Updated at 4:05 p.m. ET
Stocks continued their free-fall on Thursday, with major indexes falling into correction territory. The Dow Jones Industrial Average tumbled nearly 1,200 points as worries mounted about the economic toll of a widening coronavirus epidemic.
The Dow ended the day down 4.4%, and nearly 13% below its recent peak on Feb. 12. A drop of 10% from a recent high is the technical definition of a "correction."
The broader S&P 500 index and the tech-heavy Nasdaq are also in correction territory. Both are down more than 12% from their recent peak, reached just last Wednesday.
President Trump tried to project a note of calm in a news conference Wednesday evening, stressing that the United States is well prepared for any health crisis and predicting the stock market will recover, thanks in part to robust consumer spending. But investors were not immediately reassured.
A poll by Morning Consult this week found that 69% of U.S. adults are either "very" or "somewhat" concerned about the domestic economic impact of the epidemic, a 14 point increase from a few weeks ago.
Goldman Sachs lowered its forecast of corporate profits for this year and next. The firm expects zero growth in profits in 2020, as a result of reduced economic activity in both China and the U.S., reduced demand for American exports, supply chain disruptions and increased uncertainty.
The steep drop in financial markets could put a dent in consumer confidence and spending — a major driver of the U.S. economy. It may also increase pressure on the Federal Reserve to lower interest rates. On Tuesday, the central bank's vice chairman, Richard Clarida, said the Fed is monitoring the outbreak closely but he cautioned it's too soon to assess the economic effects.
Health officials also reported the first known case of coronavirus in the U.S. with no apparent link to China or other sources, suggesting that the virus may be spreading domestically.
STEVE INSKEEP, HOST:
The U.S. stock market continues its freefall today. The Dow Jones Industrial Average tumbled more than 1,000 points in the first hour of trading. Now it's since regained a little bit of that. But investors are still looking at big losses for this week, day after day after day, amid fears about the spread of the new coronavirus and its effects on the world economy. NPR economics correspondent Scott Horsley has been following all this. He's in our studios. Scott, good morning.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: How bad is it?
HORSLEY: It's pretty grim. We are just about two hours into the trading day. And as of this moment, the Dow is off another 2.4%. The broader S&P 500 Index is down a little over 2%. The tech-heavy Nasdaq is down a little over 1%. So another steep drop this morning. And, of course, we also saw markets in Europe and Asia suffering steep drops overnight.
INSKEEP: You told us earlier today that the market had already dropped 13%, I believe, in recent days - and so now even a little more than that. You don't want to get too upset about one day's drop, but this is looking - this is pretty significant.
HORSLEY: It is. And the reason investors are so spooked is this is the week the coronavirus story went global. You know, the growing number of cases we've seen outside of China is forcing investors to really rethink their expectations about just how costly this epidemic is going to be. The prospect that the virus will take hold not only in Asia but maybe in Europe, maybe even here in the United States, raises the concern that governments around the world will have to order their own measures to try to contain the virus. That could mean fewer workers going to factories, fewer shoppers going out to stores, maybe shortages of parts on assembly lines, reduced demand for U.S. exports.
On top of that, there's just a lot of uncertainty. And those concerns have been climbing day by day this week, as we've seen the first cases popping up in Africa and South America, where health systems may be hard-pressed to respond. We also had the first case in this country that was not easily traced to overseas travel. And now we've got a weekend coming up and the possibility of more bad news. Some investors are just trying to get ahead of that. You know, it's leap day tomorrow, and they are leaping to sell.
INSKEEP: How is the Trump administration responding to all of this?
HORSLEY: They're trying to calm both the financial markets and also just calm the general public out there. Vice President Pence made a show this week of meeting with the Coronavirus Task Force, trying to demonstrate that public health officials are on the job. Earlier this morning, White House economic adviser Larry Kudlow stepped in front of TV cameras and urged people not to panic.
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LARRY KUDLOW: I just think everybody, whether you're an investor or whether you're, you know, ordinary Main Street person - people should not overreact. That's the important thing - to not overreact.
HORSLEY: Kudlow stressed that the public health system in this country is very strong. And, of course, that's true. But part of the challenge for markets is the very things that a public health system might do very reasonably to contain the virus might make the economic fallout worse. You know, that's what we saw in China, where it wasn't so much the virus that brought the economy to a near standstill but rather the very aggressive quarantine measures the government took to contain it.
The other challenge for the administration is they have squandered a good deal of credibility unnecessarily when they offer, you know, alternative facts about things like tax cuts paying for themselves or the size the president's inaugural crowd. And there have been warnings all along that there would come a moment when you really want an official voice of reassurance that can carry some weight. And the squandering credibility may mean they don't - aren't able to do that.
INSKEEP: It's a delicate thing when you say, don't panic. One of the words you just said was panic. And that's the word people are going to hear unless they really, really believe what you're saying. Now, there are other parts of the government here that can act, though, right?
HORSLEY: Yes. And we're seeing mounting pressure now on the Federal Reserve to cut interest rates. That's not the perfect medicine for what is ailing the economy right now. But markets are now assuming that the Fed will cut rates as early as its next meeting in a few weeks. And that may do something to help consumer demand, which, of course, is a huge part of the U.S. economy.
INSKEEP: Scott, thanks always - as always for your reporting. Really appreciate it.
HORSLEY: Good to be with you.
INSKEEP: NPR's Scott Horsley on this morning, when the Dow Jones Industrial and the other stock markets indexes are down once again. Transcript provided by NPR, Copyright NPR.