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S&P 500 down over 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

(New throughout, adds closing market data, adds context on

stock market ownership)

By Lewis Krauskopf and Saqib Iqbal Ahmed

NEW YORK, March 10 (Reuters) -

President Donald Trump's tariffs have spooked investors,

with fears of an economic downturn driving a stock market

sell-off that has wiped out $4 trillion from the S&P 500's peak

last month, when Wall Street was cheering much of Trump's

agenda.

A barrage of new Trump policies has increased uncertainty

for businesses, consumers and investors, notably back-and-forth

tariff moves against major trading partners like Canada, Mexico

and China.

"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."

The stock market selloff deepened on Monday. The

benchmark S&P 500 fell 2.7%, its biggest daily drop of

the year. The Nasdaq Composite slid 4%, its largest

one-day decline since September 2022.

The S&P 500 on Monday closed down 8.6% from its February 19

record high, shedding over $4 trillion in market value since

then and nearing a 10% decline that would represent a correction

for the index. The tech-heavy Nasdaq ended Thursday down more

than 10% from its December high.

Trump over the weekend declined to predict whether the

U.S. could face a recession as investors worried about the

impact of his trade policy.

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.

"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."

Stock market wealth is mostly owned by the richest section

of the population.

The percentage of total corporate equities and mutual

fund shares that are owned by the bottom 50% of the U.S.

population, ranked by wealth, stands at about 1%, while the same

measure for the top 10% of the population by wealth stood at

87%, according to Federal Reserve Bank of St. Louis data as of

July 2024.

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, dragging major indexes down with them.

Those tech and megacap stocks that had propelled the market

higher the past two years were hit hard on Monday. The S&P 500's

technology sector dropped 4.3%, while Apple ( AAPL )

and Nvidia ( NVDA ) both fell about 5% and Tesla tumbled 15%.

Other risk assets were also punished, with bitcoin

dropping 5%.

Some defensive areas of the market held up better, with

the utilities sector logging a 1% daily gain.

Safe-haven U.S. government debt saw more demand, with benchmark

10-year Treasury yields, which move inversely to prices, down to

about 4.22%.

INVESTOR UNEASE

The S&P 500 has given up all gains recorded since

Trump's November 5 election, and it is down nearly 3% in that

time.

Hedge funds

reduced their exposure to stocks on Friday at the largest

amount in more than two years, according to a Goldman Sachs note

released on Monday.

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, has dampened sentiment.

"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.

"Many people have been worried about elevated valuations

among U.S. equities for some time and looking for the catalyst

for a market correction," said Dan Coatsworth, investment

analyst at AJ Bell. "A combination of concerns about a trade

war, geopolitical tensions and an uncertain economic outlook

could be that catalyst."

Investors' equity positioning has fallen in recent weeks,

dipping to slightly underweight for the first time since briefly

hitting that level in August, Deutsche Bank analysts said in a

note on Friday.

A further retreat to the bottom of the historic range for

equities weighting, as seen during Trump's U.S.-China trade war

in 2018-2019, could drag the S&P 500 to as low as 5,300, or down

another 5.5% from current levels, they added.

In another sign of growing investor unease, the Cboe

Volatility index on Monday reached its highest closing

level since August.

The administration is "still trying to figure out how to

define a win politically, economically, and what is the right

timeframe," said Edward Al-Hussainy, senior interest rate and

currency analyst at Columbia Threadneedle Investments. "And

until they do that, it's going to be like this every week."