Nasdaq Nears Correction as S&P 500 Slumps

The S&P 500 benchmark index closed Tuesday at its lowest level since November 4, wiping out gains accumulated since President Donald Trump’s November 5 election victory. Investor anxiety surged over concerns that the administration’s sweeping tariffs could dampen economic growth.

The tech-heavy Nasdaq Composite briefly dipped into correction territory—defined as a 10% decline from its recent peak—before rebounding slightly. The index closed down 0.4% at 18,285.16, its lowest finish since November 4, after hitting an intraday low of 17,956.60.

“Tariffs are likely to exert upward pressure on inflation and weigh on economic growth at the margin—an unfavorable combination for risk assets broadly,” said Josh Jamner, senior investment analyst at ClearBridge Investments.

On Tuesday, the U.S. imposed 25% tariffs on imports from China and Mexico, along with an additional 10% tariff on Chinese goods, adding to last month’s 10% levy. China and Canada retaliated with their own measures, while Mexico is expected to announce its response by Sunday.

After markets closed, Commerce Secretary Howard Lutnick suggested in a television interview that President Trump might be open to meeting Canada and Mexico halfway, potentially easing tariffs as early as Wednesday.

A Nasdaq close below 18,156.50 would confirm a correction, reflecting a 10% drop from its record close of 20,173.89 on December 16. If the index falls 20% from its high, it would enter a bear market. The Nasdaq reclaimed its 200-day moving average of 18,376.37 after closing just below the level on Monday—a key technical indicator often seen as a gauge of the market’s long-term direction.

The Dow Jones Industrial Average finished down 670.25 points, or 1.6%, at 42,520.99, after sliding as much as 843 points intraday. A close below 40,512.64 would confirm a correction from its record high of 45,014.04 set on December 4.

The S&P 500 dropped 71.57 points, or 1.2%, to 5,778.15—its lowest close since November 4. A decline below 5,529.74 would confirm a correction from its February 19 record close of 6,144.15. The index flirted with its 200-day moving average of 5,725, a level not tested since November 2023. Jonathan Krinsky, chief market technician at BTIG, suggested this level could spark a short-term rebound, but warned that the market might require a more complex bottoming process.

“The question isn’t whether we bounce at the 200-day moving average—it’s what happens after the bounce,” Krinsky wrote. “Investors are accustomed to ‘V-shaped’ recoveries, but we need to consider the possibility of a ‘W-shaped’ bottom, with a bounce followed by a re-test later this month.”

Escalating trade tensions have heightened fears of a slowdown or recession, further unsettling markets.

Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments, believes the market is sliding into a correction.

“Corrections always feel painful in the moment, and I believe we’re in one now,” Tengler wrote. She noted that corrections typically occur every 12 months and are often triggered by catalysts that seem dire at the time.

“This time, it’s tariffs,” Tengler said. “The key is not just assessing the tariffs themselves, but their duration. If they’re short-lived, this could present a prime buying opportunity for long-term investors.”