The S&P 500 index entered correction territory on Thursday as U.S. stocks extended recent losses amid concerns over tariff-driven slowdown or contraction in economic growth and corporate earnings.

The Dow Jones Industrial Average dropped 537.36 points, or 1.30 percent, to close at 40,813.57. The S&P 500 fell 77.78 points, or 1.39 percent, to 5,521.52, while the Nasdaq Composite Index declined 345.44 points, or 1.96 percent, to 17,303.01.

Ten of the 11 primary S&P 500 sectors finished lower, with communication services and consumer discretionary stocks leading the declines, down 2.67 percent and 2.58 percent, respectively. Utilities was the only sector to post gains, edging up 0.27 percent.

With Thursday's losses, the S&P 500 is now down 10.2 percent from its record closing high set three weeks ago, putting it on the verge of entering correction territory -- defined as a drop of more than 10 percent from a recent peak.

The Dow is also nearing a correction, down 9.3 percent from its December all-time high, while the Nasdaq Composite has tumbled 14.3 percent from its record level in December.

U.S. President Donald Trump announced plans to impose a 200 percent tariff on alcoholic beverages from the European Union in response to the bloc's decision on Wednesday to slap a 50 percent tariff on American spirits such as bourbon. The EU's move was a direct retaliation for Trump's earlier 25 percent tariffs on steel and aluminum imports.

While markets initially brushed off the tariff developments on Wednesday, selling pressure intensified on Thursday as the trade dispute between Washington and Brussels escalated. The latest decline has extended a broader market downturn fueled by uncertainty surrounding Trump's trade policies.

U.S. Treasury Secretary Scott Bessent said Thursday on CNBC that he is not concerned about "a little bit of volatility over three weeks." Bessent said the Trump administration is focused on the "real economy" and the outlook for the long term.

Investors also analyzed an inflation report that showed prices remained steady in February, although egg prices surged. Inflation concerns have been growing, as Trump's import tariffs threaten to push prices higher while simultaneously weighing on economic growth.

"Tariff uncertainty has captured most of the blame for the selling pressure and is exacerbating economic growth concerns," said Adam Turnquist, chief technical strategist at LPL Financial, in a note Thursday.

Geopolitical tensions also added to market jitters, as it is reported that Russia rejected a U.S.-brokered ceasefire proposal for Ukraine, arguing that the 30-day truce would allow Kiev to regroup.

Wall Street's fear gauge, the Cboe Volatility Index, or VIX, surged this week to its highest level since December. "Extreme fear" has been the sentiment driving markets since the end of February, according to CNN's Fear and Greed Index.

Economic data released Thursday showed that the producer price index remained flat in February, defying economists' expectations for a 0.3 percent increase. While the softer-than-expected reading suggests the Federal Reserve's inflation-fighting efforts are working, it also raises concerns that economic activity may be slowing.

Among individual stocks, Adobe tumbled 13.85 percent, leading S&P 500 decliners, after the software company posted stronger-than-expected quarterly results but issued disappointing guidance. Super Micro Computer, Inc. (SMCI) and Palantir, two AI-driven stocks that have experienced heightened volatility, lost about 6 percent and 5 percent, respectively.

Intel was the standout gainer, surging 14.6 percent after the struggling chipmaker announced that industry veteran and former board member Lip-Bu Tan had been appointed as its new chief executive officer.

The U.S. yield on the 10-year Treasury note, which has been under pressure amid rising concerns about economic growth, stood at 4.27 percent as of 4:23 p.m. EDT, down from 4.32 percent at Wednesday's close.