Tech hits ominous market milestone

When it comes to the stock market, America’s technology giants have become a harbinger of more pain to come.

If Facebook, Apple or Google looked shaky this year — as investors worried about growth, regulation or mismanagement — the rest of the market felt it. In recent weeks, as these companies have succumbed to concerns about the global economy, slowing profits or privacy concerns, they have led the decline in stocks. Now technology companies are dragging stocks into an

ominous territory that investors have not seen in nearly a decade: a bear market.

The tech-heavy Nasdaq is down almost 22 percent from its August peak, meaning it has officially entered a bear market. The S&P 500 and Dow Jones industrial average, both of which also include the biggest tech companies, are not far behind after falling 17.5 percent and 16.3 percent from their respective highs. After a month of heavy losses, stocks are on track for their worst year since 2008.

Bear markets are rare, but have the power to spread gloom through the economy. In the last 20 years, there have only been two — one that began with the financial crisis in 2007, and the other that started with the dot-com bust in 2000. Market downturns can gather steam even without strong evidence that economic and corporate fundamentals are weakening.

“It’s kind of a feedback loop,” said Robert Shiller, a professor of economics at Yale University. “What’s happening right now, we’ve seen some declines, and that emboldens some pundit to say, ‘This is it.’ They get attention, it puts thoughts in people’s minds and they start thinking, ‘Maybe I should exit.’ ”

The Russell 2000 index, which tracks shares of smaller companies, entered a bear market earlier this week. Seven of the S&P 500’s 11 industrial sectors are also at the level, led by energy stocks, which are down 28 percent from their highs, largely because oil has been in a bear market since November.

If the broader stock market declines by more than 20 percent, it would end what was, by some measures, the longest bull run in history. From March 2009 until its peak in September, the S&P 500 surged 333 percent, a rally that provided a silver lining to the lackluster years that followed the financial crisis of 2008. Investors enjoyed trillions of dollars of gains.

Those profits are not close to being wiped out. The stock market is still well above where it was even at the start of 2017. But the longer bear markets last, the more pessimism they spread.

If stock portfolios stagnate, consumers may cut their spending. And bear markets can reverberate through corporate America. The dotcom bust of the early 2000s contributed to a wider bear market and investors were wary of technology stocks for years. When stocks slump, chief executives slow investment in new projects and avoid decisions that investors might decide are too risky, which can dampen economic growth.

Companies thinking of issuing public stock for the first time may hold off. Lyft and Uber, ridehailing companies, are considering initial public offerings. They may have to delay those deals if the market stays in a funk.

As recently as this summer, investors were still piling into superstar companies like Apple and Amazon, in the belief that they stood to make huge profits. In August, Apple’s stock market value exceeded $1 trillion, a feat no other publicly traded U.S. company had achieved. A month later, Amazon reached the same milestone.

They are far below those levels now. But Apple is now worth around $715 billion. Amazon has lost nearly a third of its value since hitting its high, and Alphabet, Google’s parent company, is down 23 percent.