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Powell warns of 'lasting damage' due to coronavirus
https://finance.yahoo.com/news/stock-market-news-live-may-13-2020-221848805.html?.tsrc=fin-notif

Stocks fell Wednesday, with declines in the three major indices accelerating into the last hour of trading, as traders digested commentary from Federal Reserve Chair Jerome Powell.

In his comments, Powell undercut hopes of a quick V-shaped recovery for the U.S. economy amid the coronavirus pandemic, saying that a deep, long downturn could “leave behind lasting damage” to economic productivity.

“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Powell said during his webcast appearance with the Peterson Institute for International Economics, according to prepared remarks.

Powell also reiterated that the central bank would use all of its monetary policy tools “until the crisis has passed and the economic recovery is well under way,” and suggested that Congress boost fiscal stimulus to mitigate the risk of longer-term economic damage.

The remarks reiterated sentiments previously expressed by other Fed officials, many of whom acknowledged that the extended shutdowns that have helped bring down new case growth for the virus have simultaneously come at the expense of economic and business activity. A number of Federal Reserve officials who delivered public remarks on issued more cautious commentary around the coronavirus’s near- and long-term impacts on the U.S. economy and financial markets.

Cleveland Fed President Loretta Mester, a voter in this year’s Federal Open Market Committee (FOMC), said Tuesday she expected unemployment to hit or top 20% domestically, and for second-quarter annualized GDP growth to be negative by as much as 40%, before a gradual economic recovery kicks off in the second half of the year.

And during a webcast Tuesday, St. Louis Fed President James Bullard said widespread shelter in place orders could not go on indefinitely, saying, “You’ll get too many business failures and you’ll really do lasting damage.”

Earlier, on Tuesday, the three major U.S. equity indices ended with their largest one-day declines in seven sessions, as market participants grew wary of some states’ reopening processes, and considered other major metropolitan areas’ extended stay in place orders. Los Angeles County will likely remain under distancing orders through July, officials said Tuesday. And New York City residents are likely to remain under stay in place orders through at least June, Mayor Bill De Blasio said earlier this week.

But other states and counties are already in the midst of – or will soon begin – a phased reopening process. During a congressional testimony Tuesday, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned of consequences that “could be serious” if parts of the country open before the pandemic is adequately contained.