Nasdaq now in bear country

SECURITIES NEW YORK •TheNasdaq 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-percent decline considered the threshold for a bear market.

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 bear markets, among them the Russell 2000 smallcap 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. The S&P 500 is down 17.5 per cent from its Sept. 20 record high close, while the Dow Jones Industrial Average is down 16.3 per cent from its Oct. 3 record. in Toronto, the TSX index closed Friday at 13,935.44, an uptick from a two-year low hit on Dec. 17.

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 tech and internet stocks.

“It’s the old saying, the generals finally got hit,” said Quincy Krosby at Prudential Financial.

The latest round of selling, which on Friday dragged the Nasdaq down nearly three per cent to its lowest closing level since August 2017, comes two days after the U.S. Federal Reserve raised interest rates for a fourth time this year, as the U.S. central bank continues to unwind the low interestrate policy that supported stocks for nearly a decade.

Concerns of slowing economic growth have also led investors to flee stocks in high-valuation sectors such as technology and communication services.

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.