Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Nasdaq Hides Deeper Pain With Over One-Third of Stocks Down 50%

Stock MarketsJan 14, 2022 19:24
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

(Bloomberg) -- The tech stock-rout, as steep as it’s been, has still only pushed the Nasdaq Composite Index down about 8% from its November high, just shy of an official correction for a benchmark that’s more than doubled in less than two years.

Yet beneath the surface it looks a lot worse. 

More than 36% of the stocks in the index are down at least 50% from their 52-week highs, an extraordinarily large number given the scale of the overall index’s drop, according to Ned Davis Research. Typically when the Nasdaq is within 10% of its peak, an average of just 12.5% of its stocks have declined that much, the firm said.

The break reflects how strongly the major equity benchmarks are being influenced by the technology industry’s mega-cap giants. And their stocks haven’t been hit as hard this year as some of the smaller, fast-growing tech companies that are reliant on financing and whose valuations depend heavily on future profits, making their shares particularly sensitive to higher interest rates. 

As a result, it’s unclear whether the market will break with previous patterns suggesting there’s more pain ahead. Ned Davis said the number of Nasdaq stocks that have fallen so deeply from their peaks would usually point to a “cyclical bear market,” which tends to be a short-term decline of at least 20% from records that lasts a few months. 

“Market breadth for Nasdaq stocks is pretty pathetic,” Ed Clissold, chief U.S. strategist at Ned Davis, said in an interview. “When you’re in the middle of something like this, it’s tricky to decipher whether it’s a normal rolling correction or a bull market peak. But the longer this goes on, the harder it’s going to be to ignore.” 

Since 1972, there’s only been 39 days when the Nasdaq has held within 10% of its highs while more than 35% of its members were down more than 50% from their peaks, data from Ned Davis show. And until December 2021, all of them occurred in 1998 and 1999, during the height of the Internet bubble.

To be sure, the divergences won’t necessarily lead to a bear market. Much of the recent weakness has centered on micro-cap stocks, which have typically been more volatile and less liquid than shares of larger companies, Clissold said.

Tech stocks were under pressure again on Friday, with the Nasdaq Composite 0.5% lower in late-morning trading after staging a brief rebound at the open. 

“We’ll have to see if earnings season comes to the rescue once again,” Clissold said, explaining that technical indicators like market breadth have improved over the past few quarters as corporate-profit outlooks improved. “Still, earnings revisions over the past several weeks weren’t as strong as other pre-announcement periods last year, which leads us to believe that we may not get those fantastic beat rates.”

©2022 Bloomberg L.P.

 

Nasdaq Hides Deeper Pain With Over One-Third of Stocks Down 50%
 

Related Articles

KLA-Tencor Earnings, Revenue Beat in Q2
KLA-Tencor Earnings, Revenue Beat in Q2 By Investing.com - Jan 27, 2022

Investing.com - KLA-Tencor reported on Thursday second quarter earnings that beat analysts' forecasts and revenue that topped expectations. KLA-Tencor announced earnings per...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email