US Fed chief wants more government spending to avert downturn

US stocks opened in the red Wednesday and continued to fall after the Federal Reserve chairman said more government spending is necessary to avert a sharp and prolonged economic downturn.

"The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II," 

said Wednesday in a speech delivered online.

"Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery."

US employers have slashed about 30 million jobs as demand fell during the coronavirus pandemic. Despite recent reversals, stocks have climbed about 30 percent from their March lows.

Investors are betting on a strong recovery as some states take the first steps to restart the economy. But it's not clear that demand will fully recover and that profits will increase. That could make stocks overpriced and could lead to a sell-off.

FactSet said earnings are expected to decline 13.6 percent overall in the first quarter and 40.6 percent in the second. The rate of decline is expected to slow in the third and fourth quarters, but FactSet doesn't foresee a return to growth.

Meanwhile, House Speaker Nancy Pelosi, a California Democrat, announced a $3 trillion coronavirus relief bill that includes a second round of direct payments of $1,200 to individuals and $1 trillion in relief for state and local governments.

The bill also would extend through January an additional $600 a week in unemployment benefits, provide $200 billion in hazard pay for essential workers who face health risks, provide $10 billion to help small business retain workers and offer $175 billion in mortgage, rent and utility assistance as well as relief for the US Postal service.

The House is expected to vote on the measure Friday.

Republicans were skeptical.

House Minority Leader Kevin McCarthy of California, derided the bill as a "liberal wish list" and a "waste of taxpayer time".

Senate Majority Leader Mitch McConnell said, "What you've seen in the House is not something designed to deal with reality, but designed to deal with aspirations."

In early trading Wednesday, the Dow Jones Industrial Average fell 193.36 points, or 0.81 percent, to 23,569.31. The S&P 500 lost 0.61 percent. The Nasdaq Composite slipped 0.05 percent.

On Tuesday, the Dow fell 457.21 points, or 1.89 percent. The S&P 500 lost 2.05 percent. The Nasdaq Composite retreated 2.06 percent.

West Texas Intermediate crude, the gauge for US prices, on Wednesday edged up 0.54 percent to $25.93 a barrel. Brent crude, the worldwide benchmark, gained 0.43 percent to $30.13. The price of oil is a proxy for future economic activity.

Gilead Sciences said it has reached a licensing agreement that will allow generic drug-makers to make remdesivir available in 127 countries.

The deal doesn't include the United States.

Mylan, Cipla, Ferozsons, Hetero Labs and Jubilant Lifesciences will produce the drug for "low income and lower-middle-income countries" ,Gilead said in a statement.

Gilead Sciences said it won't charge a royalty fee until the World Health Organization says the coronavirus is no longer a global health threat or a drug developed by a competing company is approved the treat the coronavirus.

On May 1, the US Food and Drug Administration authorized remdesivir for the emergency treatment of the coronavirus. Johns Hopkins University reported that the coronavirus has infected 4 million people worldwide.

In early trading, Gilead Sciences gained 0.60 percent.