S&P 500 Avoids Circuit Breaker After 3.8% Drop

The S&P 500 dropped as much as 3.8% on Thursday amid a rout in chip stocks. An additional 3.3% decline would have tripped a mechanism that halts all US stock tading.

That mechanism is a market-wide circuit breaker, which locks out all buyers and sellers from US stocks for 15 minutes.

What Is a Circuit Breaker, and How Close Did Stocks Get?

Circuit breakers are automatic trading halts that apply across the entire market. US exchanges introduced them following the October 1987 crash, according to an SEC filing.

Each day, the thresholds are recalibrated based on the S&P 500's prior closing value, which on Wednesday was 7,688.62.

A 7% decline to 7,150.41 pauses trading for 15 minutes. A 13% drop to 6,689.09 triggers another halt. A 20% fall to 6,150.89 would close the market for the day.

These initial two halts are effective only before 3:25 p.m. ET. After that, any decline continues straight to the session's end.

The Nasdaq experienced a steeper drop, but only the S&P 500 can activate the circuit breaker.

Tuesday's election gave Democrats control of Congress, raising concerns about slower expansion for data centers that purchase AI chips, which fueled Thursday's chip selloff.

The Philadelphia Semiconductor Index, a benchmark for large US chip firms, slipped 10.2%.

By midday, the S&P 500 had rebounded to approximately 7,400, leaving about 285 points before the first threshold, according to Trading Economics data.

WALL STREET WATCHES CIRCUIT BREAKERS AS S&P 500 PLUNGES 3.8%

US stocks are sliding sharply, bringing market-wide trading halt thresholds into focus.

Under US circuit-breaker rules, the following S&P 500 levels would trigger:

🔸 7% decline — 7,150.41: 15-minute trading halt
🔸…

— *Walter Bloomberg (@DeItaone) November 5, 2026

Do Circuit Breakers Calm Panic or Feed It?

The circuit breaker was triggered four times in March 2020 amid the COVID-19 crash. Experts remain divided on its impact.

Some researchers caution about a “magnet effect,” in which prices are drawn toward the threshold as they approach it.

“…the circuit breakers slowed, but did not completely inhibit downward pressure and the magnet effect is in play,” wrote Laura Kodres, senior distinguished fellow at MIT Golub Center for Finance and Policy.

Exchanges hold a different view. A 2022 study by the World Federation of Exchanges (WFE) concluded that prices stabilized after the 2020 pauses.

“…the circuit breakers in the U.S. are designed adequately and serve as an effective safeguarding mechanism,” WFE CEO Nandini Sukumar said in a statement.

On November 1, BeInCrypto covered Jim Cramer's caution that the midterm elections might prolong the Nasdaq downturn. The 7% threshold remains active until 3:25 p.m. ET.