Stocks abruptly sank on Tuesday afternoon after President Donald Trump moved to scuttle talks with Democratic lawmakers over another round of coronavirus relief.
In a series of tweets, Mr. Trump said he had instructed administration officials to end the negotiations, accusing House Speaker Nancy Pelosi of "not negotiating in good faith."
The Dow swung from a gain of about 200 points earlier in the day to a loss of 315 points, or 1.1%. The broader S&P 500 and tech-heavy Nasdaq also dropped suddenly.
Pelosi reacted to the president's announcement with a statement saying, "Clearly, the White House is in complete disarray."
Investors had hoped that congressional leaders and Treasury Secretary Steven Mnuchin could reach a compromise on further fiscal stimulus. Democrats earlier this month passed a $2.2 trillion package that would restore a $600 per week payment to supplement unemployment benefits, direct a second stimulus check to million of Americans and provide funding for state and local governments.
Although Mnuchin had made a counteroffer of $1.6 trillion, the sides have been unable to broker a deal.
Fed chief warns of "tragic" consequencesMr. Trump's message came just hours after Federal Reserve Chair Jerome Powell urged Congress to come through with more aid, saying that too little support "would lead to a weak recovery, creating unnecessary hardship for households and businesses."
Powell said that government support — including expanded unemployment insurance payments, direct payments to most U.S. households and financial support for small businesses — has so far prevented a recessionary "downward spiral" in which job losses would reduce spending, forcing businesses to cut even more jobs.
But without further support those downward trends could still emerge, the chairman said.
"A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy," Powell said. "That would be tragic, especially in light of our country's progress on these issues in the years leading up to the pandemic."