Wall Street benchmarks closed sharply down on Wednesday, after Federal Reserve Chairman Jerome Powell warned of a longer recession if Congress did not step in with additional fiscal stimulus.

The Dow Jones ended the day lower by just over 515 points, with the S&P 500 down by 1.7 percent. The Nasdaq — which earlier this week had turned positive for the year, breaching the 9,000 mark — closed down by 1.5 percent on Wednesday.

“There is a growing sense that the economy may recover more slowly than we would like,” Powell said Wednesday morning during a scheduled video conference with the Peterson Institute for International Economics.

“Fiscal support could be costly, but worth it if it helps avoid long-term economic damage,” Powell said, referring to the $3 trillion stimulus plan that Congress unveiled on Tuesday. His comments kicked off a slide for all three major averages, with the Dow falling by over 500 points as he spoke.

“The record shows that deeper and longer recessions can leave behind lasting damage,” Powell warned as part of his somber outlook on the economy. “Avoidable household and business insolvencies can weigh on growth for years to come.”

Overall, concern is growing that despite the gradual reopening of the economy and return to work, the proverbial “V-shaped” recovery may not materialize — and the country may instead suffer a prolonged recession.

The U.S. economy lost an unprecedented 20.5 million jobs in April, shattering all previous records and hitting the highest level since the Great Depression.

The unemployment rate soared to 14.7 percent, up from 4.4 percent in March after months at a half-century low, according to the monthly employment report, released Friday by the Department of Labor.

In just over a month, the coronavirus has wiped out all job gains since the Great Recession and brought the country’s decade-long record economic growth streak to an abrupt halt.

“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,” Powell said, describing the scope and speed of the economic downturn as “significantly worse than any recession since World War II.”

Market participants also weighed concerns that the recently inked — and hard-fought — trade deal with China may flounder amid heightened tensions between the world’s two largest economies. Rhetoric has ratcheted up in the past week, with the White House’s top trade adviser, Peter Navarro, saying Beijing should be held accountable for spreading the coronavirus.

“They inflicted tremendous damage on the world, which is still ongoing,” Navarro told CNBC on Monday. “We’re up to close to $10 trillion we’ve had to appropriate to fight this battle.”

President Donald Trump tweeted on Wednesday that “100 trade deals” would not outweigh the damage caused by the “Plague from China.”

Investors were also parsing disappointing monthly data from the Department of Labor that showed prices for U.S.-produced goods fell in April by the largest amount since 2015. The producer price index fell by 1.3 percent, far worse than economist expectations of 0.5 percent.

Source Article