The sell-off on Wall Street struck a new low Thursday following the expanding trade war pushed by President Donald Trump, dragging the S&P 500 more than 10 percent below its record high set last month.
Such a drop of 10 percent is referred to as a “correction” among professional investors, and the index’s 1.4 percent slump on Thursday alone sparked the first correction for the index since 2023. The stock market losses followed Trump’s threat to impose massive tariffs on European alcoholic products. The drop continued despite otherwise good news for the American economy.
The NASDAQ composite dropped 2 percent, while the Dow Jones Industrial Average fell 1.3 percent. The swings have been coming hour to hour, with the Dow going between a small gain and a 689-point drop during trading on Thursday.
The chaos comes following a lack of clarity regarding how much discomfort the president intends to have the economy endure as he fights his trade war. Trump has said that he wants manufacturing jobs back in the U.S. as well as cutting back the government workforce and other significant changes.
On Thursday, Trump threatened to put 200 percent tariffs on European wines unless the European Union removes a tariff on American whiskey, which in itself was a response to a Trump tariff on European steel and aluminum.
American businesses and households have experienced a decrease in confidence because of the lack of clarity regarding what tariffs will remain amid a torrent of on-and-off announcements from the president. That has created concerns about a decrease in spending that could stunt the energy of the economy.
Among the top fears is that the economy enters “stagflation” — stagnating growth alongside high inflation, with few options available to solve such a situation. For instance, if the Federal Reserve opted to cut interest rates to give the economy a boost, that may increase inflation.
But there was good news on Thursday, with one report revealing that wholesale inflation was milder than initially expected. That came after another report showing good signs on the inflation that consumers are experiencing.
Chris Larkin, the managing director for trading and investing, at E-Trade from Morgan Stanley, said “the question for markets is whether good news on the inflation front can make itself heard above the noise of the ever-changing tariff story.”
Another report stated that fewer American workers applied for unemployment benefits last week than economists had expected. If that continues, U.S. consumers could possibly keep spending and keep the economy running.
A number of stocks connected to artificial intelligence continued to slide, pulling down indexes. Palantir Technologies dropped 4.8 percent while Super Micro Computer, the server producer, slid eight percent. Meanwhile, Nvidia swung up and down before finishing close to where it started.
AI stocks have faced pressure in the recent sell-off following critics arguing they went too high amid the excitement surrounding the industry.
Other parts of the market that had been seeing significant momentum earlier experienced big swings. One of those companies was Elon Musk’s Tesla, which dropped three percent after a rare back-to-back gain. It’s down more than 40 percent so far this year.
In the end, the S&P lost 77.78 points to 5,521.52 while the Dow Jones Industrial Average decreased 537.36 to 40,813.57. The Nasdaq composite went down 345.44 to 17,303.01.
The Associated Press contributed to this report