The decision came two weeks before the Fed’s scheduled meeting as the central bank felt it was necessary to act quickly to combat the effect of the virus spreading worldwide. It’s the first such emergency action coming in between scheduled meetings since the financial crisis.
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“It’s great that the Federal Reserve recognizes that there’s going to be weakness, but it makes me feel, wow, the weakness must be much more than I thought,” CNBC’s Jim Cramer said on “Squawk on the Street” right after the sudden cut. “I’m now nervous. I’m more nervous than I was before.”
The Dow Jones Industrial Average traded 392 points lower, or 1.5%, after rising more than 300 points earlier in the day. The 30-stock average gyrated between sharp gains and solid losses after the decision was announced. The S&P 500 and Nasdaq Composite were both down at least 1.2%.
“The coronavirus poses evolving risks to economic activity,” the Fed said in a statement. “In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate.”
Traders had already priced in a rate cut of 50 basis points by this month’s policy meeting. Fed Chairman Jerome Powell noted the central bank was not prepared to use any additional tools to stimulate the economy aside from rate cuts. This may have disappointed some on Wall Street who were expecting something more from the central bank.
Bank shares fell broadly, led by a 3% drop in Bank of America shares. JPMorgan Chase and Citigroup slid 2.5% and 0.4%, respectively.
Tuesday’s moves follow a roaring comeback rally in the previous session that saw the Dow post its biggest percentage gain since March 2009. The index also recorded its largest-ever point surge on Monday.
Monday saw U.S. stocks snap a losing streak that had gone on for over a week. Some investors were skeptical that the rally has legs without a significant central bank response. Even if that comes to fruition, investors have their doubts the market has seen the end of its tumultuous trading of the last six days.
“The worse the economic situation gets, the more likely there will be massive coordinated monetary and fiscal stimulus to offset the weakness,” Tony Dwyer, chief U.S. equity strategist at Canaccord Genuity, said in a note. “There is no way to judge the global economic and EPS impact of the COVID-19 virus as cases globally are still ramping.”
Tuesday’s moves follow a roaring comeback rally in the previous session that saw the Dow post its biggest percentage gain since March 2009. The index also recorded its largest-ever point surge on Monday.
Monday saw U.S. stocks snap a losing streak that had gone on for over a week. Some investors were skeptical that the rally has legs without a significant central bank response. Even if that comes to fruition, investors have their doubts the market has seen the end of its tumultuous trading of the last six days.
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2020-03-03 16:25:00Z
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