Here’s what you need to know:
The Fed cuts interest rates.
The Federal Reserve slashed interest rates by half a point on Tuesday as fears about the economic fallout of the coronavirus mounted.
“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.”
The move underlines what a fraught moment economic policymakers in the United States and around the world currently face. While they can bolster confidence and help to keep borrowing cheap, there are questions about how effective rate cuts will ultimately be in counteracting the virus fallout. Central banks cannot keep disease from spreading, prevent workers from losing hours at work, or mend broken supply chains amid factory delays.
President Trump, who has no control over monetary policy, has been urging the Fed to lower interest rates when asked about the virus’ potential economic fallout.
U.S. stocks volatile after Fed’s surprise announcement.
Stocks in the United States rallied immediately after the Fed said it would cut interest rates, but those gains then faded.
The S&P 500 was erratic after having spiked more than 1 percent immediately after the announcement. Britain’s FTSE 100 and Germany’s DAX were about 2 percent higher.
Investors have been watching for any sign of action from the world’s central banks in battling the economic impact of the coronavirus. In the United States on Monday, the S&P 500 booked its biggest single-day gain since late December 2018, after the news that central bankers would join the conference call with finance ministers, fueling expectations that governments might lower interest rates in tandem.
Stocks in Taiwan led a rally in Asia on Tuesday, with the Taiex index up 1.4 percent. Stocks in the rest of the region were more restrained. In China, the Shanghai Composite Index rose 0.7 percent.
Other economic powers vowed to fight the crisis.
Before the Fed’s announcement, central bankers and political leaders of the world’s economic powers on Tuesday expressed their resolve to combat economic damage from the coronavirus, but stopped short of promising interest rate cuts or other immediate rescue measures.
The joint statement of solidarity showed that the leaders of the so-called G7 nations, which also includes Britain, Canada, France, Germany, Italy and Japan, are capable of cooperation. But the statement fell short of the more aggressive action that investors have been hoping for and that many economists say is needed to prevent the virus outbreak from undermining global growth.
Earlier Tuesday, the Reserve Bank of Australia cut its interest rates to a record low, while Malaysia’s Bank Negara cut its key lending rate for a second time this year.
Could the coronavirus outbreak cause a recession?
The global outbreak has caused upheaval in stock markets and disrupted supply chains around the world. But so far, there have been few signs of widespread economic damage, at least in the United States.
Economists say a pandemic could clearly cause a recession in the United States. But for that to happen, the effects would have to spread beyond manufacturing, travel and other sectors directly affected by the disease. The real sign of trouble, said Tara Sinclair, an economist at George Washington University, would be if companies with no direct connection to the virus started reporting a slump in business.
“The key is to watch big macro numbers rather than obsessively watching things tied to virus and supply chains,” Ms. Sinclair said. “If people aren’t getting haircuts anymore, that’s a bad sign.”
A recession is more than just a dip in gross domestic product. As most economists think of it, a recession involves a cycle that feeds on itself: Job cuts lead to less income, which leads to less spending, which leads to more job cuts.
What if the boss tells you to stay home?
Some companies have already taken precautions like limiting travel to affected countries or big international conferences. Others have asked employees to stay home because they visited a country with a more serious outbreak.
But with new unexplained cases being reported in the United States — and the first domestic death from the illness reported on Saturday — a growing number of American workers could soon be asked to alter their routines, or just stay home.
Exactly how that affects you will depend on many factors, including the generosity of your employer’s benefits and where you live. U.S. workers are less likely to be covered by a paid sick leave policy than those in other developed countries.
“This can put hourly workers in a bind, and make employees in the U.S. more likely to show up for work when they are sick,” said Joseph Deng, who specializes in employment and compensation law at Baker & McKenzie in Los Angeles.
Will you be paid if you’re told to stay home? This largely depends on your company’s policies, but so far many larger businesses are seeing to it that affected employees get paid, one way or another.
The shortest “correction” in almost a century.
Before Monday’s rally, the S&P 500 had dropped more than 11 percent in a week. That’s its worst weekly decline since the 2008 financial crisis, and a drop that pushed it into what’s known as a correction — a drop of 10 percent or more, representing a psychologically significant marker for investors.
But Monday’s surge meant that the correction lasted only nine days, which, according to Yardeni Research, was the shortest on record in terms of calendar days since 1928, the earliest date for which the research group has published data on the S&P.
The previous two corrections in the S&P 500 were both in 2018, when the market fell 10.2 percent for 13 days ending in February and 19.8 percent for 95 days ending in December.
Here’s what else is happening:
Late on Monday, Hyatt Hotels withdrew its financial forecasts for 2020, in part because of the impact of travel restrictions imposed by companies since the virus outbreak, saying its ability to assess the impact of the virus “continues to be limited because of quickly changing circumstances and uncertain consumer demand for travel.”
British Airways canceled 216 flights from London to New York, Italy, France, Germany, Belgium, Austria and Ireland from March 16 to 28. The airline had previously canceled flights to mainland China and reduced service to Italy. Ryanair, the Irish discount airline, canceled a quarter of its flights to and from Italy, from March 17 to April 8.
Twitter, which had already closed offices in Japan and South Korea and banned nonessential travel, on Monday encouraged all of its employees in the United States and other countries to work from home. And its chief executive, Jack Dorsey, pulled out of a speaking engagement at South by Southwest, an annual technology conference and music festival scheduled to be held in two weeks in Austin, Tex.
Reporting was contributed by Tara Siegel Bernard, Ben Casselman, Geneva Abdul, Kate Conger, Alexandra Stevenson, Jeanna Smialek, Kevin Granville, Carlos Tejada, and Jack Ewing.
https://www.nytimes.com/2020/03/03/business/stock-market-today.html
2020-03-03 16:32:00Z
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