Another Wall Street selloff on Wednesday wiped out the gains for the year for the Dow and the broad S&P 500, lending support to the view of some analysts that the stock market has entered a correction phase.
The sweeping downturn in the market continued with the Dow tumbling more than 600 points, or 2.41%, and the S&P 500 dropping more than 3%.
The Nasdaq composite, home to many of the market’s most popular tech stocks, plunged 4.4%, sending it down 12.3% from its late August high and deeper into official correction territory.
According to USA Today, there is growing concern among Wall Street pros that the market’s decline is “more than a garden variety pullback, or drop of 5% to 9.99%, and could morph into a drop of 10% of more for the broad market.”
“This is a correction,” said Bruce Bittles, chief investment strategist at money management firm Baird. “The question is does it lead to a bear market,” or a decline of more than 20%.
On Wednesday, technology stocks and media and communications companies accounted for most of the selling. Banks, health care and industrial companies also took heavy losses.
A previous dip in February dragged the S&P 500 and the Dow into correction territory. In a bear market, stocks would fall at least 20% from their peak but Art Hogan, chief market strategist at B. Riley FBR, said valuations remain attractive and the current slide may amount to a garden-variety correction.
“Economic data continues to show no sign of a pending recession, and recessions are what kill bull markets,” he told MarketWatch. “We are in a correction in a long-term bull, driven more by uncertainty over China and trade, than rising rates.”
“I still believe we are in a bullish phase and this will pass and we move up,” agreed Robert Lutts, president of Cabot Wealth Management.
While the causes of the downturn are many, “The overarching theme is that investors are concerned about slowing growth here and abroad and the impact of tariff clashes between the U.S. and China,” MarketWatch said.