By Yasin Ebrahim
The Dow plunged on Wednesday as Federal Reserve Chairman Jay Powell warned of a protracted road to recovery for the economy at a time when many are concerned that reopening too quickly could trigger a second wave of Covid-19 infections.
The Dow Jones Industrial Average fell 2.16%, or 512 points, the S&P 500 slumped 2.11%, while the Nasdaq Composite lost 2.27%.
Underscoring the severe impact of the pandemic, Powell said the scope and speed of the economic downturn are "significantly worse" than any recession since World War II and hit back against calls to cut rates below zero, which he said had yet to prove an effective policy tool.
"We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased," Powell said in prepared remarks. "This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future."
As efforts to reopen the economic continue, New York state is dealing with an illness potentially related to the novel coronavirus that has caused inflammation in children.
Gov. Andrew Cuomo said Wednesday that the state is investigating 102 cases of children with an inflammatory illness possibly connected to coronavirus - 60% of the sick children tested positive for Covid-19.
U.S.-China tensions were also in the spotlight as the FBI warned the Chinese government is seeking to hijack U.S. research into the Covid-19 pandemic.
Downside in the broader market was led by energy, as oil prices slipped despite an unexpected draw in weekly U.S. supplies as concerns over a deeper recession cooled some hopes of a recovery in demand.
Financials, meanwhile, continued their weak start to the week, paced by an ongoing decline in banking stocks as U.S. bond yields slipped after Powell's cautious outlook and ongoing data that continued to highlight the impact of the pandemic.
JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) were down more than 2%.
The Labor Department said on Wednesday, its producer price index for final demand fell 1.3% last month, wider than economists' forecasts for a 0.5% decline.
Technology stocks, meanwhile, also contributed to the selloff, led by Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).
