Nasdaq pain spreads, talk of correction grows

The tech-rich Nasdaq Composite Index skidded lower for the thirdweek in a row, but this time it took the rest of the market down with it.The Nasdaq slumped 128 points (3.10 percent) to 3,999.73. The Dow Jones IndustrialAverage and S&P 500, both of which avoided major falls the last two weeks, joinedthe Nasdaq in the red. The Dow shed 385.96 (2.35 percent) to 16,026.75, while the broad-based S&P 500 lost49.40 (2.65 percent) to 1,815.69.The broadening of the pain in the market has deepened talk that a pullback sparkedby the overvaluation of highflying technology and biotechnology names hasmorphed into an overall market correction.Tech names endured an especially ugly close of the week. Since Wednesday's close,Pandora Media sank 15 percent, biotechnology company Celgene fell 7.1 percent,Amazon shed 6.1 percent and Netflix lost 7.5 percent.But other sectors also took a hit. JPMorgan Chase, weakened by a disappointingearnings report Friday, lost 6.7 percent over the 48-hour stretch. Macy's slid 3.3percent and Visa shed 5.3 percent."In previous weeks, it didn't really go into the broader market," WunderlichSecurities chief market strategist Art Hogan said of the declines."When the trend broadens to the overall market, I tend to be worried that it becomesself-fulfilling."Chris Low, chief economist at FTN Financial, agreed that investor psychology hasdeteriorated."People are always talking about a correction being necessary," Low said. "But oncethe correction is under way, panic tends to set in. We seen to be at that panic point." Stocks had a muted reaction to Tuesday's outlook from the International MonetaryFund, which trimmed its forecast for global growth, but also alluded to a recoverythat "is becoming not only stronger, but also broader."The following day, US stocks rallied after US Federal Reserve minutes from a Marchpolicy meeting showed no support for an early rise in interest rates. Stocks jumpedmore than one percent Wednesday, with the Nasdaq leading the charge with a 1.7percent surge.But sentiment shifted Thursday as the Nasdaq suffered its steepest decline in twoand a half years as another wave of anxiety about  tech-sector overvaluationovertook the market.Thursday's drop came on the heels of March trade data from China, which showedimports dropped 11.3 percent and exports fell 6.6 percent. FTN's Low said the weak China data played a factor in the late-week stock swoon."When we look over the past year, whenever there is surprisingly bad news in China,the stock market always has a very bad day," Low said.According to Low, other less-discussed factors behind the market's retreat include arise in health care costs due to the new health care law and the need of manyinvestors to sell stocks in order to pay higher capital gains taxes following the stockmarket's surge in 2013.Many market watchers believe a correction is neither surprising nor worrisome given how far stocks have risen since the financial crisis. The S&P 500 rose nearly 30percent in 2013.Scott Wren, senior equity strategist at Wells Fargo Advisors, is urging clients to takethe dip as a buying opportunity. His firm projects the S&P 500 will close the year inthe 1,975-2,025 range."I think there is probably a little more downside" to stocks in the near-term, Wrensaid. "I don't think there's a lot.For me, pullbacks are an opportunity.Next week's agenda includes releases on March retail sales and housing starts, aswell as publication of the Fed's Beige Book. The earnings calendar picks up considerably with reports from major companiesacross the economy. Major names include Citigroup, Coca-Cola, General Electric,Google and General Electric.