The coronavirus has sent shockwaves rippling through U.S. stocks, forcing investors to contemplate outcomes more worrying than those of a recession, including several quarters of declining economic activity, a credit crisis or even a depression.

The rising global toll from the pandemic and uncertainty over how far it may spread has left investors and economists scrambling to gauge the financial fallout.

Forecasters at Goldman Sachs and other banks are now projecting a steep economic contraction in at least the second quarter, as governments in the United States and Europe start shutting restaurants, closing schools and calling on citizens to stay home.

"This market looks like it has already priced in most of a garden variety recession," said Frances Donald, global chief economist at Manulife Investment Management. "It is now, on top of that, having to price in some probability of a credit crisis."

But there is hope among some economists that the economy will start expanding again later this year – depending in part on efforts to contain the virus, known as COVID-19.

The S&P 500 on average has fallen 28% from peak to trough during recessions, according to an analysis of the past 70 years by Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services. As of Monday’s close, the benchmark index had declined 29.5% from its Feb. 19 closing record high.

But the market’s plunge was much deeper over a decade ago during the financial crisis, with the S&P 500 tumbling more than 50%.

"A 2008-like financial contagion is not yet priced into this market," Donald said, adding, however, that the market "probably won’t have any reassurance that we have avoided that 2008-type scenario completely until we see a calming of credit spreads and the pace of COVID-19 cases starts to decline."

Stocks crumbled anew on Monday a day after the Federal Reserve took emergency action designed to cushion the economy, using tools similar to those the central bank deployed to help the country emerge from the 2007-2009 financial crisis.

Some $2.7 trillion in market value was wiped from the S&P 500 on Monday as it suffered its third-largest daily percentage decline on record. Over the past 18 days, the benchmark index has lost $8.3 trillion. World stocks have hemorrhaged over $15 trillion.

Global share markets and oil prices again struggled on Tuesday after coronavirus panic caused Wall Street’s worst one-day rout since the Black Monday crash of 1987.

Asia’s traders saw the Philippines become the first country to close its markets. Europe’s watched an early rebound get wiped out as the region’s battered airline and travel stocks suffered another 7% drubbing.

Data showed German investor morale at lows last seen in the 2008 financial crisis, and rating agency S&P Global warned the inevitable global recession this year would lead to a spike in defaults.

In Europe, early 1.5.% to 3% gains in London, Frankfurt and Paris were quickly wiped out as airline and travel stocks suffered a 6.5% drubbing.

The dollar recouped some lost ground against the safe-haven Japanese yen. Oil gave up attempted gains after Brent’s dropped below $30 a barrel on Monday. Financial markets cratered on Monday with the S&P 500 tumbling 12%. Emergency central bank rate cuts globally only added to the investor panic.

Tuesday’s stabilization saw Australian shares close 5.9% higher, their biggest daily percentage gain since October 2008, after plunging nearly 10% on Monday.

MSCI's broadest index of Asia-Pacific shares and Japan's Nikkei both finished steady. South Korea finished down 2.4%, however, and the Philippines became the first country to suspend all trading over the virus.

Prolonged slump?

Joachim Fels, PIMCO’s global economic adviser, said in written commentary that a global recession appeared to be a "foregone conclusion" and that the task for governments and central banks was to ensure that the recession "stays relatively short-lived and doesn’t morph into an economic depression."

Fels loosely defined a depression as "a combination of a prolonged slump of activity that lasts longer than just a few quarters, a very significant rise in unemployment, and mass business bankruptcies and bank failures."

Data out of China, where the pathogen originated late last year, underscored just how much economic damage the disease had already done with industrial output plunging 13.5% and retail sales 20.5%.

At least one other big Wall Street name appears concerned that the current crisis could snowball into something bigger than a recession.

Billionaire investor Ray Dalio, whose main Bridgewater Associates LP hedge fund fell sharply amid the coronavirus-led market rout, is worried that the Fed and other central banks may have already expended a good deal of their firepower by cutting rates to near zero.

In a note on Monday, Dalio said he had been concerned that the next economic downturn would "lead to hitting the 0% interest rate floor with a lot of debt outstanding and big wealth and political gaps in the same way that configuration of events happened in the 1930s."

Strategists at Deutsche Bank said in a note last week that the market’s recent volatility, marked by swings of over 3% in the S&P 500, was coming at "a frequency previously seen only in the Great Financial Crisis and the Great Depression." Following the Fed’s action, Wall Street’s focus is now on what fiscal policies governments will enact and even more so, on what can be done to contain the virus.

"Nothing else matters if we can’t get this under control," said Eric Winograd, chief U.S. economist at AllianceBernstein. The market’s pullback has taken the S&P 500 down to the level it was last at in late 2018 and mid-2017.

"I don’t think it is quite pricing in a prolonged depression scenario at this stagem and I think it is probably appropriate not to," Winograd said. "That’s not the base case." However, Winograd said, he is concerned the situation could turn into a "durable recession" that stems in part from distress in the banking sector. "If we end up in a multiple-quarter level decline, I would expect there still to be a significant downside for the market."