US stocks tumbled Wednesday as Federal Reserve boss Jerome Powell warned the coronavirus could leave the economy with lasting scars.
The Dow Jones industrial average fell as much as 292.48 points, or 1.2 percent, to 23,472.30 in early trading after Powell said the pandemic poses “significant downside risks” to the nation’s economic recovery.
The S&P 500 slipped as much as 1 percent following the Fed chief’s gloomy remarks, while the tech-heavy Nasdaq dropped as much as 0.8 percent.
Powell’s comments added to Wall Street’s worries about a second wave of coronavirus infections compromising efforts to reopen the US economy, which led stocks to slide Tuesday.
“The stock market seems to get the message that the Fed chair doesn’t see the best economy in 50 years returning any time soon,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “Companies can’t make money if the wheels of the economy fall off the bus and that means the stock market is overvalued at current levels.”
Powell said the virus crisis may require “additional policy measures” from the Fed, which has already slashed its benchmark interest rate to near zero and started buying up trillions of dollars in assets to backstop the economy.
He also suggested that Congress should pass another stimulus package to help strengthen the eventual economic recovery. Lawmakers have already approved nearly $3 trillion in spending since late March to put money in consumers’ pockets and shore up small businesses.
“The overall policy response to date has provided a measure of relief and stability, and will provide some support to the recovery when it comes. But the coronavirus crisis raises longer term concerns as well,” Powell said in a live-streamed address hosted by the Peterson Institute for International Economics.
“The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” he added.