The Nasdaq 100 Index sank as much as 4 per cent Thursday, the most since early October, after a report showed U.S. jobless claims remained near historically low levels, underscoring that the Fed has plenty of reasons to keep tightening policy. Separate data showed a key inflation gauge was up slightly from the prior reading.
The economic figures “were hotter than the market was hoping for, so now we have to contend with the notion the Fed will stay aggressive raising rates,” said Joe Gilbert, a portfolio manager for Integrity Asset Management. “This along with earnings reports from cyclical companies that suggest the forward outlook is weakening substantially, and a policy error by the Fed is becoming more likely everyday. This points to a risk-off market.
This month’s selloff would have to get worse to exceed losses suffered in December 2002 when the benchmark dropped 12 per cent. There may be some good news for bulls looking back at how things played out 20 years ago: The Nasdaq 100 had already bottomed in October 2002 after plunging 83 per cent from a March 2000 peak.