Wall Street sinks as Fed's shock cut increases worries over virus spread

Authored by reuters.com and submitted by snusnunews

NEW YORK (Reuters) - U.S. stocks fell sharply on Monday as the Federal Reserve’s drastic move to cut interest rates to near zero fueled anxiety over the extent of economic damage from the coronavirus pandemic.

The Fed’s second emergency interest rate cut in less than two weeks and its pledge to purchase more than $700 billion in assets came late on Sunday, ahead of its scheduled policy meeting on Tuesday and Wednesday. It added to the alarm about the pandemic that has paralyzed parts of the global economy and squeezed company revenue.

Investors are worried over how effectively policymakers will be able to mitigate the economic damage from the spreading virus.

The market is down despite the Fed’s move because “this is a different type of crisis. Lower rates will not create demand when people are home,” said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management.

“But this doesn’t mean what the Fed has done is futile. Lower rates are a precondition to other policies,” she said. “So I think this has to be done, but it’s understandable the way the market is reacting.”

The benchmark index slid as much as 11.4% early in the session, shedding about $2 trillion in market value, before bargain-hunting helped the main indexes claw back some losses.

Trading on Wall Street's three main stock indexes was halted for 15 minutes shortly after the open as the S&P 500 index .SPX plunged 8%, crossing the 7% threshold that triggers an automatic cutout.

Rate-sensitive financial stocks .SPSY tumbled more than 11%, leading declines among the major S&P sectors. The sector also came under pressure after the big U.S. banks halted their share buy-backs.

Energy stocks .SPNY also fell sharply along with oil prices, and the S&P 500 technology index .SPLRCT was down more than 9%.

Heavyweights Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Facebook Inc (FB.O) were among the biggest drags on the S&P 500.

A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., March 16, 2020. REUTERS/Lucas Jackson

The Dow Jones Industrial Average .DJI fell 2,120.11 points, or 9.14%, to 21,065.51, the S&P 500 .SPX lost 233.51 points, or 8.61%, to 2,477.51 and the Nasdaq Composite .IXIC dropped 710.35 points, or 9.02%, to 7,164.52.

Wall Street’s fear gauge jumped 21.15 points to 78.98.

The markets should stay open despite the intense volatility, the head of the U.S. securities regulator said, quashing speculation that the government might shut down the country’s exchanges to stop the plunge in stock prices.

Bars, restaurants, theaters and movie houses in New York and Los Angeles were ordered shut, and U.S. states pleaded with the Trump administration to coordinate a national response to the outbreak.

Nike Inc (NKE.N), Lululemon Athletica Inc (LULU.O) and Under Armour Inc (UAA.N) said they would close stores in the United States and some other markets, dragging the S&P 500 retail index .SPXRT sharply lower.

The S&P 1500 airlines index .SPCOMAIR slumped after United Airlines Holdings Inc (UAL.O) booked $1.5 billion less revenue in March and warned employees that planes could be flying nearly empty into the summer.

Adding to worries, severe virus containment measures sent China’s factory production tumbling at its fastest pace in three decades.

Declining issues outnumbered advancing ones on the NYSE by a 13.72-to-1 ratio; on Nasdaq, a 11.32-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 332 new lows; the Nasdaq Composite recorded 3 new highs and 1,321 new lows.

chronic616 on March 16th, 2020 at 15:18 UTC »

I'm 60 and according to my calculations if all goes well I'll be able to retire in 75 years. 😳

Chucknastical on March 16th, 2020 at 12:23 UTC »

Every trading index that's open is a bloodbath.

Yikes

edit: aaaannnnnd It's gone.

GoingTibiaOK on March 16th, 2020 at 11:45 UTC »

I was listening to an economist this morning who said that the Fed cutting the rate to 0% is basically the strongest tool in the box for correcting a faltering economy. He compared it to a fire engine. Sometimes people see the fire engine go by and say “oh, good this will put out the fire,” and sometimes the say “that’s a lot of fire engines, so it must be a really big fire.” Cutting the rate to zero is a lot of fire engines, and apparently the market is thinking the fire might be too hard to put out. I hope he’s wrong.