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The market sell-off tied to President Trump’s “reciprocal” tariffs entered a second day on April 4. After the S&P 500 SPX dropped 4.8% on Thursday, the index continued its slide on Friday, falling more than 5% in midday trading.
With the S&P 500 falling at this rate, the stock market could be at risk of triggering a circuit breaker.
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Circuit breakers have become a feature of the stock market that halt trading across exchanges when the S&P 500 falls rapidly. They were born out of the “Black Monday” stock-market crash of 1987 and intend to pause panic selling to avoid a downward stock-market spiral.
Circuit breakers have multiple levels that end up triggered when the S&P 500 declines by a certain percent. Here are the levels to watch:
Trading would be halted for 15 minutes after a 7% or 13% drop in the S&P 500. If the S&P 500 drops 20%, and triggers a level 3 circuit breaker, trading would stop for the rest of the day.
The S&P 500 traded as low as 5,101.75 on Friday, down more than 5%. While this certainly feels like a significant decline, the index would have to drop to 5,018.76 to trigger the first circuit breaker. So it still has some way to go.
The last time a stock selloff triggered a marketwide circuit breaker was in March 2020, during the onset of the Covid-19 pandemic. Circuit breakers were triggered on four separate trading days: March 9, 12, 16 and 18.
The Dow Jones Industrial Average DJIA was last down over 1,600 points, trading 4% lower at last check Friday. Meanwhile, the Nasdaq Composite COMP was down 4.6%.