The S&P 500 entered a correction on Thursday, falling more than 10% from its recent record high just three weeks ago. This drop comes amid growing concerns over President Donald Trump’s latest tariff threats, new inflation data, and the looming risk of a government shutdown. The index dropped 1.4% on Thursday, officially falling into correction territory, defined as a drop of over 10% from its peak.
Trump’s Tariff Threats and Inflation Concerns
The trigger for the market’s decline came from Trump’s warning of a 200% tariff on European wine, champagne, and other spirits. This move is seen as retaliation for the European Union’s decision to impose a 50% tariff on U.S. whiskey and bourbon, as well as for Trump’s ongoing tariffs on steel and aluminum. The threat of escalating trade tensions has intensified inflation concerns on Wall Street, despite inflation cooling slightly in February, with the consumer price index rising by just 0.2%.
“Tariff uncertainty has captured most of the blame for the selling pressure,” said Adam Turnquist, chief technical strategist at LPL Financial. “It’s exacerbating economic growth concerns.”
The Tech Sector and Other Major Indices Hit Hard
The Nasdaq Composite, which is more tech-heavy, also slid nearly 2%, having already entered correction territory last week. The Dow Jones Industrial Average saw a significant drop, losing nearly 550 points, or 1.3%, on Thursday.
Kristina Hooper, Invesco’s chief global market strategist, noted that markets are increasingly concerned about the risk of a recession, a stark contrast to expectations going into 2025.
Inflation Data and the Growing Government Shutdown Threat
The latest inflation data showed that the consumer price index rose 0.2% in February, keeping annual inflation at 2.8%. However, this cooling was not enough to mitigate concerns about rising tariffs.
Meanwhile, the threat of a government shutdown is adding to the instability. Senate Democrats have signaled their intention to block a Republican spending bill aimed at preventing a shutdown. They are pushing for a funding plan to last until April 11.
Trump’s Tariff Stance and Market Volatility
Despite the mounting economic concerns, Trump remained steadfast in his tariff stance, stating that he would not consider exempting Canada from tariffs. “I’m sorry, we have to do this,” he said.
As Wall Street faces growing uncertainty, it seems that the volatility driven by tariff threats and political gridlock is likely to continue, adding pressure to the already struggling markets.
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