Financial markets plunged Monday as the spread of the coronavirus that has ravaged China threatens economic havoc on a global scale.

The Dow Jones industrial average sank by more than 1,000 points, or 3.6 percent, to close at 27,961.01 after Wall Street interpreted new disease clusters in South Korea, Italy and Iran as a sign that the respiratory illness has outraced confinement efforts. The technology-heavy Nasdaq index fell by more than 3.7 percent.

Factories around the world are grappling with parts shortages as their Chinese suppliers struggle to resume normal operations. With global economic engines sputtering, the Federal Reserve and other central banks face calls for emergency help.

But central bank chiefs may be ill equipped to battle the economic consequences of the flu-like illness, which has prevented many Chinese workers from returning to their assembly lines and kept consumers at home instead of shopping. Interest rates are in negative territory in Europe and at near-historic lows in the United States. And while making credit less expensive – the Fed’s standard tool for combating a slump – may offset some of the financial upheaval, it can do little to remedy broken supply chains or ease individuals’ fears of contagion.

“There’s just growing angst in the investor community that this thing is more serious than we realized,” said Chris Meekins, an analyst with Raymond James and a former Trump administration preparedness official. “When you’re worried about catching a disease, you’re not going to go out to dinner; you’re not going to go to the movies or sporting events or concerts. The only question is how widespread this becomes.”

President Trump weighed in after the close of trading with an upbeat tweet proclaiming the virus “very much under control in the USA” and urging investors to adopt a buy-the-dip approach. “Stock Market starting to look very good to me!” the president tweeted.

One of his top economic advisers was equally positive. “The coronavirus will not last forever. The U.S. looks well contained and the economy is fundamentally sound,” National Economic Council Director Larry Kudlow told The Washington Post in an interview late Monday. “If you’re a long-term investor, you should seriously consider buying these dips,” he said.

Still, the administration’s cheerleading seemed at odds with news that the number of U.S. cases had reached 53, including 36 patients who had been evacuated from the Diamond Princess cruise ship and returned to the United States.

The comments also defied the market’s verdict, showing that the illness extends into every corner of the global economy. Shares of automakers such as Renault are down nearly 30 percent this year. Three cruise lines – Norwegian Cruises, Royal Caribbean and Carnival – are all off by more than one-quarter. And declines in ExxonMobil, Burberry and Air China shares show the impact spreading into energy, consumer goods and airlines.

The financial toll spiked after reports over the weekend of sharp increases in case numbers in South Korea, Italy and Iran. Italy, which Moody’s says will fall into recession this quarter because of the virus, has the largest known outbreak outside Asia, with more than 200 confirmed cases and six deaths as of Monday. The caseload in South Korea, a critical link in the technology industry’s pan-Asian supply chain, climbed to 833. And a spokesman for Iran’s health ministry said the death toll in that country had reached 12.

Wall Street and official Washington were slow to grasp the coronavirus’s danger. Kudlow said at the end of January that the administration anticipated “no material impact” from the virus that first appeared in Wuhan, China. Likewise, stocks climbed steadily through the first several weeks of the health crisis.

But that sanguine mood is gone. Goldman Sachs on Monday cut its estimate for U.S. economic growth in the first quarter to 1.2 percent from an original 1.4 percent, which would make it one of the weakest three-month periods in Trump’s presidency. And after weeks of playing down the likely impact outside China, investors on Monday rushed into traditional safe havens, sending the price of gold soaring as government bond yields, which move opposite prices, approached decade-old lows. Oil also fell into bear market territory amid expectations of prolonged global weakness.

“It may not be an actual pandemic yet, but it’s an economic pandemic,” said Diane Swonk, chief economist for Grant Thornton. “It’s global in scope and disrupting activity around the world.”

Monday’s markets action showed the rapid evolution of the coronavirus from a limited threat to supply chains into an across-the-board tightening of financial conditions, said Gregory Daco, chief U.S. economist for Oxford Economics. A spike in volatility may prompt businesses to pause planned investments. And as nervous global investors sought safety in U.S. assets, they pushed up the value of the U.S. dollar.

That will make imported goods for American consumers less expensive, chilling inflation and leaving the Fed further from hitting its goal of 2% annual price increases, which the central bank sees as a sign of a healthy economy. As a result, some investors now expect the Fed to cut rates as soon as next month to counteract some of the economic weakness.

“The Fed can’t eliminate all the risks on its own,” Daco said. “What the Fed can do is prevent a worsening of the situation.”

Narayana Kocherlakota, a former member of the Fed’s policymaking committee, called for the central bank to cut rates before the economy feels the full effects of the coronavirus. At a time when rates already are hovering around 1.5 percent to 1.75 percent, the risk of waiting is that the economy first tips into recession and the Fed doesn’t have room for a big enough cut to pull it out.

“The Fed has to do its best to keep the economy as healthy as it can and stimulate demand now,” said Kocherlakota, an economics professor at the University of Rochester. “It has to ease the pain for the economy as much as possible.”

Monday’s unsettling events showed that investors had wrongly assumed the coronavirus would be largely a China problem that might hobble the global economy in the first quarter but not beyond, said Meekins, who spent 19 months as a top Trump administration preparedness official in the Department of Health and Human Services.

On Monday, Chinese leaders postponed the National People’s Congress – the most prominent event on their political calendar – set for March 5. Beijing also reversed course after saying it would relax travel restrictions on the outbreak’s hotbed of Wuhan.

Raymond James’ estimate of the risk of a widespread outbreak in the United States has risen steadily over the past two weeks from 1 in 7, to 1 in 5 to 1 in 3. “And that may still be too low,” he said.

Gold, a safe haven in times of turmoil, climbed 1 percent to $1,659 an ounce. Crude oil skidded 4 percent on worries that the outbreak will subdue demand for months. China is the world’s largest energy consumer, but it has been buying less crude amid virus-related travel restrictions. Meanwhile, major oil producers have yet to reach a deal on emergency measures to scale back output. The drop in oil prices will ramp up pressure on OPEC – the Organization of the Petroleum Exporting Countries – and Russia to reduce oil supplies at an upcoming meeting in March.

The likelihood of more bad news as the virus expands to more countries makes further market rockiness likely, which could prompt the Fed to act, according to a research note from Ian Shepherdson, chief economist at Pantheon Macroeconomics. But it took a nearly 20 percent market drop and additional credit tightness in late 2018 to convince the Fed to retreat from plans to raise rates, so any move may not be imminent, he wrote.

Nathan Sheets, chief economist for PGIM Fixed Income, said the Fed can do only so much to help. “If U.S. firms can’t produce because supply chains are broken, a rate cut won’t get production lines rolling again. If spending is down because consumer confidence has been hit, a rate cut won’t reverse these anxieties,” he said. “That said, a rate cut can create a somewhat more supportive macro environment – a safety net of sorts – to help the economy absorb the shock.”

In a CNBC International interview that aired Monday, Treasury Secretary Steven Mnuchin said it would be difficult to “have strong predictions on the economic issues without being able to predict the health outcome.”

“I think we need another three or four weeks to see how the virus reacts until we really have good statistical data,” Mnuchin said.

The Chinese government reported 409 new coronavirus cases and another 150 deaths by the end of Sunday. There are now more than 77,000 confirmed cases, with a cumulative death toll of more than 2,500.