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Stocks' staggering skid that began less than three weeks ago has pulled Wall Street into what’s known as a bear market.
The collapse fueled by uncertainty surrounding the coronavirus has officially ended the bull market for stocks that began more than a decade ago.
After a string of sharp losses, all major U.S. indices have now fallen more than 20% from their recent peaks.
Here are some common questions asked about bear markets and corrections and what they mean for average investors:
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HOW IS A BEAR MARKET DIFFERENT FROM A MARKET CORRECTION?
A correction is Wall Street's term for an index like the S&P 500, the Dow Jones Industrial Average, or even an individual stock, that's fallen 10% or more from a recent high. A bear market occurs when the index or stock falls 20% or more from the peak for a sustained period of time.
Corrections are common during bull markets, and are considered normal and even healthy. They allow markets to remove speculative froth after a big run-up and give investors a chance to buy stocks at lower prices.
The major U.S. stock indexes entered a correction this month amid mounting fears about the impact that the coronavirus outbreak could have on the global economy and company earnings growth. A oil market price war this week that led analysts to lower their profit forecasts for energy companies fueled more selling on Wall Street.
On Thursday, the S&P 500 plummeted 9.5% to 2,480.64. It has plummeted 26.7% from its all-time high of 3,386.15 on Feb. 19.
The Dow had its worst day since the market crash of 1987, sinking 10% to 21,200.62. It is now 28.3% below its record close of 29,551.42 on Feb. 12.
The Nasdaq dropped 9.4% to 7,201.80, or 26.6% below its peak of 9,817.18 on Feb. 19.
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WHAT'S BOTHERING INVESTORS?
The outbreak of the coronavirus that originated in China has quickly grown into a pandemic that is threatening major sectors of the global economy, stoking fear that the U.S. and other economies could be tipped into a recession.
Many companies, including airlines, cruise operators and big consumer technology manufacturers, have warned their earnings will take a hit this year due to the economic fallout from the outbreak.
Investors remain uncertain over whether action taken by the Federal Reserve and the Trump administration to shield the economy will be effective or arrive quickly enough to prevent widespread economic pain.
More recently, a sharp drop in crude oil prices has further dimmed the overall outlook for corporate profits this year and next. Company profits tend to be the biggest driver of stock market gains.