U.S. stocks experienced significant losses on Thursday, with the S&P 500 officially entering correction territory as investors weighed economic concerns, inflation data, President Trump’s escalating trade war, and the threat of a U.S. government shutdown.
The S&P 500 (^GSPC) dropped 1.4%, marking a correction as it fell more than 10% from its February record high. The Nasdaq Composite (^IXIC), which entered correction last week, fell nearly 2%. The Dow Jones Industrial Average (^DJI) declined 1.3%, or nearly 550 points, as market sentiment soured.
Markets remain volatile, driven by a wave of uncertain developments. President Trump’s tariff threats continued to dominate headlines, contributing to Wall Street’s unease. On Thursday, Trump escalated his trade offensive by threatening a 200% tariff on EU wines and spirits in retaliation for European tariffs on U.S. steel and aluminum imports. Trump has made clear his stance, stating he would not “bend” in his broadening trade fight.
In addition to trade tensions, the looming risk of a U.S. government shutdown added further stress to markets. Senate Democrats have indicated they will block a Republican spending bill aimed at preventing a shutdown, according to Minority Leader Chuck Schumer.
Thursday also brought concerning economic data. The latest wholesale inflation report showed no change in prices for February, falling short of the expected 0.3% month-over-month increase. The Producer Price Index (PPI) rose 3.2% on an annualized basis, slightly below the expected 3.3% increase.
Meanwhile, concerns about the impact of job cuts from the Department of Government Efficiency (DOGE), spearheaded by Elon Musk, have begun to affect economic activity. Bank of America analysts pointed to macroeconomic pressures, particularly in the federal sector, noting a slowdown in average card spending growth in Washington, D.C. compared to other East Coast cities. The federal job cuts, particularly in education and environmental agencies, have led to a reduction in discretionary consumer spending, though essentials remain in demand.
“Total card spending growth is holding up for now, indicating that the impact of the DOGE cuts has been localized so far,” said Aditya Bhave, U.S. economist at Bank of America. “We will continue to monitor these data going forward to assess whether the drag is growing over time.”
As these concerns continue to unfold, investors are left navigating a turbulent market with uncertain economic and political headwinds.
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