Could tariffs trigger a stock market circuit breaker? Here's how much further the S&P 500 has to fall.

Dow Jones04-04

MW Could tariffs trigger a stock market circuit breaker? Here's how much further the S&P 500 has to fall.

By Gordon Gottsegen

Circuit breakers were built into the fabric of the stock market to prevent panic selling

Stocks were falling in response to President Donald Trump's sweeping tariff announcement Wednesday after market hours. The S&P 500 index SPX opened 3.2% lower on Thursday, and continued to decline in early trading.

With the S&P 500 facing its largest percentage drop since 2022, traders were wondering if the quick decline would trigger a circuit breaker.

Circuit breakers have become a feature of the stock market that halt trading across exchanges when the S&P 500 falls rapidly. They were born out of the "Black Monday" stock-market crash of 1987 and intend to pause panic selling to avoid a downward stock-market spiral.

Circuit breakers have multiple levels that end up triggered when the S&P 500 declines by a certain percent. Here are the levels to watch:

-- Level 1: a 7% drop

-- Level 2: a 13% drop

-- Level 3: a 20% drop

Trading would be halted for 15 minutes after a 7% or 13% drop in the S&P 500. If the S&P 500 drops 20%, and triggers a level 3 circuit breaker, trading would stop for the rest of the day.

The S&P 500 was trading around 5,470 on Thursday, down about 3.6%. While this certainly feels like a significant decline, the index would have to drop to 5,274.01 to trigger the first circuit breaker. So it still has some way to go.

The last time a stock selloff triggered a marketwide circuit breaker was in March 2020, during the onset of the Covid-19 pandemic. Circuit breakers were triggered on four separate trading days: March 9, 12, 16 and 18.

The Dow Jones Industrial Average shed over 1,200 points, trading 2.8% lower on at last check Thursday. Meanwhile, the Nasdaq Composite was down 4.7%.

-Gordon Gottsegen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 03, 2025 12:28 ET (16:28 GMT)

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Could tariffs trigger a stock market circuit breaker? Here's how much further the S&P 500 has to fall.

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