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(Bloomberg) — The S&P 500 Index is on track to close in a correction on Tuesday, its first since late 2023, after dropping 10% from its Feb. 19 high as investors grow increasingly worried about an economic downturn and sell risky assets in favor of safe havens. 

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The equity benchmark was down 1.5% as of 1:27 p.m. in New York, meeting the market’s definition of a correction. It is now trading at 5,528.88, compared with the record closing high of 6,144.15 it hit last month. Technology behemoths Apple Inc., Nvidia Corp. and Alphabet Inc. were among the biggest contributors to the index’s losses on the session. The tech-heavy Nasdaq 100, which entered its own correction on March 7, fell 1.3%.

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“We are in a situation where the pendulum has shifted and fear has taken over,” said Adam Sarhan, founder of 50 Park Investments. “A lot of this has to do with the ‘Trump trade’ being unwound, but also concerns about growth going forward, and also the R-word, which is recession.” 

Equities sentiment has soured rapidly in recent weeks as economists dial back their expectations for economic growth based on the potential for a brutal trade war. Those fears escalated after President Donald Trump said in a Fox News interview on March 9 the US economy faces “a period of transition” and refused to rule out the possibility of a recession.

Mega-Tech Selloff

“A reasonable base case for the US economy is growth trending in a 1.5%-2% range over the next year or so, down from about 2.5% over the past few years, based on tariff implementation,” Dennis DeBusschere of 22V Research wrote in a note to clients. 

At the same time, the the mega-cap tech stocks that have largely driven the S&P 500’s more than 50% gain over the past two years are caught in a selloff, as investors grow doubtful about the immediate future of artificial intelligence and, more broadly, retreat from riskier growth assets.  

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Meanwhile, sell-side strategists are warning about rising volatility in equities, with Morgan Stanley predicting the S&P 500 will drop as much as 5% to 5,500 in the first half as corporate earnings suffer from tariffs and lower fiscal spending. JPMorgan Chase & Co. and RBC Capital Markets have also tempered their bullish calls for 2025.

Investors’ rotation away from risk is on display in the S&P 500’s sector performance this year. Consumer discretionary and information technology stocks, which typically thrive when the economy is healthy, are the biggest decliners in 2025, while defensive groups such as health care, real estate and consumer staples leading the way.

The tariff noise has also widened the benchmark’s underperformance relative to its global peers, with US equity indexes lagging those in Europe, China, Mexico and Canada.

“The bears are in control right now and every time the market tries to bounce we see another violent leg down,” Sarhan said. “If this continues, fast forward a few more days, we are looking at a complete change in environment from a bull market to a bear market.”

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