Forget the Santa rally, the stock market is fending off one of its worst Decembers in recent memory, and now the Nasdaq is on the brink of a bear market. It’s a scenario that may unofficially commence the end of the longest equity market bull run, by some measures, in history.
As of Wednesday’s decline, the Nasdaq Composite Index
COMP, -0.41%
was 18.2% from its all-time high of 8,109.69 hit on Aug. 29. Wall Street’s widely accepted definition of a bear market is a drop of at least 20% from a recent peak, leaving the technology and internet-laden stock gauge a stone’s throw from bearish territory.
According to Dow Jones Market Data, the last time the Nasdaq entered a bear market was March 3, 2009, with it exiting that phase less than three weeks later.
By some estimates, the index would need to fall to 6,487.75 to slip into a bear market, with other subindexes having already retreated there, including the Russell 2000 index
RUT, -0.01%
of small-capitalization stocks and the Dow Jones Transportation Average
DJT, -0.01%
less than 24 hours ago.
Read: The last key death cross has engulfed the stock market
On Wednesday, already-fragile stocks took a notable leg lower after the Federal Reserve lifted short-term interest rates for the fourth time this year (the ninth time since 2015) and delivered forecasts for future hikes that was less supportive to a market rally than investors had hoped.
The Fed raised interest rates by a quarter of a percentage point to a range of 2.25% to 2.50%, as widely expected, and Chairman Jerome Powell signaled that rate increases in 2019 were dialed back to two from three.
However, investors decided that monetary policy makers weren’t sufficiently responding to a market that has spiraled lower since early October, with all three of the main equity benchmarks, including the Dow Jones Industrial Average
DJIA, -0.68%
and the S&P 500 index
SPX, -0.37%
already in correction territory, usually defined as a decline of at least 10% from a peak.
Read: Opinion: There’s a darker message for investors in the FAANG selloff
The bull market has thrived amid a decade of financial and political upheaval, thanks in part to the all-you-can-eat liquidity feast hosted by the Federal Reserve and other major central banks.
Check out: Powell party pooper: Here are the worst-performing stocks after the Fed wrecks the market
And perhaps no index has enjoyed that backdrop more than the Nasdaq, with its contingent of high-powered components, including Facebook
FB, +0.29%
Apple
AAPL, -0.24%
Amazon.com
AMZN, -0.65%
Netflix
NFLX, -0.96%
and Google-parent Alphabet
GOOG, -0.53%
GOOGL, -0.56%
— a contingent of companies known as FAANGs, which by dint of their outsize market values and share prices have helped deliver the most significant contributions to gains over the past 10 years.
Last year, the Nasdaq led its peers, returning 28% for the full year, compared with a gain of 25% for the Dow and 19.4% for the S&P 500. Thus far in 2018, the S&P 500 is on track to shed 6.2% in value, the Dow is set for a 5.7% drop, while the Nasdaq is looking at a drop 3.9%.
A separate index, representing the largest companies in the Nasdaq, the Nasdaq-100
NDX, -0.34%
is off 17.2% from its late-August peak, as of Wednesday’s close, according to FactSet data.
Read: Text of FOMC statement for December
The Fed has shifted to an apparently tighter stance advocated by Powell and the market isn’t dealing with the transition well, as it implies increased borrowing costs for institutions and individuals and more competition from fixed-income assets that will offer richer yields with theoretically less risk.
On Aug. 22, 2018, many market pundits hailed the stock market unofficially becoming the longest bull run on record, having avoided an “official” 20% bear market. That move surpassed the Oct. 11, 1990 to March 24, 2000 bull market.
(To be sure, some market participants take issue with that record, including Stock Trader’s Almanac Jeff Hirsch.)
In any case, that uninterrupted record of gains, unofficial or not, is in jeopardy.
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Source : MTV
