The Nasdaq Composite index dropped 2.2% on Friday, nearing confirmation of a correction territory amid worries about inflated Big Tech valuations and a cooling economy. This decline places the Nasdaq 10.2% below its record high of 18,647.45 points reached on July 10.
Softer-than-expected job reports and disappointing forecasts from Amazon and Intel contributed to the Nasdaq's recent downturn. The Nasdaq 100 index is also approaching correction territory from its peak closing high of 20,675.38 points.
A correction, typically indicating investor pessimism, is defined by an index or stock falling 10% or more from its previous record high.
The recent selloff in the Nasdaq follows a trend of investors offloading heavyweight stocks on Wall Street. Lackluster results from Tesla and Alphabet have intensified concerns over stretched valuations and fears that the rally, driven by optimism around AI technology, may have been overextended.
Key drivers of Wall Street's record highs in 2024, such as Nvidia, Microsoft, and other Big Tech stocks, have been bolstered by expectations of interest-rate cuts from the U.S. Federal Reserve and the excitement surrounding AI advancements. However, the recent market corrections suggest a recalibration of investor expectations and growing caution in the face of economic uncertainties.
