S&P 500 Plummets 4.5% Amid Trump Tariffs, Faces 7% Drop

In the wake of President Trump's implementation of the most significant tariff measures in a century, the S&P 500 index is hovering around a critical technical level. If this level is breached, it could signal a more prolonged downturn. The index opened lower by more than 3% on Thursday, with early trading in New York seeing a drop of up to 4.5%. The index is now near the 5500 point correction level. Technical analysts, who observe moving averages and other indicators to determine market momentum, note that there are few points below this critical psychological level that could attract buyers.

“There is a sense of panic in the air,” said Jay Woods, Chief Global Strategist at Freedom Capital Markets. “Trump and his administration are trying to sell this trade war to the American public, but the stock market isn't buying it. People are tired of the rhetoric, and they don't see any benefit to the tariffs other than the potential to push the U.S. into a recession. They are now rushing to pull their money out of the market.”

If the S&P 500 index falls below the 5500 point mark, it could drop to the 4900-5300 point range. This has led strategists to reconsider their year-end targets. For instance, Lori Calvasina, Head of U.S. Stock Strategy at Royal Capital Markets, suggested that such a decline would make their pessimistic scenario for the year-end — 5550 points — more likely than their current target of 6200 points.

During the previous trade war in 2018 and 2019, stock positions fell to the bottom of their historical range. According to data, the S&P 500 index would need to drop to 5250 points — a decline of over 7% from Wednesday's closing price of 5670.97 points. Additionally, technical traders are watching the 5119.26 point mark — the low point reached by the S&P 500 index on August 5, 2022, when the unwinding of yen carry trades caused market instability.

Woods also noted the significance of how far the S&P 500 index is from the 200-day moving average of around 5762 points. Last month, the index ended a streak of 336 consecutive trading days above the 200-day moving average, closing 2% below this level on Wednesday. In previous sell-offs in 2022, 2020, and 2018, the index fell more than 10% below this support line.

Mark Newton, Head of Technical Strategy at Fundstrat Global Advisors, highlighted the importance of the 5400 point level reached in early September 2022. He also noted the Fibonacci retracement levels from the 2022 bear market low, which provide support around 5375 to 5425 points.

“The speed of the decline will leave scars,” said John Kolovos, Head of Technical Strategy at Macro Risk Advisors. “Trump's tone is very serious — almost resolute — and this signals that these tariffs won't be quickly reduced in negotiations. April 2 is the culmination of his lifelong tariff ambitions.”