The S&P 500 and the Nasdaq fell into a ‘correction.’ What’s that?

Stock markets took another hit on Thursday, with several key benchmarks slipping into correction territory — a sign that Wall Street may be losing momentum in the early days of the second Trump administration.

The downturn reflects rising investor anxiety over the administration’s unpredictable policy moves. Sudden shifts in tariffs and federal job cuts have left many investors feeling uneasy.

What is a market correction?

A market correction occurs when a stock index, individual stock, or other financial asset drops 10% or more but less than 20% from its recent peak. The term “correction” reflects the idea that prices are adjusting from overvalued levels. It’s called a correction because the drop often “corrects” and returns prices to their longer-term trend.

Corrections can happen in any type of investment, but they’re most common in the stock market when investors get nervous about things like the economy, interest rates, or global events. While a correction might seem worrying, it’s normally short-lived and just part of the market’s natural ups and downs.

How much have stocks fallen?

As of March 13, 2025, the major U.S. stock indices have suffered notable declines from their recent highs.

The S&P 500 fell nearly 10% to about 5,578 since reaching a peak of 6,144 on Feb. 19. The Dow Jones industrial average has fallen approximately 9% to about 41,132 from its December high of 45,073. And the Nasdaq composite has dropped down more than 13% to about 17,539 from its recent peak of 20,204.

What’s the difference between a correction and a bear market?

The main difference between a market correction and a bear market is the depth of the decline.

A correction is a drop of 10% or more and can last weeks to a few months. They are often temporary and driven by factors like economic data, interest rates, or geopolitical uncertainty.

A bear market is a more severe downturn of 20% or more, that can stretch over several months or longer. Bear markets typically signal deeper economic trouble, such as a recession or financial crisis.