The Nasdaq Composite Index confirmed on Friday it is in a bear market for the first time since 2008, underscoring fears that the longest bull run in history for U.S. stocks could soon be over.
The index finished the day down 21.9 per cent from its Aug. 29 record closing high, exceeding the 20 per cent decline considered the threshold for a bear market.
The pain was felt across North American markets. The S&P/TSX composite index lost 206.33 points to end at 13,935.44. In New York, the Dow Jones industrial average closed off 414.23 points at 22,445.37. The S&P 500 index was down 2 per cent, falling by 50.84 points at 2,416.58, while the Nasdaq composite was down 3 per cent or 195.41 points at 6,332.99.
The Nasdaq is the first of the three major U.S. stock indexes to cross that threshold, with its drop in less than four months the latest sign that the bull market that began during the financial crisis a decade ago could be almost done.
Several other key indexes in recent days have confirmed they were in bear markets, among which are the Russell 2000, the S&P 600 small-cap index and the Dow Jones transportation average.
The S&P 500, the benchmark for U.S. stocks, is not yet in a bear market, though more than 60 per cent of its components are.
But the Nasdaq’s fall reflects a sharp move by investors away from what had been the market’s leaders - the so-called FAANG group of five favourite technology and internet stocks.
“Nasdaq is your more growth-oriented story, so the biggest stocks are driving the over all market because they’re a bigger chunk of it,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
The latest round of selling, which on Friday dragged the Nasdaq down nearly 3 per cent, comes two days after the Federal Reserve raised interest rates for a fourth time this year, as the U.S. central bank continues to unwind the low interest-rate policy that supported stocks for nearly a decade.
In Nasdaq’s record-long bull market, which ended with its all-time high close on Aug. 29, the index gained more than 539 per cent from its post-financial-crisis low on March 9, 2009. Including reinvested dividends, it delivered a total return of more than 611 per cent in that time.
By contrast, in that same period, the S&P 500 gained just 331 per cent, with a total return of 425 per cent.
Even with the drop since late August, Nasdaq is nearly 400 per cent above its March 2009 low, with a total return of more than 456 percent.
Past Nasdaq bear markets have lasted a long time and cut deeply. For instance, the Nasdaq fell 55.6 per cent during its last bear market, which ran from Oct. 31, 2007, to March 9, 2009.
Canadian markets
The Toronto Stock Exchange’s S&P/TSX fell 206.33 points, or 1.46 per cent, to 13,935.44.
Leading the index were Stars Group Inc, up 7.3 per cent, Home Capital Group Inc, up 7.1 percent, and OceanaGold Corp, higher by 4.3 per cent.
Lagging shares were Canada Goose Holdings Inc., down 8.2 per cent, BlackBerry Ltd., down 8.1 per cent, and Aphria Inc., lower by 7.4 per cent.
On the TSX, 55 issues rose and 187 fell as a 0.3-to-1 ratio favoured decliners. There were two new highs and 65 new lows, with total volume of 581.8 million shares.
The most heavily traded shares by volume were Enbridge Inc., Bombardier Inc. and Manulife Financial Corp.
The TSX’s energy group fell 2.49 points, or 1.86 per cent, while the financials sector slipped 5.22 points, or 1.95 per cent. West Texas Intermediate crude futures fell 1.07 per cent, or $0.49, to $45.39 a barrel. Brent crude fell 1.55 per cent, or $0.84, to $53.51. The TSX is off 14 per cent for the year.