The world’s most closely watched stock market index entered correction territory on Thursday, signaling that the two-year-long bull market is losing momentum in the early days of the Trump administration.

Stocks Tumble Into Correction as Investors Sour on Trump

The decline reflects mounting investor anxiety over the administration’s unpredictable policy decisions in recent weeks. The back-and-forth on tariffs and widespread layoffs of federal employees have unsettled Wall Street.

On Thursday, the S&P 500 dropped 1.4 percent. After weeks of selling, the index has now fallen 10.1 percent from its recent peak less than a month ago, officially entering correction territory—an industry term for a 10 percent or greater decline from a high point, often seen as a warning sign of deeper losses.

Other major indexes had already crossed into correction territory, including the Russell 2000 and the tech-heavy Nasdaq Composite. On Thursday, the Nasdaq slid 2 percent, while the Russell 2000, which tracks smaller companies more vulnerable to economic fluctuations, fell 1.6 percent.

A deeper concern among investors is the uncertainty surrounding the economic impact of President Trump’s policies. Fear that consumers will cut back on spending and businesses will hesitate to invest has raised the specter of an economic slowdown, prompting investors to reevaluate stock valuations.

“I think the market is signaling real concerns about a potential recession,” said Kristina Hooper, chief global market strategist at Invesco. “That certainly wasn’t what investors had anticipated heading into 2025.”

According to data from Yardeni Research, this marks the 11th correction in the S&P 500 since the 2008-2009 financial crisis. Of the previous downturns, three evolved into bear markets—defined as a more severe decline of at least 20 percent.

Despite the market turmoil, the administration has largely dismissed concerns. Treasury Secretary Scott Bessent downplayed the volatility on Thursday, stating that his focus remains on the “real economy” rather than short-term market fluctuations. “I’m not worried about a little turbulence over three weeks,” he said.

As stock prices have tumbled in recent weeks, the Trump administration has defended its economic policies, arguing that while they may create short-term instability, they are designed to promote long-term job growth.

However, Seema Shah, chief global strategist at Principal Asset Management, noted that the economy is already feeling the strain.

The decline has been especially painful for major tech firms, which had fueled much of the market’s previous growth but are now seeing their soaring stock prices reverse. The Nasdaq Composite has dropped roughly 14 percent from its December peak.

The sell-off has also spread beyond tech, raising broader concerns beyond the revaluation of high-growth stocks. The Russell 2000 has plunged 18 percent from its November high, nearing bear market territory.

Industries most affected by tariffs, such as food producers, have also suffered, and businesses ranging from retailers to airlines are bracing for weaker consumer demand if economic conditions worsen. On Thursday, Dollar General reported a decline in customer traffic last quarter and warned of ongoing financial pressure. Delta Air Lines also cut its financial forecast for the first quarter, citing weaker demand for domestic travel.

“So far in 2025, the U.S. economy has faced nothing but obstacles,” Shah added.

Adding to the uncertainty, President Trump on Thursday threatened to impose a 200 percent tariff on European wine and champagne, a day after the European Union announced retaliatory duties on U.S. whiskey and other American goods. He has already raised tariffs on steel, aluminum, and a broad range of Chinese imports.

When pressed about potential tariff relief for Canada—one of the United States’ key trade partners—Trump stood firm.

“I’m sorry, but this has to be done,” he declared.

The administration’s shifting stance on trade has left investors on edge, to the point that even positive economic reports have done little to restore confidence. On Thursday, weekly unemployment claims came in lower than expected, and a strong Consumer Price Index report on Wednesday briefly lifted stocks, but the gains quickly faded.

Concerns are growing that once tariffs fully take effect, they will drive up prices, hurting both businesses and consumers. Meanwhile, Trump’s immigration policies and the dismissal of federal employees under the newly formed Department of Government Efficiency (DOGE) add to the unease—along with the looming risk of a government shutdown.

“The inflation outlook now depends more on tariffs, deportations, and DOGE than on past economic data,” said Bill Adams, chief economist at Comerica Bank, on Thursday.