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More than 36 percent of tech stocks listed on NASDAQ have lost at least half their value compared to their 52-week highs, although the index itself remains just 8 percent below its recent peak, Bloomberg reported.
Typically, when the tech-heavy NASDAQ is within 10 percent of its highest recent value, only about 12.5 percent of its stocks are down by half or more, Bloomberg noted.
Now, however, the index’s overall value is being propped up by a few super-stocks such as Amazon, Apple, Meta, and Microsoft, which have been barely damaged by the prospect of higher interest rates.
In contrast, a large proportion of NASDAQ tech stocks depend heavily on financing and the hope of future profits, both of which are at risk now that the U.S. Federal Reserve is poised to raise interest rates three or more times this year.
“Market breadth for NASDAQ stocks is pretty pathetic,” Ed Clissold, chief strategist at Ned Davis, said to The Wall Street Journal.
“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,” he added, “but the longer this goes on, the harder it is to ignore.”
In the last 50 years—since 1972—there have been only 39 days in which the NASDAQ held within 10 percent of its high price while 35 percent or more of its stocks had fallen from their peaks by more than half.
Until last month, all of those days took place in 1998 and 1999 as the Internet bubble was about ready to burst, Bloomberg pointed out.
TREND FORECAST: We signaled the tech sector’s looming troubles in this Trends Journal and “U.S. Markets Stumbled into the New Year” (11 Jan 2022). We forecast the tech equity market struggling through the rest of this year as chip shortages continue, commodity prices rise, and inflation picks consumers’ pockets… and central banks raise interest rates.