs report that prompted fears the economy may be headed for a hard landing or even outright recession as investors await the start of a rate-cutting cycle by the Federal Reserve.

"Looking at the numbers, it is very clear now that the Fed has made another policy mistake and the rates should have been cut, and there is no time left," said Naeem Aslam, chief investment officer at Zaye Capital Markets, in a note. "In other words, now traders and investors are worried about recession fears."

Tech stocks have led a rally for U.S. equities, but saw pressure in July as investors rotated into left-behind sectors of the market, including small-caps. Stocks saw widespread losses Friday, with the Dow Jones Industrial Average DJIA slumping over 600 points, or 1.5%, while the S&P 500 SPX dropped 2.1%.

Read: An ugly July jobs report revives talk of recession and bigger Fed rate cuts

The Nasdaq Composite last entered correction territory on Oct. 25, just as stocks were bottoming and before a tech-led rally that saw the index surge, setting a series of all-time highs.

The Nasdaq Composite has fallen into a correction 71 times in its history, including Friday, Dow Jones Market Data noted. Of the 70 previous corrections, 27 of them continued to fall 20% or more from the recent high, or 38.6% of the time.

The Nasdaq-100 NDX was also down more than 10% from its recent high, ending at 18,440.84. The correction level for the Nasdaq-100 was at 18,607.84

-William Watts

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08-03-24 0624ET

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