Recognizing the notion of market correction: The US stock market undergoes a notable downturn. In the US, market corrections happen

As China's response to President Donald Trump's tariffs escalated the ongoing global trade war, U.S. stocks saw a sharp drop on Friday.

The Dow Jones Industrial Average experienced a 5.5% decline, or 2,231 points. While the Nasdaq Composite fell 5.82%, the S&P 500 fell 5.97%.

With a decline of more than 10% from its peak in December of last year, the Dow ended the day in correction territory. This is the first time since March 7, 2022, that the Dow has closed lower.

What does a market correction entail?

A drop of 10% or more in stock prices from their recent highs is referred to as a market correction. According to The New York Times, "the 10 percent threshold for a correction is a somewhat arbitrary figure, but it indicates a notable shift in investor sentiment towards pessimism regarding the market." Although they are typically short, market corrections can last anywhere from a few days to several months.

Why do market corrections occur?

When investors are more likely to sell stocks than buy them, market corrections and other types of market declines take place. This behavior can be caused by a number of things, such as a slowing or weakening economy, predictions of a recession, or the conviction that the market is overheated with inflated prices. Non-economic occurrences like wars or interruptions in the oil supply can also make investors uneasy, which can lead to.

It's critical to differentiate between bear markets and market corrections. A bear market typically lasts longer than market corrections and is defined by a 20% or more drop in stock prices. Additionally, compared to bear markets, market corrections typically have less negative effects on the market.

According to a Morning Star report, bear markets have different underlying causes, even though they are frequently associated with economic recessions.

In the US, market corrections happen quite frequently. According to a Reuters analysis using data from Yardeni Research, the S&P 500 has undergone corrections 56 times since 1929. The data showed that only 22 of these cases escalated into bear markets.

India's three main indices, the Nifty, Sensex, and Nifty 500, have experienced significant corrections eight times in the past thirty years. Most recently, between September 2024 and March 2025, the Nifty 50 index dropped by about sixteen percent.