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Across the U.S., concerns over novel coronavirus have governments, businesses and individuals putting normal operations on hold. With events and travel canceled and more people staying home, what is the economic impact likely to be, and how should U.S. policy address it? Judy Woodruff reports and talks to Carl Tannenbaum, executive vice president and chief economist at Northern Trust.
The coronavirus outbreak is generating new infections and new commercial chaos tonight. Fears of a global economic crisis sent Wall Street on another wild ride today, ending its worst week since October 2008.
The Dow Jones industrial average fell nearly 1,100 points, before a late-day recovery. It ended up losing 357 points, to close at 25409. The Nasdaq managed to rise one point, and the S&P 500 fell 24.
But at the White House this morning, economic adviser Larry Kudlow said that he expects the market to come back fairly quickly.
I acknowledge that the situation could deteriorate, and I acknowledge the risks.
But given what we know factually, it looks to me like the market has gone too far. I just think everybody, whether you're an investor or whether you're an ordinary Main Street person, people shouldn't overreact.
The market frenzy came as more than 3,500 new cases were reported in several countries today that have the largest outbreaks outside of China. Disruptions to plans and typical business are growing throughout the globe.
In Geneva, the Swiss government became the latest to ban large public events, scrapping an international auto show.
Alain Berset (through translator):
We know this will have a significant impact on public life, but the move is expected to provide protection to public health.
Reports poured in from around the globe that the coronavirus, COVID-19, has disrupted events, commerce and travel. As airlines cut flights to a number of Asian countries, including Japan, Tokyo Disneyland and other theme parks were closed.
In Italy, where cases have steadily increased, officials say jitters over the virus have affected tourism.
Dario Franceschini (through translator):
Bookings have collapsed all over Italy. Hotels are in a difficult situation. So it's a very complicated situation that we must face immediately.
One Swiss insurance company even put in place a no-handshaking policy.
In Iran, workers sprayed disinfectant at a Shiite shrine, as Friday prayers in parts of the country were canceled. In Seoul, South Korea, hundreds flocked to stores to buy masks, and workers continued to canvas public places, spraying disinfectant.
As fears over coronavirus rise, World Health Organization officials raised their risk assessment to the highest level.
The health systems around the world are not ready, and need to be better prepared to absorb the impact of the virus. It's time to prepare. It's time to get ready. It is time to act. And people need to take a reality check now.
The list of American-based businesses canceling travel, meetings and events also grew. Amazon told all its employees to defer nonessential travel, even within the United States.
Yesterday, Facebook said it would cancel its biggest event of the year, an annual conference known as F8.
At the same time, the politics of the virus intensified. In Washington, White House acting Chief of Staff Mick Mulvaney accused Democrats and the news media of stoking fears to hurt President Trump.
The reason that you're seeing so much attention to it today is that they think this is going to be what brings down the president. That's what this is all about.
On Capitol Hill, Democrats, in turn, blamed the White House for politicizing the outbreak.
Rep. Andy Levin, D-Mich.:
The career professionals say that this community spread is inevitable, it's going happen, it's a question of when, but not if. But the political people are saying, oh, this is nothing, it's passing over.
Today, the Centers for Disease Control and Prevention said it aims to have virus testing kits in every state by the end of next week.
More than $3 trillion of value were wiped out from American stocks this week, just days after the markets were at record highs. The week was so tumultuous that Federal Reserve Chairman Jay Powell took the unusual step of issuing a statement about the fundamental strength of the economy.
But he acknowledged that the coronavirus poses risks, and said that the Fed would act, if needed, signaling a possible rate cut.
Later, a White House official confirmed to our Yamiche Alcindor that they are considering pursuing a targeted tax cut package.
It's a lot to discuss with Carl Tannenbaum. He is the executive vice president and chief economist for Northern Trust.
Carl Tannenbaum, welcome to the "NewsHour."
So the markets didn't end the day as down as they were earlier, but still another wild ride. How do you interpret the forces at work here?
I think, over the last week, Judy, the markets have been undergoing a massive reevaluation of the consequences of the coronavirus.
The data on the infection certainly is one thing, but I think what the market may be reacting to in the main is how public health officials in the private sector will react to all of this. The preventative measures taken by both of those will tend to impede commerce.
And while they will be quick to implement them, they may be slow to remove them, even as the coast clears. What this means is an interruption in the global supply chains, which are used to make many manufactured goods, and also an interruption in services businesses, like travel, hotel.
And so this is both a supply and a demand shock. In light of all that, perhaps the market needed to reevaluate its expectations for economic activity and corporate profits.
So what is it that's going on in the economy that most — and in the reaction to the coronavirus that is most concerning to people like you, who look at all this?
Well, in heavier industries, if you can't get parts to your plant, you can't finish products.
And, certainly, the way that things are working in Asia, it's very, very difficult to get those supplies at the moment. Companies are tied closely into China and other Asian vendors.
And that means their business is very slow. And that means they may ultimately have to furlough workers for a little while.
For service businesses, certainly those involved in the hospitality industry, Judy, the logistics industry, the movement of people and parts across the country are very, very slow.
And there's also a psychology developing that will need to be managed carefully. People without the benefit of clear information often assume the worst. And that can create decisions for concern and investment that perpetuate a negative cycle.
How did you read the Fed statement today, the statement from Chairman Powell?
I think the statement was entirely appropriate.
The situation is unfolding, but it is clear that this just isn't a market correction, that there is something fundamental underneath it. And in order for the Fed to continue to pursue its objectives, it may need to lower interest rates, even though that's not exactly the right tool for coping with a pandemic.
It will restore some confidence and would also help financial conditions from getting too tight.
So, if that's not entirely the right tool, what could be the right tool? And when you hear the White House is considering doing something with tax cuts, what does that say to you?
Well, like the flu itself, sometimes, the best remedy is just to let it run its course.
But there are some therapies that can be applied in the interim in order to help buffer the symptoms. And in the case of fiscal policy, certainly, some aid to prepare health officials for dealing with whatever might come our way, as well as some help for industries that might be particularly impaired, would help them from taking further steps that could be damaging to our economy.
And what does that say about tax cuts, if that's what the administration wanted to do? Could that be effective?
I think some fiscal measures would be helpful. It's early days, so I haven't seen the specifics.
But they should be designed so they hit with the most force over the next three to six months. Even in a worst-case scenario, it seems likely that global supply chains will be back on to line within that window. And so what we need help with is the short term.
All right, a lot to digest.
Carl Tannenbaum with Northern Trust, thank you very much.
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