Just minutes after markets opened on Thursday, they were temporarily shut down after the S&P 500 index dipped below a crucial threshold, losing 7 percent of its value in a rapid sell-off of leading stocks.
In order to ward off a panic that can send markets into a death spiral, trading automatically halts if certain “circuit breakers” are tripped. If the S&P 500 loses 7 percent of its value before 3:25 pm on a day when the markets are open, trading halts for 15 minutes.
A second 15-minute halt will occur if the index loses 13 percent of its value before 3:25 pm. If the S&P 500 loses 20 percent of its value at any point before markets close this afternoon, then trading will halt for the remainder of the day.
Thursday’s trading pause is the second time a circuit breaker was tripped this week — the first happened on Monday as markets came to terms with the economic damage that is likely to result from the coronavirus pandemic. Markets opened at 9:30 am on Thursday, and the 7-percent circuit breaker was triggered about six minutes into the trading day.
Investors and traders continue to be alarmed by the widespread economic implications of the coronavirus pandemic, as travel restrictions and trade worries grip financial markets.
Monday’s trading pause was the first time a circuit breaker was tripped since the system was revamped over a decade ago, and only the second time one was tripped since 1997.
Thursday’s sell-off was predicted by futures markets, which began to crumble shortly after President Donald Trump announced Wednesday evening that he would impose a travel ban on Europe.