Market Extra: As the Nasdaq Composite nears correction, here is the number to watch on Friday


The Nasdaq Composite on Friday was ending the week the way it began it, with a drop in the technology-laden index putting it in jeopardy of falling into correction for the first time since March.

The Nasdaq Composite COMP, -0.13%,  was off 1.6%, for the week to reach around 14,698. The index needs to stay above 14,451.69 to avoid a correction from its Nov. 19 record close peak. It is 7.8% below its November peak, as of Thursday’s close. A correction is commonly defined by market technicians as a 10% fall from a recent peak.

The Nasdaq Composite last week posted its biggest one-week percentage decline since February, as rising bond yields punctured tech valuations.

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On Friday, the 10-year Treasury note TMUBMUSD10Y, 1.774%  yielded around 1.7%, down for the week, according to Dow Jones Market Data. Yields move opposite to price.

Yields have been mostly rising as investors anticipate tighter policy from the Federal Reserve and as many as three interest-rate increases in 2022 starting possibly in March. 

Federal Reserve Gov. Christopher Waller recently suggested that as many as five interest-rate increases are a possibility in 2022 as the central banks aims to beat back rampant inflation. Though the policy maker said his baseline expectation was for three rate increases on the year, which is more in line with expectations.

Tech and other growth stocks are more sensitive to moves in yields. That is because valuations of growth stocks are based on cash flows that extend far into the future. A rise in yields makes that future cash less valuable than it was when the yield on “risk-free” Treasurys was lower.

The Nasdaq Composite last entered correction on March 8 and didn’t exit correction until April 9.

For the week, the Dow Jones Industrial Average DJIA, -0.97% was down 1.5%, while the S&P 500 index SPX, -0.47% was off 1.2%, as of Friday afternoon.

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