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Illustration: Aïda Amer/Axios

The stock market is heading south with unprecedented velocity amid coronavirus fears. Does that mean it's crashing? Are we in a recession? Is this a financial crisis?

  • No, no, and no.

How it works:

A stock-market crash happens when the market plunges suddenly, often for no particular reason.

  • The stock market might be down 13% from its highs, but that decline took place over more than a week.
  • Crashes can cause investors to lose a lot of money very quickly, but seldom have a big effect on the economy as a whole.

A recession is what happens when the broader economy stops growing and starts shrinking.

  • The official designation of when a recession started and ended comes many months later from the National Bureau of Economic Research, a nonpartisan nonprofit.

A financial crisis will normally cause a recession. But while a recession takes place across the economy, a financial crisis is centered on the financial system, especially banks.

  • In a financial crisis, fears of widespread defaults on bonds and loans spark worries that a country's entire banking system might be insolvent.
  • Unless the government steps in, often with a bank bailout, the economy can rapidly spiral into a full-fledged depression.

Where are we now? Stocks are down, but it's a relatively orderly (if fast) decline, without a lot of panic selling. Financial analyst Josh Brown calls it "Panic Holding."

  • Because we're more than 10% below the all-time highs, this is a "correction."
  • If we go down to 20% below the all-time highs, it will officially be a "bear market."
  • Context: The market is still about 30% higher than it was when Trump took office.

What about the Fed? The Fed's job is to prevent a recession, and it should only care about the stock market insofar as it impacts the broader economy.

  • On Friday, the Fed made the rare move of issuing a statement during trading hours saying it was "closely monitoring developments" on the coronavirus.
  • "We will use our tools and act as appropriate to support the economy."

Go deeper

Dion Rabouin, author of Markets
Oct 8, 2020 - Economy & Business

Investors still looking for clarity on Fed's inflation aims

Illustration: Aïda Amer/Axios

Market participants got little more information on how the Fed plans to boost U.S. inflation with the minutes from the central bank's latest policy meeting on Wednesday, and in particular, lacked guidance on its quantitative easing program.

Why it matters: Some have blamed the Fed's lack of specifics on the future path of QE for the market's pullback since early September.

Updated 44 mins ago - World

HRW: Over 100 former Afghan security members dead or missing under Taliban rule

Members of the Taliban movement patrol Kabul's airport in September. Photo: Valery Sharifulin/TASS via Getty Images

The Taliban have "killed or forcibly disappeared" over 100 former members of Afghanistan's security forces since the group took power in August, a Human Rights Watch report published Tuesday found.

Why it matters: Former military members and officials from the ousted government, activists and other Taliban critics are facing peril amid executions driven by revenge — despite Taliban promises of an "amnesty" with no retributions, notes the New York Times, which first reported the news.

4 hours ago - World

Barbados becomes a republic, replacing U.K. queen with president

Combination images of Dame Sandra Mason, president of Barbados, and Britain's Prince Charles at her swearing-in ceremony in Bridgetown, Barbados, late Monday.

Barbados officially became a republic at midnight local time after Dame Sandra Mason was sworn in as the Caribbean nation's first president in a ceremony attended by the United Kingdom's Prince Charles.

Why it matters: Mason replaced Britain's Queen Elizabeth as head of state Tuesday — removing the country's final remaining colonial tie to the U.K. almost 400 years after the first British ships arrived in Barbados.