Equity markets started 2025 pretty well, but things haven't been so rosy in the past couple of months. The tech-heavy Nasdaq Composite index is down by 8% since the beginning of the year as I write this.
As much as investors might loathe the idea of rapid moves lower in the iconic Dow Jones Industrial Average (^DJI -0.62%), broad-based S&P 500 (^GSPC -1.07%), and widely followed Nasdaq Composite (^IXIC -1.71%), stock market sell-offs are normal, healthy, and inevitable.
The Nasdaq-100 has been in sell-off mode since mid-February, but it officially entered correction territory this month when the losses exceeded 10% from the index's record high. However, history proves the U.S. stock market always climbs to new highs over a long enough period of time, and so the recent weakness is likely to be a buying opportunity for long-term investors.
The Nasdaq, an index that led overall stock market gains over the past two years, has done just the opposite over the past few weeks. The tech-heavy benchmark fell into correction territory, dropping more than 10% from its most recent peak on Dec. 16.
The Nasdaq Composite (^IXIC -1.71%) entered market correction territory on March 6, meaning it closed more than 10% below its recent bull-market high. The index has continued to fall since then and currently trades 12% below the record high it reached in December.
The CNN Money Fear and Greed index showed a decline in the overall market sentiment, while the index remained in the “Extreme Fear” zone on Tuesday.
The past few weeks have been rough for technology stocks. The sector has been hammered by the tariff-induced trade war, which has led investors to book profits and enter a risk-off mode amid concerns regarding a potential economic slowdown.
The major indices remain lower across the board, with the Nasdaq Composite taking the brunt of the selling for a 1.8% decline.
Nasdaq 100 and S&P 500 slip as Nvidia's GTC looms. Traders brace for AI spending insights and the Fed's next rate decision.
US stocks are predicted to open lower on Tuesday as the Federal Reserve's two-day meeting begins and investors await the results of a phone call between Presidents Trump and Putin over a potential deal between Russia and Ukraine. After a mostly positive start to the week, futures were pointing to the S&P 500 losing 0.2%, with Dow Jones futures down 0.15% and Nasdaq 100 futures down 0.4%.
Many investors are starting to panic with the Nasdaq index in correction territory (marked by the index being down at least 10% from its all-time high). However, corrections happen quite often, usually about once per year on average.
News flash: stocks can go down just as easily as they can climb. Every now and then, investors are given a wake-up call that the stock market wouldn't be a "market" without the ability for equities to move in both directions.