Stock Market Plummets Despite Federal Reserve Slashing Rates, Introducing New Stimulus

The stock market plunged on Monday morning despite the Federal Reserve’s attempt to tamp down economic anxiety over the coronavirus pandemic.

Trading was temporarily halted after the S&P 500 opened down more than 8% on Monday.

The Dow Jones Industrial Average fell 9.5% on Monday morning after a brutal streak last week.

The Dow is now 26% lower this year just four weeks after hitting a new recent record high in February.

The Nasdaq Composite was also trading 7% lower after the weekend.

Fed announces rate cut:

The market woes continued despite the Fed’s announcement that it is effectively cutting interest rates to zero in its most drastic move since the 2008 global recession.

Federal Reserve Chairman Jerome Powell told reporters that the coronavirus will have a “significant effect on economic activity.”

The Fed reached an agreement with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to lower rates globally.

Along with the rate cuts, the Fed said it would buy $700 billion worth of Treasury bonds and mortgage-backed securities.

"I don't think they would have done this unless they felt the financial markets were at significant risk of freezing up tomorrow," Mark Zandi, the chief economist at Moody's Analytics, told CNN. "They're very concerned the financial markets won't work."

Fed expects tough road ahead:

"The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States," the Fed said in a statement. "Global financial conditions have also been significantly affected."

Economist Robert Stein, the former chief economist for the Senate Budget Committee, warned that real GDP could fall by 10% in the second quarter.

Stein predicted that the “drop in real GDP” will be one of the worst declines since World War II, though he expects the economy to rebound in the second half of the year.

 

Related News
Comments