ARI SHAPIRO, HOST:
After more than a decade of growth, the U.S. economy is falling victim to the coronavirus. Businesses around the country are closing their doors, at least temporarily. And Americans are being encouraged to hunker down in an effort to slow the spread of the pandemic. With so much activity coming to an abrupt standstill, a recession looks all but certain. Unfortunately, that is about the only thing that is certain these days. NPR's Scott Horsley joins us now to talk through what is happening.
Hi, Scott.
SCOTT HORSLEY, BYLINE: Good afternoon, Ari.
SHAPIRO: Just a month ago, the stock market was hitting record highs. Now it is dropping so fast. Tell us what happened today.
HORSLEY: Ari, we are running out of ways to say freefall. The Dow Jones Industrial Average lost nearly 3,000 points today or almost 13%.
SHAPIRO: Three thousand points.
HORSLEY: That's right. Came within two points of losing 3,000 - 2,998 and change. The Broader S&P 500 was off nearly 12%. Over the weekend, you know, there was a lot of news about the more aggressive measures that the government is recommending or, in some cases, ordering to address this coronavirus - closing bars and restaurants, limiting big gatherings - all stuff that is perhaps totally essential for public health but all of which comes with a huge price tag for the economy. So investors spent the weekend worrying about that.
And as soon as the market opened this morning, the S&P tumbled 8%, which is more than enough to trigger that automatic circuit breaker that we've seen a few times in recent days. That brings all trading on the New York Stock Exchange to a halt for 15 minutes. When trading resumed a little later in the morning, the selloff continued. Since hitting its record just over a month ago, the Dow has now lost more than 30% of its value.
SHAPIRO: Wow. Now, as you mentioned, a lot happened over the weekend. The Federal Reserve announced that it was going to cut interest rates to near zero and pump hundreds of billions of dollars into the financial system. Explain what they're trying to do with these steps.
HORSLEY: The central bank is trying to cushion the impact of what is obviously a very abrupt downturn in the economy. The chairman, Jerome Powell, acknowledged that in the next few months, the economy is going to contract. But what happens beyond that - it's hard to say. It obviously depends in part on the path of the virus and how compliant Americans are with these orders that would've seemed Draconian or unfathomable just a few weeks ago. President Trump said today we could be living with this outbreak through July or August. Now, while the Fed's action was aggressive, cutting rates by a full percentage point, it's still not clear how much difference this is really going to make. The idea ordinarily in cutting interest rates is to make borrowing cheaper so that consumers spend more and businesses invest more. But right now it's hard to imagine consumers or businesses doing those things.
SHAPIRO: I don't even know how this works once interest rates get to zero. Can they go into negative territory? Can they go any farther than that?
HORSLEY: In theory, they can't. Other central banks have experimented with that. The Fed has suggested they're not really interested in trying negative rates. And again, if zero rates don't solve the situation, it's hard to see how negative rates would make much difference.
SHAPIRO: So when you look at the impact on Americans, obviously, the stock market slide is hard on Americans' retirement accounts. But in the short term, so many people are suddenly out of a paycheck, whether we're talking about bartenders or performers or retail workers. I mean, can the Fed help with that at all?
HORSLEY: It can help some. The central bank is encouraging regular banks to make more loans to struggling consumers and struggling businesses. And the Fed is working to make sure banks have the resources they need to do that. Some would like to see the Fed go further and ensure that otherwise solvent businesses don't go out of business during this difficult period. We heard from the chronically upbeat economic adviser Larry Kudlow at the White House today. He tried to put the best face on this situation.
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LARRY KUDLOW: I believe this is a short-term problem. I believe it's a matter of weeks and months. It is not a matter of years.
HORSLEY: But, Ari, even, you know, a few weeks or months without customers for a business or without a paycheck for a worker can be devastating.
SHAPIRO: Yeah.
HORSLEY: We have already seen the big airlines asking the government for help to get through this difficult period. Airlines were among the first to feel the squeeze. Now you can imagine lots of smaller businesses who are in or about to be in the same situation. Whether or not they get financial life support from the government may determine whether customers and workers have something to go back to when this is all over.
SHAPIRO: Scott, let me take you back to the stock market for a moment. You mentioned that this morning when trading started, there was an automatic trigger that trading was just halted for 15 minutes to let investors catch their breath. Then trading came back, and it started falling even farther. Is there any talk of taking a longer pause - like, perhaps days - until people can get a handle on what's happening?
HORSLEY: Actually, there was an opinion piece in, of all places, Bloomberg today suggesting that maybe it is time to just close the stock market for a while. The author argued that, look. Nobody knows how this is going to turn out. So investors are just speculating. And these wild swings we're seeing in the market aren't helping anybody's confidence or blood pressure. The president of the New York Stock Exchange dismissed that idea of a shutdown, though, today. She said it wouldn't prevent the slump. It would only delay it. And she warned that if investors who want to take money out of the market were unable to do so because it was closed, it would only increase their anxiety.
SHAPIRO: NPR's Scott Horsley on another tough day in the economy.
Thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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