Wall Street benchmarks snap two-day recovery as Fed emergency rate cut amplify coronavirus fears
- All the major three benchmarks, namely SJIA, SP500 and NQ100 register nearly 3.0% losses.
- Fed delivered a shock rate cut of 0.50%, the first since 2008.
- Markets fear the economic implications of coronavirus higher than initially anticipated.
Wall Street failed to cheer a surprise 50 basis points (bps) rate cut from the Fed, the first since the Great Financial Crisis (GFC), as surprise actions from the global policymakers push traders to smell something fishy about coronavirus (COVID-19).
Read: Forex Today: Federal Reserve cuts 50 bps in emergency meeting, FX volatility spikes
The DJIA lost 817 points, 3.06%, to close at 25,885.84 whereas the Nasdaq Composite Index came in second with 2.99% loss, down 267.67 points, while closing around 8,684. Further, the S&P 500 Index also followed the suit by trimming 89.22 points, or 2.89%, to 3001.01.
An absence of any major help from the Group of Seven (G7) conference call earlier helped the Wall Street benchmarks to extend the previous two days’ recovery. However, traders turned risk-averse as the Federal Reserve surprised global markets after the RBA’s rate cut whereas the ECB and the rest of the top-tier central banks also signaled to join the league. With the noticeable action form the global policymakers, investors fear that they don’t know something that the central bankers do about the economic implications of COVID-19.
The pandemic has so far caused nine lives in the US while infecting 27 on Monday. The first case in Chile, as well as increasing numbers from Italy, also spread the fears.
While also portraying the risk-off, the US 10-year treasury yields drop to fresh record lows to 1.0%.
Markets players will now pay close attention to COVID-19 headlines as well as commentary from global central bankers for near-term direction ahead of Friday’s US NFP. However, today’s US ISM Non-Manufacturing PMI and intermediate Fedspeak could also entertain the momentum traders.