The U.S. stock market has experienced a significant downturn in recent weeks. The S&P 500, a widely followed benchmark, slid into correction territory on Thursday. This means it has fallen more than 10% from its recent peak less than a month ago.
Investors are growing increasingly pessimistic about the impact of President Trump’s policies. Tariffs and layoffs of federal workers have created unease on Wall Street. There are concerns that uncertainty around these policies could lead to reduced consumer spending and business investment.
This, in turn, could potentially drive the economy into a recession. Other major indexes have also been hit hard. The tech-heavy Nasdaq Composite and the Russell 2000 index of smaller companies were already in correction before Thursday’s sell-off.
“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 2008-9 financial crisis, the S&P has experienced nearly a dozen corrections. Three of those turned into bear markets, defined as declines of 20% or more.
On Monday, the Dow closed down 890 points, or 2.08%. This was after falling more than 1,100 points at one point during the day. The S&P 500 dropped 2.7%, while the Nasdaq plummeted 4%.
Stock market downturn triggers recession fears
It was the worst day of the year for the Dow and S&P 500. The Nasdaq had its biggest one-day drop since September 2022.
In a Sunday interview, President Trump said the U.S. economy would see “a period of transition.” He refused to rule out a recession, saying, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
Tech stocks led Monday’s sell-off. Major names like Alphabet, Amazon, Microsoft, Nvidia, and Tesla were all in the red.
Tesla closed down 7.4% amid protests against CEO Elon Musk’s role in the Trump administration and slumping sales in Europe. The VIX, known as Wall Street’s fear gauge, surged to its highest level this year on Monday. Bitcoin also slid to around $7,800, its lowest since November.
Over the past three weeks, the U.S. stock market has lost approximately $5.28 trillion in value. As of February 19, the market value of the S&P 500 was $52.06 trillion. By Thursday, that had dropped to $46.78 trillion.
Factors contributing to the market volatility include tariffs, trade tensions, and signs of slowing economic growth. Consumer sentiment has weakened and corporate outlooks are tepid. The unwinding of the artificial intelligence growth trade has also played a role, with related stocks like Nvidia falling sharply.
Despite the downturn, the S&P 500 is still trading at a relatively high valuation compared to historical averages. Investors will need to remain vigilant and analyze the situation carefully as they navigate this turbulent period in the markets.
