But Tuesday appeared to tell a different story. The Dow opened flat, then quickly fell about 200 points. Earlier in the morning, Dow futures were up roughly 250 points only to U-turn into the red.
The S&P and Nasdaq composites fell .8 percent and .7 percent, respectively.
Investors had rallied around prospects that the Federal Reserve may act to cushion the economy from coronavirus. On Tuesday morning, Group of Seven finance ministers and central bankers held a call to discuss how to respond. But a statement released after the call contained no specific actions, prompting the futures drop.
“Alongside strengthening efforts to expand health services, G-7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase,” the finance ministers and central bank governors said in a statement.
Chris Rupkey of MUFG Bank described the markets’ response to the much-anticipated statement “deafening.”
“They’ve got nothing to throw the markets way, not even a bone,” Rupkey said of the statement. “They’ve got nothing, they raised their bayonets, but discovered they had no bullets to fire.”
Wall Street is now expecting a 100 percent likelihood that Fed leaders will cut interest rates at their next scheduled meeting on March 18 — if not before. The expectation is that the Fed will cut the benchmark U.S. interest rate from just below 1.75 percent to just below 1.25 percent, which would be the largest cut since 2008. The Reserve Bank of Australia cut interest rates Tuesday in response to the outbreak.
In Europe, Britain’s FTSE 100 climbed roughly 2 percent, and Germany’s DAX rose 2.5 percent. Asian stocks dipped, with Japan’s Nikkei down 1.2 percent and Hong Kong’s Hang Seng essentially flat.
Arturo Bris, professor of finance and lead of the IMD World Competitiveness Center at the IMD business school in Lausanne, Switzerland, said that markets and companies could hopefully come out of the outbreak with crisis response plans “that prevent the overreaction and panic we’re in now — and help keep markets and economies stable even during the unthinkable.”
“The virus, of course, is serious, but this is not the end of the world,” Bris said. “In addition to making preparations for a pandemic, they also need to be planning for what comes after a pandemic, when things return to normal.”
For weeks now, coronavirus has caused a rupture in global supply chains, particularly for goods manufactured and produced in China, where economic activity has largely stalled. And the longer fears swirl around the virus’ spread, shaky consumer confidence could push Americans to rein in their spending. The world economy is now expected to have its worst year of growth since 2009, according to numerous forecasts. And Goldman Sachs is predicting no growth in the second quarter, which would be the worst quarter the country has experienced in six years.
“Stocks are likely to continue reacting to ebbs and flows in the news cycle, and it is too early to tell if Monday’s 1,300 point rally in the Dow means a bottom is in place for stocks,” said David Bahnsen, chief investment officer of The Bahnsen Group, based in Newport Beach, Calif., with over $2.25 billion in assets under management. “Economic damage has certainly been done, but how severe and for how long, remains to be seen.”
Early Tuesday morning, President Trump continued to call on the Fed to cut rates. Interest rates are already low, leaving little room for further reductions in the event of a recession. Still, Trump often attacks the central bank and Fed Chair Jerome H. Powell for not going far enough to heat up the economy.
“Our Federal Reserve has us paying higher rates than many others, when we should be paying less,” Trump tweeted. “Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome H. Powell led Federal Reserve has called it wrong from day one. Sad!”
In the United States, the number of confirmed cases surged past 100 in 15 states, with six people dead. There are at least 18 confirmed cases of coronavirus in Washington state, with evidence suggesting the virus may have spread undetected there for weeks.
Roughly 70 countries have reported incidences of the virus, and new countries are added to the list each day. In South Korea, the number of confirmed cases exceeded 5,000, the highest outside China. Government officials were placed on 24-hour alert, and health tests expanded in virus-hit areas. China, the epicenter of the outbreak and still the worst-hit country, announced its lowest number of new cases since late January.
Read more:
https://www.washingtonpost.com/business/2020/03/03/stock-markets-stimulus-coronavirus/
2020-03-03 14:40:00Z
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