Dow Ends Down 500, or 2.2%, as Fed’s Powell Says Path Ahead ‘Highly Uncertain’
Stocks finished lower Wednesday after Federal Reserve Chairman Jerome Powell said the U.S. economy may need “additional fiscal support” to help “avoid long-term economic damage and leave us with a stronger recovery.”
The Dow Jones Industrial Average fell 516 points, or 2.17%, to 23,247, the S&P 500 declined 1.75% and the Nasdaq was down 1.55%.
American Express , Walgreens Boots Alliance and ExxonMobil led the Dow’s retreat.
“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Powell said Wednesday in a webcast hosted by the Peterson Institute for International Economics in Washington.
“Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
The U.S. central bank has taken aggressive measures during the pandemic, and Powell has said that the Fed would use its “full range of tools” to shore up the U.S. economy.
Powell said Wednesday policy makers may have to provide more support to prevent the damage done from high levels of unemployment and company bankruptcies.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell said.
He added the Federal Reserve wasn’t considering “for now” negative interest rates – he has warned against them in the past.
The Fed chairman said the evidence to support such a move was “mixed,” insisting that for now “it’s not something that we’re considering. We think we have a good toolkit.”
“The biggest question of the morning was if Powell would shift his stance on negative rates, especially as global central banks flipped the switch to bolster their hard-hit economies and presidential hopes of a negative rate gift could pressure Powell’s hand,” said Mike Loewengart, managing director of investment strategy at E-Trade.
“But Powell remained steadfast in his commitment to avoid dipping into negative territory.”
U.S. lawmakers, meanwhile, have contemplated stepping up their Covid-19 response, with House Democrats floating an additional $3 trillion in rescue funds, with increased support for states and farmers.
Senate Majority Leader Mitch McConnell (R-Kentucky) dismissed the ideas as a partisan “wish list” that had “no chance” of becoming law.
Uber and Grubhub are in talks that might see the ride-hailing icon take over the food-delivery service for around $60 a share, or $6 billion, The Wall Street Journal reported, citing sources.
Oil prices were down Wednesday even after the Energy Information Administration said U.S. crude inventories fell by 700,000 barrels in the week ended May 8, vs. analysts’ expectations that called for an increase of 4.8 million barrels.
West Texas Intermediate crude declined 1.82% to $25.31 a barrel.
On Tuesday stocks had finished lower after Dr. Anthony Fauci, the nation’s top infectious-disease expert, told a Senate committee that if the country reopens too soon, it could lead to needless “suffering and death” and could set back plans to reopen the economy.