Over the last five weeks, investors have been given a needed but potentially unpleasant reminder that stocks don't move higher in a straight line. Between Feb. 19 and March 21, the widely followed Dow Jones Industrial Average, broad-based S&P 500 (^GSPC 1.76%), and growth stock-powered Nasdaq Composite (^IXIC 2.27%) respectively shed 5.9%, 7.8%, and 11.3% of their value.
The Nasdaq Composite (^IXIC 2.27%) has spent much of March more than 10% off its all-time high, which put the index in correction territory. But Wall Street analysts see that drawdown an opportunity to buy shares of Arm Holdings (ARM 4.93%) and Upstart Holdings (UPST 6.25%).
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The markets are flexing their gains today, with all three of the major stock market indices holding onto earlier gains.
There have been strong inflows into fixed income, especially ultrashort funds. Precious metal funds have seen surprisingly light inflows.
The technology-heavy Nasdaq Composite index currently finds itself in correction territory. A stock market correction occurs when the market falls 10% or more from its all-time highs.
We investors, especially newish investors, are often drawn to certain kinds of investments, not always with good results. When I was a new investor, for example, I got excited about a mutual fund that had gained around 82% in a single year.
Although market downturns can be anxiety-inducing, they are perfectly normal and, in fact, always create opportunities for astute investors to scoop up shares of great companies from the discount bin. The recent dip that especially affected the tech-heavy Nasdaq Composite is no different.
There are several ways to approach a market correction. One would be to resort to panic selling, which is usually a bad idea.
The Nasdaq Composite index is made up of almost every stock listed on the Nasdaq exchange. It soared by 28% during 2024 thanks to massive gains in artificial intelligence (AI) stocks, but it's currently down 12% from its December record high, placing it in correction territory.
Just weeks after the Nasdaq Composite flirted with a new all-time high, the tech-heavy index has sunk into a correction (defined as a pullback of at least 10%).