All major stock indices have been falling fast in a major turnaround from the previous week's strong rally.

CNBC reported that, as of 12:33 p.m., the Dow Jones Industrial Average had lost 600 points, while the S&P 500 had shed 2.3 percent of its value and the Nasdaq had decreased by  2.6 percent.

Markets seemed to be largely reacting to recent remarks from Fed Chair Jerome Powell calling for a more forceful policy response to the economic damage wrought by the COVID-19 pandemic. In his prepared remarks for a speech before the Peterson Institute for International Economics, Powell said that the "scope and speed of this downturn are without modern precedent," calling the current state of play "significantly worse than any recession since World War II." He also said that a recent Fed survey, soon to be released, revealed that, of those who were working in February, "almost 40 percent of those in households making less than $40,000 a year had lost a job in March."

In addition, he warned that the 2020 economic crisis risks doing long-term damage to the economy that will blunt whatever recovery that happens after. He pointed out that "[l]ong stretches of unemployment can damage or end workers' careers as their skills lose value and professional networks dry up, and leave families in greater debt. "He also said, "The loss of thousands of small- and medium-sized businesses across the country would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes."

On the employer side of things, he added that a "prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement." 

To avoid what he said could be an "extended period of low productivity and stagnant incomes," he called on policy makers to provide additional fiscal support, which he conceded "could be costly" but would be "worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery."

This grim warning bolsters other recent remarks from the Federal Reserve that, despite conventional wisdom that a rising tide lifts all boats, the recovery will likely be uneven, with certain sectors springing back quickly while others languish for far longer.

What makes this recession so difficult to understand and predict, Powell said in his speech, is that unlike others in the post-War period, it was sparked by an external event, the virus, and the efforts to limit its fallout. He said this time around there is no bubble that has popped. Evidently, the Fed does not believe that the stratospheric rise in corporate debt over the past decade, and the attendant slow bleed of credit in the market now, represents such a bubble, despite literally trillions of dollars now at risk from the wave of ratings downgrades and loan defaults sparked off by the crisis, particularly where collateralized loan obligations (CLOs) are concerned.

This could be because the central bank has been working overtime to prop up credit markets, including by taking the unprecedented step of directly purchasing corporate debt, including junk bonds, as a buyer of last resort, apparently believing that if cheap credit got us into this mess, cheap credit can get us out. This has been met with some amount of skepticism by certain Fed watchers, such as Allianz chief economic advisor Mohamed El-Erian who, in a CNBC interview last week, warned that opening up purchases of risky corporate debt, even if that debt is better than most junk, raises the specter of zombie companies–that is, companies that cannot exist without continual infusions of cheap credit. This was already a problem well before the crisis, as years of cheap credit had led the Swiss Bank of International Settlements to calculate that roughly 12 percent of all public companies globally were zombies kept alive because credit has been dirt cheap for years.