Thursday’s Nasdaq Composite Index fell nearly 10% from its recent high, a move that is typically defined as a market correction, reflecting a reversal of historical highs in technology stocks as bond yields rise. .
The technology-laden Nasdaq Composite COMP,
fell 8.5% Thursday morning after seeing a peak on Feb. 12 at 14,095.47.
The last time the Nasdaq Composite fell into a correction, defined as a recent peak drop of at least 10% but no more than 20%, was in early September last year.
On Wednesday, the index recorded the strongest two-day decline since Sept. 8.
The fall of the Nasdaq reflects an increase in benchmark government debt yields that may make the technology aspect less attractive compared to fixed income investments and other sectors of the stock market that have not done as well as the economy has begun to recover. the COVID pandemic. Technology stocks are particularly sensitive to rising bond yields because their value depends largely on the growth of future profits, which are discounted more deeply when bond yields increase.
Investors are betting that an additional congressional fiscal stimulus will drive the economic recovery in the United States, but it will also boost inflation and force the Federal Reserve to raise interest rates sooner than it would prefer, a global environment that is not happy for technological actions.