As Markets Tumble, Tech Stocks Hit a Rare and Ominous Milestone
...Now, technology companies are dragging stocks into an ominous territory that investors have not seen in nearly a decade: a severe decline known as a bear market.
The tech-heavy Nasdaq closed on Friday at 6332.99, down almost 22 percent from its August peak, meaning it has officially entered a bear market. The S&P 500 and Dow Jones industrial average, both of which also include the biggest tech companies, are not far behind after falling 17.5 percent and 16.3 percent from their respective highs. After a month of heavy losses, stocks are on track for their worst year since 2008.
Bear markets in stocks are rare but have the power to spread gloom through the economy. In the last 20 years, there have been only two — one that began with the financial crisis in 2007, and the other that started with the dot-com bust in 2000. Market downturns can gather steam even without strong evidence that economic and corporate fundamentals are weakening.
“It’s kind of a feedback loop,” said Robert Shiller, a professor of economics at Yale University. “What’s happening right now, we’ve seen some declines, and that emboldens some pundit to say, ‘This is it.’ They get attention, it puts thoughts in people’s minds and they start thinking, ‘Maybe I should exit.’”
The Nasdaq is not the only group of stocks in such distress. The Russell 2000 index, which tracks shares of smaller companies, entered a bear market earlier this week. Seven of the S&P 500’s 11 industrial sectors are also at the level, led by energy stocks, which are down 28 percent from their highs earlier this year. That’s in large part because oil has been in a bear market since November.
If the broader stock market declines by more than 20 percent this year, it would end what was, by some measures, the longest bull run in history. From March 2009 until its peak in September, the S&P 500 surged 333 percent, a rally that provided a silver lining to the lackluster years that followed the financial crisis of 2008. Investors enjoyed trillions of dollars of gains from the stock market.
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