The U.S. stock market has lost about $5.28 trillion in value in just three weeks. The S&P 500 has gone from a record high on February 19, 2025, with a market value of around $52.06 trillion, to $46.78 trillion as of Thursday. This 10% drop has put the market in correction territory.
Various factors have contributed to the market volatility, including unstable trade relations and changing economic indicators. President’s policies and trade negotiations have also played a role, with news about tariffs often impacting market sentiment. Signs of slowing economic growth are also contributing to the downturn.
Consumer sentiment surveys have shown weakness, and outlooks from several economic sectors appear tepid. Barclays strategist Emmanuel Cau noted, “Our interactions with clients indicate that the mood music is changing. While many see recession talk as premature, concerns about erratic policy from the new administration abound, with the ‘uncertainty tax’ hitting growth expectations.”
The unwinding of the growth trade related to artificial intelligence (AI) stocks has also been a significant factor.
Since February 19, Nvidia has fallen 17%, and the Roundhill Magnificent Seven ETF has dropped 16%. Before the correction, the rapid rise in AI-related stocks had raised concerns about overvaluation, with some companies having market caps over $3 trillion at times. Despite the recent decline, the S&P 500 is still relatively high, trading at 24.1 times its trailing 12-month earnings, which is well above its historical average.
This high valuation continues to be a topic of discussion among investors and analysts. The U.S. stock market has seen a significant decline, losing around $4 trillion in value, as President Trump continues to push forward with his tariff policies. The S&P 500 index has fallen over 8% from its all-time high on February 19, while the Nasdaq has confirmed a 10% correction from its December peak.
Even with a moderation in the S&P 500’s price-to-earnings (P/E) ratio, it remains high compared to historical averages. Major companies are feeling the impact. Delta Air Lines has reduced its forecast due to increasing economic uncertainty, and Tesla has experienced a massive loss, shedding more than $125 billion in value in a single day.
Traders at the New York Stock Exchange (NYSE) in New York City are seeing increased volatility as the market responds to ongoing developments. Investor confidence remains shaky, contributing to the widespread selloff. European shares have also been affected, slipping on Wednesday following the Wall Street selloff.
Meanwhile, the dollar has ticked up from a five-month low, ahead of the Federal Reserve’s rate decision later today.
Market volatility and valuation concerns
The market’s reaction highlights the unease among investors as they navigate the unpredictable economic landscape shaped by current tariff policies and global economic uncertainties.
After Thursday’s sell-off, the S&P 500 has entered correction territory, defined as a decline of 10% or more from a recent high. The index dropped 1.39% and is now 10.1% down from its record close. The Dow Jones Industrial Average lost 1.3%, marking its fourth consecutive day of decline, and the Nasdaq Composite fell 1.96%.
In contrast, China’s CSI 300 jumped over 2%, and Australian mining stocks soared as gold prices hit a record high. U.S. President Donald Trump announced Thursday his plan to impose a 200% tariff on alcoholic products from European Union nations. This move is in response to the EU lifting its prior suspension on levies on American whiskey.
Trump has remained resolute on tariffs despite the ongoing market downturn, which is now in its third week. At an Oval Office meeting, Trump indicated that he is “not backing down” on his tariff stance. Seasonally adjusted figures from the Bureau of Labor Statistics on Thursday showed a flat Producer Price Index (PPI) for February, lower than the 0.3% increase expected in a Dow Jones survey.
Core PPI, which excludes food and energy prices, decreased by 0.1%, against an estimate for a 0.3% rise. This marks the first negative core PPI reading since July. The muted consumer and producer price reports add to the Federal Reserve’s complex economic outlook.
Moscow has agreed in principle to a ceasefire deal backed by Ukraine earlier this week, but Russian President Vladimir Putin highlighted there are still significant uncertainties. On Thursday, a U.S. delegation led by Trump’s special envoy Steve Witkoff arrived in Russia for further ceasefire talks. Early indications from Russian officials suggested some ambivalence towards the agreement.
Market watchers have linked the stocks’ poor performance this week to fears of an economic recession in the U.S. However, JPMorgan analysts argue otherwise, suggesting that other factors could be at play. If JPMorgan’s assessment is accurate, there might be a silver lining to the current market sell-off. In response to the growing demand for speed and convenience, logistics companies are increasingly adopting emerging technologies like artificial intelligence and robotics.
Javier Bilbao Uzquiano, Asia-Pacific CEO of DHL Supply Chain, reported extensive use of robotics across DHL’s warehouses. Additionally, Dubai-based online food ordering service Talabat is enhancing its AI capabilities. CEO Tomaso Rodriguez noted the company is focusing on leveraging AI’s predictive abilities to increase customer orders, as discussed Thursday at CONVERGE LIVE, a two-day event at Singapore’s Jewel Changi Airport.
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