The speed of the latest rout on Wall Street is rekindling unpleasant memories of market-wide trading halts that fired time and again during the the COVID meltdown of March 2020.
The S&P 500 fell as much as 5.97% Friday, taking it within striking distance of the 7% plunge that would trip the NYSE breakers that halt all trading for 15 minutes. The circuit breakers are designed to tamp down volatility in markets and can also help address the risk of erroneous trades in an era of high-frequency trading.
They were last tripped shortly after markets opened on several days in mid-March 2020, when economies around the world were shutting down and unemployment spiked.
“This level of selling and emotion has echoes to the pandemic,” said Mark Hackett, chief market strategist at Nationwide. While the degree of uncertainty is much lower compared to Covid, Hackett noted that right now “few see the urgency to catch the falling knife, and some systematic traders are forced to sell at certain levels.”
The 7% levels widen to 20% after 3:25 p.m. and are in effect until the cash close at 4 p.m.
US stocks are down 10% in the two days since President Donald Trump announced the harshest tariffs in a century and sparked concerns the global economy will tip into a recession. Selling accelerated early Friday after China said it will slap similar trade barriers on American products, escalating a trade war.
Volatility has reigned in markets over the past few weeks. The Cboe VIX Index jumped to as high as 45.56XX on Friday, while a gauge of price swings in the Nasdaq 100 Index jumped to as high as 37.79.
“There is reckless selling across the board, even gold is selling off today. Nothing is holding up except bonds really,” said Eric Diton, president and managing director at Wealth Alliance. “The word of the day is uncertainty. Markets really hate uncertainty and right now it is inescapable because not even Donald Trump knows the outcome of this right now. No one does.”
The initial halt on S&P 500 institutes a 15-minute pause in market-wide trading. From here on, another breaker would again force a 15-minute pause when the decline reaches 13%, and the next one will end trading for the day when the decline hits 20%.
The selling was so broad-based on Friday that it was hard to find corners that offer respite. All eleven of the S&P 500 sectors were in the red, with energy and financials leading the declines. Biggest contributors to the benchmark’s losses were the tech behemoths, including Nvidia Corp., Apple Inc., Tesla Inc., and Berkshire Hathaway Inc.. Less than 20 stocks were in the green, with Home Depot Inc. and Nike Inc. among the rare few.
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