The S&P 500 plunged as much as 3.8% on Thursday, a rout severe enough to put emergency trading halts into the conversation barely 24 hours after President Donald Trump celebrated Wall Street's record highs. The selloff prompted traders to monitor the market's circuit-breaker thresholds, which can temporarily shut down trading across US stock exchanges when losses become too severe. A further decline to 7,150.41 points would trigger the first market-wide circuit breaker, temporarily halting US stock trading for 15 minutes.

AI and semiconductor stocks led the selloff as investors reassessed the implications of the Democratic Party's midterm victories for the technology sector.

Trump's celebration ages quickly

The timing was particularly awkward for Trump, who has repeatedly pointed to stock market performance as evidence of his administration's economic success. Less than 24 hours before the plunge, he boasted that Americans' retirement accounts were going "through the roof."

"Stock Market just hit another Record High—91 Days in just a short period of time—Less than two years. Your 401(k)s are through the roof," Trump wrote Wednesday on his Truth Social account, closing the message with, "Record Setting All! President DONALD J. TRUMP."

Wall Street had rallied Wednesday following the Democratic Party's sweeping midterm election victories. The S&P 500 gained 1.6%, its strongest daily performance in three months, while the Dow Jones Industrial Average jumped more than 1,500 points to 53,361. Thursday's losses erased that rally in a single session, with technology stocks taking the biggest hit.

Because the S&P 500 serves as the benchmark for a large share of US retirement funds, swings of this size reach well beyond trading floors and into the 401(k) balances Trump cited.

How close is Wall Street to a circuit breaker?

The US stock market has three emergency thresholds, known as circuit breakers, designed to slow panic selling. The mechanisms automatically suspend trading when the S&P 500 falls by a specified percentage from its previous closing price. They were introduced in the aftermath of the October 1987 crash, when the Dow Jones Industrial Average lost nearly 23% in a single session. Market-wide halts remain rare: the first activation came in October 1997, and the thresholds were triggered four times amid the market turmoil of March 2020.

The first threshold is a 7% decline, corresponding to an S&P 500 level of 7,150.41 points for Thursday's session. Reaching that level before 3:25 p.m. ET would trigger a 15-minute halt across US equity markets.

A 13% decline, or 6,689.09 points, would trigger another 15-minute suspension. The most severe threshold comes at 20%, or 6,150.89 points, and would shut down trading for the remainder of the day.

Under the New York Stock Exchange's rules, the first two circuit breakers stop applying at 3:25 p.m. ET, while the 20% threshold remains active throughout the session. The rules apply to the entire US equity market, not just the stocks included in the S&P 500, meaning a market-wide halt would also suspend trading in companies listed on the Nasdaq and other US exchanges.

AI stocks lead the selloff

The technology sector was particularly hard hit as investors continued digesting the consequences of Tuesday's election results. At around 11 a.m. ET, the Nasdaq Composite had fallen nearly 5%, while the S&P 500 was down 3.2%. From its intraday decline, the index would have needed to fall another 3.2 percentage points to set off the first emergency halt.

Nvidia lost more than 6%, while the broader semiconductor index plunged nearly 11%. Companies involved in building AI infrastructure were also under pressure as investors worried that the Democratic victories could bring stricter oversight of the aggressive AI buildout.

"We suspect there is going to be some scrutiny on this aggressive AI buildout," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told Reuters.

The selloff also spilled into cryptocurrencies. Bitcoin fell below $76,000, wiping out its post-election recovery, after approximately $428 million in leveraged crypto long positions were liquidated within an hour, as Decrypt reported earlier today.

Stocks also faced pressure from persistent inflation concerns and uncertainty over the Federal Reserve's next interest-rate decision. Investors are awaiting Friday's October employment report, which could provide further clues about the direction of monetary policy.

Despite Thursday's sharp losses, the S&P 500 had not reached its first market-wide circuit breaker at the time of this report.