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S&P 500 down 8% from Feb 19 all-time high

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Nasdaq confirmed 10% correction from its Dec peak last

week

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S&P 500 P/E moderates but still high vs historical average

By Lewis Krauskopf

NEW YORK, March 10 (Reuters) - Fears that uncertainty

over trade tariffs will spark an economic downturn are causing

investors to flee equities, in a major shift for Wall Street

which had been fired-up by the prospect of President Donald

Trump's agenda.

Stocks continued their steep decline on Monday, with the

benchmark S&P 500 down 2% in mid-day trade and the Nasdaq

Composite sliding more than 3%. The S&P 500 was down

about 8% from its February 19 all-time high, nearing a 10%

decline that would show a correction for the index. The

tech-heavy Nasdaq ended down more than 10% from its December

high last week.

The S&P 500 tallied back-to-back gains of over 20% in 2023

and 2024, led by megacap technology and tech-related stocks such

as Nvidia ( NVDA ) and Tesla that have struggled so far

in 2025 and dragged major indexes down with them.

"We've seen clearly a big sentiment shift," said Ayako

Yoshioka, senior investment strategist at Wealth Enhancement.

"A lot of what has worked is not working now."

Investors are grappling with a barrage of new policies from

the new Trump administration, particularly in trade where back

and forth on tariff policy has increased uncertainty for

businesses, consumers and investors.

Trump over the weekend declined to predict whether the U.S.

could face a recession amid stock market concerns about his

tariff actions on Mexico, Canada and China.

"The Trump administration seems a little more accepting of

the idea that they're OK with the market falling, and they're

potentially even OK with a recession in order to exact their

broader goals," said Ross Mayfield, investment strategist at

Baird. "I think that's a big wake up call for Wall Street."

The S&P 500 has given up all of its gains since Trump's

November 5 election, and is now down more than 2% in that time.

Investors had expressed optimism that Trump's expected

pro-growth agenda including tax cuts and deregulation would

benefit stocks, but uncertainty over tariffs and other changes

including federal workforce cuts, have dampened sentiment.

INVESTOR UNEASE

"It was the overwhelming consensus that everything was going

to be this great environment once President Trump came into

office," said Michael O'Rourke, chief market strategist at

JonesTrading.

"Every time you have structural change you're going to have

uncertainty and you're going to have friction," O'Rourke said.

"It's understandable people are starting to be a little

concerned and starting to take profits."

While stock valuations have moderated with the recent

selloff, the market broadly is still significantly above

historic averages. The S&P 500 as of Friday was at just above 21

times earnings estimates for the next year, compared to its

long-term average forward P/E of 15.8, according to LSEG

Datastream.

Investors' equity positioning has fallen in recent weeks,

dipping to slightly underweight for the first time since it

briefly hit that level in August, Deutsche Bank analysts said in

a note on Friday.

A further retreat to the bottom of its historical range, as

seen in Trump's first term during the U.S.-China trade war

period in 2018-19, could drag the S&P 500 to as low as 5,300, or

down another 6% from current levels, they added.

Beyond the tariff uncertainty, investors are watching to see

if lawmakers can pass a funding bill to avert a partial federal

government shutdown, while a crucial report on inflation looms

on Wednesday.

In a sign of growing investor unease, the Cboe Volatility

index hit its highest level since late December on

Monday.

"Considerable uncertainty remains over the size and scope of

tariffs to be implemented," strategists at Glenmede said in

written commentary.

"Are they temporary in order to extract concessions, or are

they a new permanent fixture of U.S. trade policy? Until there's

greater clarity on these key questions, market volatility is

likely to persist."