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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.

House Judiciary Committee advances reparations bill in historic vote

Sheila Jackson Lee. Photo: Al Drago/Getty Images

The House Judiciary Committee voted 25 to 17 Wednesday to advance a bill that would create a commission to study reparations for Black Americans who are the descendants of slaves.

Why it matters: "No such bill has ever come this far during Congressional history of the United States," said Rep. Sheila Jackson Lee (D-Texas), who sponsored the bill, per the Washington Post.

Updated 3 hours ago - Politics & Policy

Officer Kim Potter arrested, charged with manslaughter in Daunte Wright's death

Kim Potter's booking photos. Photo: Hennepin County Sheriff's Office

Kim Potter, the former police officer charged with second-degree manslaughter in the fatal shooting of Daunte Wright, was released on a $100,000 bond on Wednesday, Hennepin County jail records show.

Why it matters: Sunday's shooting of the 20-year-old Black man in Brooklyn Center, Minnesota, just 10 miles from where George Floyd was killed by a Minneapolis police officer last year, has reinvigorated Black Lives Matter protests and led to three consecutive nights of unrest.