Nasdaq entered a correction as fears for growth loom

Nasdaq entered a correction as fears for growth looms

US equity market's risk-averse sentiment pushed the Nasdaq Composite into correction territory on Wednesday trading session. It looks like the fear over shrinking earning capability amid the potential tightening monetary policy evoked widespread doubt about the tech stocks that used to enjoy the fastest growth and the highest price-to-earnings valuation.

The recent turbulence in tech stocks, triggered by a spike in yields, which continued to send the 10-year U.S. Treasury yield to a high of 1.9%---26% higher than where it started this year. As a result, Nasdaq has freefallen 10% in two weeks, from 16589 on January 4th to 15030 on Wednesday this week. Nearly all the tech giants slipped: since the start of 2022, Amazon (NASDAQ: AMZN) lost 6.45%, Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOGL) dropped 8.6% and 8.2%, respectively.

From a technical standpoint, the shape of a downward trajectory has emerged to see the index potentially move further down to 14573 if the risk-off sentiment elevates. At the same time, the level of 14936 might provide some support before the floor level. On the other hand, if the Fed chooses to soothe the market in the next FOMC meeting end of the month, the index may shrug off the haze and eye on 15671.

^{Source: IG}

S&P 500 fell below multiple key supports

S&P 500 fell for a second day finished Wednesday trading session under 200-days moving average for the first time since October. The index dipped by 1%, dragged mainly by technology and struggling bank stocks.

From the technical chart, it looks like S&P has also broken through the lower boundary of the upward moving band since August. Also enhancing the bear view is the leg down from the second “shoulder” from the head shoulder shaped formed since Dec 6th. Both indicators have cemented the view that the year-long uptrend for S&P is entering a consolidation. Moreover, a correction can be in prospect should the index move towards the 4318 level.

^{SOURCE: IG}

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