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Dow stumbles 200 points as Fed’s Powell says scope of coronavirus crisis ‘without modern precedent’

U.S. stock benchmarks traded lower Wednesday morning as Federal Reserve Chairman Jerome Powell offered an uncertain near-term outlook of the economy, with state and federal officials attempting to restart businesses from a coronavirus-induced lockdown.

“The recovery may take some time to gather momentum and the passage of time can turn liquidity problems into solvency problems,” Powell said.

What are major indexes doing?

The Dow Jones Industrial Average
DJIA,
-0.62%

was down 229 points, or 1%, to 23,520, while the S&P 500 index
SPX,
-0.26%

retreated 25 points, or 0.9%, at 2,845, led lower by a 2.6% decline in energy
SP500.10,
-2.82%

and a 1.9% drop in the financials sector
SP500.40,
-1.65%
.

The Nasdaq Composite Index
COMP,
+0.38%
,
meanwhile, traded at 8,942., off 41 points, or 0.5%.

Need to Know:Why Druckenmiller says the risk-reward of investing in stocks has never been worse

What’s driving the market?

Powell said that the economic recovery may be gradual and additional government aid to households and businesses may be “worth it” to keep lasting damage from developing, during a webcast discussion with the Peterson Institute for International Economics on Wednesday.

“The recovery may take some time to gather momentum and the passage of time can turn liquidity problems into solvency problems,” said the Fed chairman.

“Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he said.

The monetary policy maker said it was ultimately up to Congress and the administration to consider this trade-off.

The Fed boss also pushed back against the idea of negative interest rates after the fed funds futures market last week, for the first time, showed some traders betting they could become reality in the U.S.

“Trump has lately toned down his criticism of Powell & Co, suggesting he is so far satisfied with the Fed’s response to the virus crisis. But the longer the U.S. economy remains in some form of a lockdown and the slower the ensuing economic recovery, the more Trump will press the Fed to do more,” said Raffi Boyadjian, senior investment analyst at XM, in a research note.

Trump on Tuesday tweeted that the U.S. should accept “the GIFT” of negative rates.

In economic reports, the April producer-price index plunged by 1.3%. Economists surveyed by MarketWatch, on average, forecast the index to fall 0.5%.

Meanwhile, analysts said there was no single catalyst for Tuesday’s turn lower. Some argued that remarks by Dr. Anthony Fauci, the government’s top infectious disease expert, in testimony in front of the Senate helped sour the mood after he warned that premature reopenings could create spikes in cases that could turn into new outbreaks.

See:Coronavirus deaths in the U.S. are likely higher than the official tally, Dr. Fauci tells Senate committee

Which companies are in focus?
How are other markets trading?

Crude-oil prices inched higher Tuesday, with West Texas Intermediate Crude for June delivery
CLM20,
+1.35%

up 3 cents, or 0.1%, to $25.81 a barrel. In precious metals, the price of an ounce of June gold
GCM20,
+0.71%

rose $13.30, or 0.8%, to $1,720.

The yield on the 10-year U.S. Treasury note
TMUBMUSD10Y,
0.655%

fell 3 basis points to 0.66%.

The U.S. dollar lost ground against a basket of its six major rivals, with the ICE U.S. dollar
DXY,
+0.00%

down 0.2%. The greenback is still up 3.4% year-to-date.

In Europe, stocks were on the slide. The Stoxx Europe 600
SXXP,
-1.28%

is down around 1.2%.

In Asia overnight, China’s benchmark CSI 300 index
000300,
+0.20%

gained 0.2%, Hong Kong’s Hang Seng
HSI,
-0.27%

closed 0.3% lower and Japan’s Nikkei
NIK,
-0.48%

shed 0.5%.

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