The Nasdaq Composite slid into correction territory in Q1 2026, defined as a drop of 10% or more from its recent peak, while the Dow Jones Industrial Average simultaneously notched a record high. The split outcome reveals a sharp rotation beneath the surface of a market that, at the index level, looks mixed. Tech-heavy growth names are absorbing the selling pressure while more traditional, value-oriented blue chips attract fresh capital.
If you hold broad market ETFs like SPY or QQQ, the divergence matters — the Nasdaq correction is pulling down tech-weighted portfolios while Dow-tracking funds outperform. Growth stocks, particularly high-multiple tech names, face the sharpest headwinds, while defensive and industrial stocks are benefiting from the rotation. This is not a broad market collapse — it's a sector-level reshuffling with real portfolio consequences.
Watch for the next CPI inflation report and the upcoming FOMC meeting minutes for clues on whether rate policy is driving the rotation. Also monitor Q1 earnings releases from major Nasdaq-listed tech companies, which will be the first hard test of whether the correction reflects real earnings risk or just repositioning.
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