Many big stocks already in 10% correction

Investors worried about a correction might be surprised to learn it's already here for a big chunk of their portfolios.

More than half the stocks in the Standard & Poor's 500 — 269 — are already down 10% or more from their recent highs, which is the unofficial definition of a correction. Some stocks, including ADT, Coach and Mattel are already in deep correction territory, falling roughly 25% or more from their highest levels in a year.

Seeing such a massive swath of stocks fall 10% or more is a reminder that while a few outperformers are helping support the broad market, the destruction is already wreaking havoc on many stocks. The S&P is down roughly 5% from its recent high, and investors are wondering if there's more pain ahead or if the market will regain its swagger, now that corporate profits are coming in better than expected.

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"We've gone a long time without a correction," says Karl Mills of Jurika Mills & Keifer. "We were way overdue." The fact individual stocks are blazing the low trail into correction territory is getting investors' attention, due to:

• The rapid deflation. The relative stability of the broad market has masked what is a significant correction beneath the surface, says David Sowerby of Loomis Sayles. Stocks in the S&P 500 are, on average, already down 12% from their 52-week highs, he says. The rapid decline is a shock to investors wondering what they'll do if there's a correction, but who already feel as if they're in one, he says. "By the time you recognize there's a correction, it's probably more than halfway over," he says.

• Brutal punishment of select companies. Forget a 10% correction. There's a broad collection of big companies down 20% or more from their 52-week highs, putting them in the category that characterizes a bear market. Already, 57 companies in the S&P 500 are down more than 20%. Raw material and commodity companies, reeling from a slow! down in emerging markets are hurt most. Newmont Mining and Cliffs Natural are down 55% and 49%, respectively.

• Undoing cases of extreme valuations. The beat-down that some individual stocks are taking is to be expected, given that so many rode the market's momentum last year, says Chris Johnson of JK Investment Group. Last year, 450 of the S&P 500 stocks either kept pace with the market or beat it, he says. Given such a large group of outperformers last year, it's natural to expect a large group to suffer on the way down.

Investors, though, shouldn't assume that just because so many stocks are getting hammered means the S&P 500 has to fall 10%, too, Mills says. Buyers usually start to step in and buy stocks when the market is down 7% or 8%, creating support that prevents a full-blown 10% correction. But more bad news can quickly push the market past the 10% barrier, he says.