The S&P 500 Just Fell More Than 4% in a Day From Near Its Record. Here's What Happened Next in 2 Similar Situations Since 1950.

On Thursday, November 5, the S&P 500 (^GSPC +0.31%) experienced its worst day since April 4, 2025, with the index falling 4.36% and ending at 7,353.73. This drop was particularly unusual as the index had closed the previous day at 7,688.62, just under 2% away from its record high set on October 6. The decline was primarily driven by tech shares, with chip stocks leading the downturn, falling the hardest among the group.

Factors contributing to the market's decline included negative reports from two chipmakers and growing concerns about potential new regulations on artificial intelligence data centers following a midterm election. To analyze the rarity of this specific drop, I examined historical data from Yahoo Finance, finding that only two instances since 1950 had the S&P 500 declining 4% or more while the index was within 2% of a record close.

These two instances were on September 26, 1955, and October 13, 1989. The 1955 drop occurred on the first trading day after President Dwight Eisenhower's heart attack, while the 1989 drop happened on a Friday the 13th, revolving around the inability to secure financing for the UAL labor-management buyout. Comparing these historical cases to Thursday's drop, the overall historical record shows that most of the large rebounds in the index followed much larger declines.

This drop, starting near its record high, is relatively modest in comparison. The broader historical trend indicates that while most of the significant drops were followed by gains, the median gain over a year later was around 23%, with an even higher median gain of around 7% for cases starting within 5% of a record high. Despite this data, it would still be premature to predict a similar rebound for the S&P 500 after Thursday's drop, as the current valuation and market conditions differ significantly from those in the past.