The Nasdaq Composite fell 2.6% on Oct. 22, its largest one-day decline since June 5. A further 4.1% drop would put the index in a correction, which would be its third in 2026. Motley Fool analyst Daniel Foelber expects choppy trading to persist, pointing to fast-moving information and index concentration.
The Nasdaq Composite fell 2.6% on Oct. 22, closing at 26,008.86. It was the largest decline since a 4.2% drop on June 5.
Correction territory begins below 24,950
A correction is a drop of at least 10% from the highs. Based on the Oct. 22 close, the Nasdaq would need to drop an additional 4.1% to reach that level.
That would mark the third correction this year, although the last two were brief. Historically, corrections have occurred every one to two years, but lately they have come with increasing speed and frequency. The recoveries have also been swift.
Mega-cap concentration amplifies the swings
Foelber points to two reasons for more volatility. First, information spreads quickly, and investors can act on it through high-frequency trading, algorithmic trading, AI-driven trading and free mobile apps such as Robinhood.
Second, index concentration matters. The tech sector makes up 39.7% of the S&P 500, and Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta Platforms, Broadcom, Tesla, Eli Lilly and Micron Technology make up 39.5% of the index.
On Oct. 22, Eli Lilly and Apple gained during the session. The other eight of those stocks all fell by more than the S&P 500, which Foelber says highlights how concentration risks are amplified during sell-offs.
Foelber's view on riding out corrections
Despite the swings, the Nasdaq has produced an 83.5% total return over the last five years. Foelber argues the simplest way to endure corrections is to hold quality companies, index funds and exchange-traded funds, though he expects choppy market behavior to persist or even worsen in the years to come.
Source: The Motley Fool
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