American stocks fell sharply again on Friday, capping off the worst week for the market since the 2008 financial crisis. The Dow Jones, a stock market index of 30 large companies, often seen as a bellwether for the overall health of the market, fell more than 12% over the week.
Meanwhile, the S&P 500, another popular index, fell 11% over the week. The two biggest companies on the S&P, Microsoft and Apple, wiped a combined $300 billion off of their books during the sell off.
As the coronavirus expands its reach across continents and countries, investors are becoming concerned that the global economy could take a hit. The virus is spreading to parts of the Middle East and Europe, and according to reports, is now spreading faster outside of China, the source of the virus.
In response to the fears, the US Federal Reserve issued a rare public assurance on Friday that they would take steps to support the economy during the crisis, likely suggesting that they will choose to cut interest rates in an attempt to stimulate economic growth through investment and borrowing.
In a statement, the US Federal Reserve Chair Jerome Powell said that despite the evolving threat of coronavirus on global markets, “the fundamentals of the U.S. economy remain strong.”
The next scheduled meeting on rate cuts is set for mid-March. However, some analysts are speculating that an emergency meeting could take place before then in order to cut rates sooner. The last emergency rate cut also took place in 2008.
President Trump’s response
In a statement earlier this week, President Trump lauded the American response to the virus, saying the US “closed up [its] borders to flights coming from certain areas” early and emphasized that “because of all we’ve done, the risk to the American people remains very low.”
He also argued via twitter that some media outlets are “stoking a national coronavirus panic” to make him look bad.
Critics, however, asserted that Trump’s downplaying of the threat of the virus was irresponsible. According to a fact check of Trump’s statement, although the numbers of confirmed cases are still low, a lack of widespread testing could be obscuring the real threat.
As for the stock market declines, President Trump was adamant that the sharp sell offs weren’t just due to coronavirus fears. On Wednesday, after a third straight day of losses, Trump argued that the recent Democratic debates might have had something to do with it as well.
“I think [the market] took a hit maybe for two reasons. I think [investors] take a look at the people that you watched debate last night and they say if there’s even a possibility that can happen, I think it really takes a hit because of that. And it certainly took a hit because of this,” Trump said, in reference to the virus.