The Nasdaq Composite Index closed down 1.15% on Wednesday, January 19. That marked the first close for the index in correction territory since March. (The common definition of a correction is a drop of 10% or more.)
The technology-heavy index is down 8.3% so far in 2022 closing t 14,340.25 on Wednesday. That’s 10.69% below the November 19 record high.
Tech stocks heavily in the red today included Tesla (TSLA) down 3.38%, Qualcomm (QCOM) down 3.57%, Amazon (AMZN) down 1.65%, Apple (AAPL) down 2.10%, Nvidia (NVDA) down 3.23%, and Applied Materials (AMAT) down 6.10%.
This is the 66th correction for the index since it was launched in 1971. 37% of those corrections have led to bear markets with a decline of 20% or more.
That’s either reassuring–hey, two-thirds of corrections haven’t resulted in bear markets–or frightening–oomph, more than one-third of corrections have led to bear markets.
More recently, in March 2021 and September 2020, corrections have served as buying opportunities.
In the long-term record, in the 65 corrections before yesterdays, the index has finished in the black by an average of 0.8% in the week after the correction. Returns over the first month after the onset of the correction are mixed. Looking three months beyond the onset of the correction, average gains have been 2.2%.
I’m not sure that any of these historical averages tell us very much about the markets after global pandemics when the Federal Reserve begins an aggressive series of interest rate increases.