The S&P 500 fell into correction territory on Thursday, reflecting growing investor concerns about President Trump’s policies. The index dropped 1.4 percent, bringing it down 10.1 percent from its recent high just a month ago. A correction is defined as a decline of 10 percent or more from a recent peak.
Other major indexes, including the Russell 2000 and the tech-heavy Nasdaq Composite, have also fallen into correction territory. The Nasdaq fell 2 percent on Thursday, while the Russell 2000, which includes smaller companies more sensitive to economic changes, was down 1.6 percent. Investors are worried about the uncertainty surrounding President Trump’s on-again, off-again tariffs and mass layoffs of federal workers.
These factors are causing consumers to spend less and discouraging businesses from making investments, which could potentially drive the economy into a downturn. “I think what markets are telling us is that they are very concerned about the potential for a recession,” said Kristina Hooper, chief global market strategist at Invesco. “That is certainly not what markets expected going into 2025.”
Since the financial crisis of 2008-2009, there have been nearly a dozen corrections in the S&P 500.
S&P 500 hits correction threshold
Of those, three have resulted in bear markets, defined as declines of 20 percent or more. The stock market’s volatility has been dizzying this week.
After a brutal sell-off on Monday, which saw the worst session for the Nasdaq since 2022, the markets plunged deeper into the red on Wednesday. The markets have been responding to President Trump’s tariff policy and his commitment to pushing forward with a trade war against some of America’s biggest partners, including Canada and Mexico. Trump announced a plan to double US tariffs on Canadian steel and metal imports to 50%, in retaliation to Ontario imposing a 25% tariff on the electricity it exports to the US.
Hours later, he reversed course after Canada suspended the new electricity charges. However, US tariffs of 25% on metal imports, including from Canada, still took effect. Europe, which is also impacted by the latest tariffs, hit back on Thursday morning, announcing tariffs on $28.4 billion worth of US goods, including boats, bourbon, and motorbikes.
So far, Wall Street has emerged as a surprising loser in Trump’s second term. As markets have started to flash warning signs about tariff whiplash, the Trump administration’s response has been a bit of a shrug, in sharp contrast to Trump’s first administration, which in part tracked its success through the lens of the stock market.
