NEW YORK (AP) — The sell-off on Wall Street reached new depths on Thursday as President Donald Trump’s intensifying trade war pushed the S&P 500 more than 10 percent down from its record high set just last month.
READ MORE: Trump doesn’t dismiss the possibility of a recession while minimizing business worries over his tariffs.
A 10 percent drop is significant enough to earn the label of a “correction” among professional investors. The S&P 500’s 1.4 percent decline on Thursday marked the first correction since 2023. The losses followed Trump’s threats of steep taxes on European wines and spirits, which failed to be mitigated even by encouraging economic news from the U.S.
The Dow Jones Industrial Average fell by 537 points, or 1.3 percent, while the Nasdaq composite dropped by 2 percent.
Stock prices have experienced extreme fluctuations not just day by day, but hour by hour, with the Dow oscillating between slight gains and a downturn of 689 points during Thursday’s session.
This market volatility stems from uncertainty regarding how much economic strain Trump is willing to inflict through tariffs and other policies in pursuit of his vision for the U.S. and the global economy. The president aims to bring manufacturing jobs back to the United States, reduce the federal workforce, and instigate other fundamental changes.
Trump’s latest threat involved imposing 200 percent tariffs on Champagne and other European wines unless the European Union retracts a “nasty” tariff imposed on U.S. whiskey. This new tariff from the EU was announced on Wednesday as a countermeasure to U.S. tariffs on European steel and aluminum.
American households and businesses have reported a decline in confidence due to the uncertainty surrounding the ongoing shifts and announcements regarding tariffs. These concerns have sparked fears of decreased spending, which could weaken the economy. Some U.S. firms have noted changes in customer behavior as a result of this uncertainty.
A particularly concerning economic scenario involves stagnation coupled with high inflation, known as “stagflation,” which presents few solutions in Washington. For example, if the Federal Reserve were to lower interest rates to stimulate the economy, it could inadvertently drive inflation higher.
On Thursday, however, there was positive news on both economic fronts.
One report indicated that wholesale inflation was milder than economists had anticipated last month, following a similarly encouraging report on consumer inflation released a day earlier.
Nevertheless, “the question for markets is whether good news on the inflation front can make itself heard above the noise of the ever-changing tariff narrative,” stated Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.
In a separate report, it was noted that fewer Americans applied for unemployment benefits last week than economists expected, signaling that the job market remains relatively strong. Continued strength in the job market could help sustain consumer spending, the primary driver of the economy.
On Wall Street, some stocks linked to the artificial intelligence sector continued their downward trend, exerting pressure on stock indexes. Palantir Technologies, which provides an AI platform, dropped by 4.8 percent, while Super Micro Computer, a server manufacturer, saw an 8 percent loss. Nvidia fluctuated between gains and losses, ultimately finishing nearly flat.
These stocks have faced the most scrutiny during the recent sell-off, as critics argue that their prices soared too high amidst the AI hype.
Other previously high-flying stocks have also experienced drastic swings. Tesla, owned by Elon Musk, fell 3 percent after logging back-to-back gains, marking a more than 40 percent decline so far in 2025.
READ MORE: How political dynamics are influencing Musk’s Tesla brand.
American Eagle Outfitters saw a 4.1 percent drop after the retailer noted “weaker demand and unseasonably cool weather” impacting its performance. Despite this, it reported stronger-than-expected profit for the latest quarter while projecting a revenue decline for the coming year.
Intel, however, was a standout performer, soaring 14.6 percent after naming former board member Lip-Bu Tan as its new CEO. Tan, 65, will step into the role next week, succeeding Pat Gelsinger, who resigned unexpectedly three months ago amid a significant downturn at the chipmaker.
Overall, the S&P 500 fell by 77.78 points to close at 5,521.52. The Dow Jones Industrial Average decreased by 537.36 to settle at 40,813.57, while the Nasdaq composite dropped by 345.44 to end at 17,303.01.
In the bond market, Treasury yields reversed their early gains and fell. The yield on the 10-year Treasury note declined to 4.26 percent from 4.32 percent, a continued decrease since January when it approached 4.80 percent, as traders and economists have scaled back growth expectations for the U.S. economy.
While few predict an imminent recession, especially with the job market still showing signs of strength, recent reports indicate a decline in confidence among both U.S. consumers and businesses.
Globally, stock markets in Europe and Asia have also seen declines, albeit relatively modest ones.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
