(Adds stock market close and U.S. Vice President Pence comment)

By Steve Holland and Richard Cowan

WASHINGTON, Feb 28 (Reuters) - The United States will invoke special powers to boost production of masks, gloves, gowns and other items to protect against the new coronavirus, Health and Human Services Secretary Alex Azar said on Friday, as the Trump administration was criticized by Democrats for its preparations.

With more countries reporting new infections, companies starting to curtail employees' travel and global stock markets on the precipice of a free fall, health officials scrambled to deal with the prospect of a widening outbreak in the United States.

"We will use the Defense Production Act as necessary to enable that our contracts go to the front of the line," Azar said in a briefing at the White House. "That is an authority that we have, and we will use it to acquire anything we need to acquire."

Two U.S. officials told Reuters on Thursday that Republican President Donald Trump's administration was considering invoking special powers through the law to rapidly boost production of key materials for national security or other reasons.

The number of confirmed U.S. cases of the respiratory disease is still relatively small at around 60, most of them repatriated American passengers from the Diamond Princess cruise ship docked in Japan, but there are growing fears that the country is on the cusp of wider outbreak.

Of the confirmed coronavirus cases in the United States, only one patient is still in the hospital, U.S. Vice President Mike Pence said on Friday.

"In every case, people are being treated and by all accounts are doing well," he said during a live-streamed news conference.

The outbreak started in China late last year. The latest World Health Organization (WHO) figures indicate over 82,000 people have been infected, with more than 2,700 deaths in China and 57 deaths in 46 other countries.

Anthony Fauci, a doctor who heads the National Institute of Allergy and Infectious Diseases, said in a closed-door briefing in the U.S. House of Representatives that the sustained spread of the coronavirus meant there would be many more infections in the United States, according to a source.

Fauci warned lawmakers the country did not have enough testing resources, the source said on condition of anonymity. The U.S. Centers for Disease Control and Prevention said it has revised its criteria for who should be tested and is ramping up testing capabilities.

"Our goal is to have every state and local health department online and doing their own testing by the end of next week," CDC official Nancy Messonier told reporters.

A vaccine may take up to 18 months to develop, health officials have said.

MARKETS PLUMMET

U.S. and global stocks plummeted as rattled investors braced for the prospect that a pandemic could further dent an already slowing world economy, increasing the pressure on governments to quickly respond to the crisis.

The S&P 500 fell for the seventh straight day on Friday. The index suffered its biggest weekly drop since the 2008 global financial crisis on fears the economic disruption caused by the coronavirus could lead to a recession.

Stocks cut losses right at the end of the session. The Dow Jones Industrial Average fell 1.4%.

Amazon.com Inc, the world's largest online retailer, said all its employees should defer non-essential travel including within the United States.

In Washington, House members were advised to establish plans for alternative work arrangements in case the coronavirus becomes widespread in the country, Sergeant-at-Arms Paul Irving wrote to lawmakers.

The White House's top economic adviser, Larry Kudlow, told reporters the U.S. economy was "sound" and said the Trump administration was not planning to take any "precipitous" policy actions at this time.

Federal Reserve Chair Jerome Powell said the coronavirus posed evolving risks to economic activity, adding that the U.S. central bank was "closely monitoring" developments and would act as appropriate to support the economy.

Trump this week said the coronavirus risk to Americans remained "very low," but he has been increasingly alarmed by the reaction of the U.S. stock market, which he considers a barometer of the economy's health and sees as important to his re-election in November.

In tweets overnight, Trump defended his administration's response.

White House acting chief of staff Mick Mulvaney played down the threat, telling a conservative conference that wall-to-wall news coverage of the disease is a ploy to hurt Trump.

But prominent Democrats accused the White House of botching its efforts and preventing health officials and scientists from properly informing the public about the extent of the threat.

Former Vice President Joe Biden, a contender in the race for the Democratic presidential nomination, said Trump and Pence had limited Americans' access to information about the virus.

"Trump and Pence decided that the public health experts cannot inform the public on their own what's going on," Biden said at a campaign event. "Now the president won't let other people tell the truth."

Pence was tapped by the White House this week to lead the government's coronavirus response.

Funding to combat the crisis has become a political issue. The White House is seeking $2.5 billion from Congress. Senate Democratic Leader Chuck Schumer has called for $8.5 billion.

The Democratic-controlled House could vote as soon as next week on emergency funding for the anticipated medical and economic costs of an outbreak, said a congressional source.

(Reporting by Steve Holland Richard Cowan, David Morgan, Susan Heavey and Makini Brice; Additional reporting by Howard Schneider in Fort Smith, Arkansas, Lisa Lambert in Washington and Jonathan Allen, Michael Erman, Hilary Russ and Sinead Carew in New York; Writing by Paul Simao and Ted Hesson; Editing by Alistair Bell and Grant McCool)

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