By Noel Randewich
(Reuters) - The Nasdaq's loss on Wednesday left it down nearly 11% from its November record high close, marking the fourth time in the nearly two years since the coronavirus pandemic shook global markets that the tech-heavy index has found itself in a correction.
The index of over 3,600 stocks traded on the Nasdaq exchange has had a rough two months since its most recent record high close on Nov. 19, with investors dumping technology shares due to growing expectation that the Federal Reserve will become more aggressive in raising interest rates to control inflation.
Several heavyweight growth stocks have underperformed the Nasdaq index since its last record close, with Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) and Nvidia (NASDAQ:NVDA) down 15%, 12% and 24%, respectively.
Rising interest rates tend to disproportionately harm shares of high-growth companies because investors value them based on earnings expected years into the future, and high interest rates erode the value of future earnings more than the value of earnings made in the short term.
According to a widely used definition, a correction is confirmed when a stock or index closes 10% or more below its record closing level. More loosely, many investors view a correction as a steep decline from a recent or 52-week high.
The Nasdaq has now declined 10% or more from a record high 16 times since 1995, and four times since the coronavirus pandemic slammed financial markets in February 2020.
(Graphic: Nasdaq losses of 10% or more from record highs, https://fingfx.thomsonreuters.com/gfx/mkt/zgpomadxrpd/Pasted%20image%201642621183801.png)
The Nasdaq's recent tumble has left it trading at about 31 times the next 12 months' expected earrings, expensive by historic standards, but down from this time a year ago, according to Refinitiv data.
(Graphic: Nasdaq's forward P/E is above its historical average, https://fingfx.thomsonreuters.com/gfx/mkt/akvezelwmpr/Pasted%20image%201642621371519.png)
The Nasdaq remains up about 10% over the past 12 months, and it has more than doubled from its lowest close in the March 2020 sell-off fueled by the coronavirus outbreak.