Stocks plunge, dollar slides as Fed's emergency cut spooks investors
S E E D E D C O N T E N T
SYDNEY (Reuters) - Stocks were slammed on Monday and the dollar battered after emergency rate cuts in the United States and New Zealand, and a raft of steps by policymakers worldwide failed to stem the rout in markets spooked by the broadening fallout of the coronavirus.
U.S. stock futures plunged 4.8% to hit their downlimit before daybreak in Singapore. The dollar sank more than 2% against the yen.
Australia’s benchmark stock index fell 7% in the first quarter-hour of trade before paring some of the losses. U.S. crude fell 5% to under $30 per barrel.
New Zealand shares were down 3%. Japan’s Nikkei was up 0.1% after a more than 6% decline on Friday to the lowest since late 2016. South Korea’s KOSPI was a shade weaker.
That left MSCI’s index of Asia-Pacific shares outside Japan off 0.5% to a level not seen since early 2017.
The U.S. Federal Reserve cut interest rates by 100 basis points on Sunday to a target range of 0% to 0.25%. It said it would expand its balance sheet by at least $700 billion in coming weeks.
“It may be a shot in the arm for risk assets and help to address liquidity concerns...however, it also raises the question of whether the Fed has anything left in the tank should the spread of the virus not be contained,” said Kerry Craig, global market Strategist at J.P. Morgan Asset Management.
“We really need to see the fiscal side...to prevent a longer than needed economic slowdown.”
New Zealand’s central bank also slashed interest rates by 75 basis points, sinking the country’s currency, as it prepared for a “significant” hit to the economy.
U.S. Treasuries futures jumped more than a full point.
E-mini futures for the S&P 500 index dropped 4.77% to their daily trading limit outside the United States.
Lockdowns and travel bans spread across the globe over the weekend, affecting tens of millions of people.
“(The Fed) must really be scared. To do that in one fell swoop is really quite shocking,” said Robert Pavlik, chief investment strategist at Slatestone Wealth LLC in New York.
“They pulled out whatever weapons they had and my sense is I think it may help initially but I don’t think it goes much further because this is still a developing issue. They used up basically all their ammunition and we’re down to sticks and stones.”
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So much for trying to juice the economy......
Go borrow some money at zero interest and buy stocks when the market bottoms out.
The rate cut was both foolish and impotent. The Fed should have given Trump the finger as he continued to push for the rate cuts. What do you expect from a person that no US banks will loan to, and has declared bankruptcy multiple times. Warton should be demanding their diploma back.
I agree completely with your statement. It is crazy stupid for them to cut the rate. Talk about panicking.
I'm still going to refinance my house and knock off some years.
Refinanced in December...… May look at it again if we can knock a full point off the interest rate.
I just bought a house 1 year ago today so this will be bigly big for me.
Good time to invest in real estate. Now that is rock solid.
Wells Fargo keeps offering to refinance my mortgage, but the difference has never been enough to tempt me.
Now, though...
Good for you PJ! Glad to hear it!
Or---it might not be a good time to invest. Things can change rapidly. Except of course for those who are in a more 'secure-stable-and abundant financial situation.
Short term fixes rarely work. I think that the fed should have thought twice, given what they saw around the world.
Trump's economy was already on a sugar high of low interest rates.
Why couldn't Trump take the same basic advise of the money managers. Don't sell your stocks..... just ride it out. The same goes for the interest rate.
So we are back to QE (quantitative easing). Not much left to fight the battle with. Another rate cut, IMO, will do nothing at all.
Hang on it's going to be a rough ride.
Why did the Fed cave to crooked donnie the bankruptcy king, is he trying to bankrupt America now.
It appears to be his pattern........racing to the bottom. I don't think the fed should have cut the rate a couple weeks ago. This is madness, imo. I guess this is the only "march madness" the country is going to participate in this year. lol
I see a photo of a plague on America in the lower right corner!
He's basing his entire presidency on the value of the stock market and peoples 401Ks....
The market will turn around, possibly mid summer if the virus is seen as coming under control. (God help us if it comes back in September-October as is possible.) Best thing..... Don't look at your 401Ks...… They will come back down the road. Just don't sell anything right now.
I won't look at my 401 but will have to look at my sinking stocks in order to buy...I won't sell anything
Excellent advice Fly.
It is about 401K's. In fact, I have several friends who's sole reason for voting for Trump is their 401ks. So, I get why he is panicking.
People tend to be reactive though (hence why we don't have TP around).
For me, this is good news. I do have real estate holdings and low interest rates is fab for me. Less leveraging needed.
This is my opinion. Personally I can not understand the market gains of the past three years when the controllers of the markets are fully aware of who Donald J. Trump was and how he conducted his financial situations---and this man entered the WH.
Or could it be that the reality of the market rise since the advent of The Trump Administration is not because of Trumpian policies, but rather in spite of them?
The only think I could give Trump credit for is projecting a business-friendly position. That, and of course lower taxes, helps business executives take on expansion initiatives.
Other than that, the economy is largely out of control of the PotUS (or anyone else for that matter). We can damage an economy easily enough, but causing an economy to grow is largely out of direct control.
Our recent good economy was mostly a result of the business cycle. In other words, complex dynamics of capitalism that ebb and flow.
There are two only ways for governments to stimulate economic growth, by cutting taxes or increasing spending. Unfortunately taxes are already historically low and we have been spending like crazy. With our deficits already above a trillion dollars our ability to fight a coming recession are very limited. The Fed rate is now at 0% so if things get worse we are SOL, especially the poor, young, underemployed...
I agree. Our best bet is a natural rebound once the crisis is under control and uncertainty is reduced. The fundamentals for the economy remain good so a natural rebound is a decent bet. Lowering the rate now seems like an incredibly dumb over-reaction.
It would have been better to have come out and said...
"We have confidence in the strength of our economy, and we see no reason to cut rates at this time. Now is the time for calm and wise decision making in the face of the ongoing pandemic. Our proven strong economy will see us through these difficult times."
What did we get..... a rate cut because agent orange needed to juice the economy some more. Investors saw it for what it was.... PANIC!
Yeah cutting the rate seems like a brain-dead decision.
The markets have been juiced by rate cuts, and un-needed tax cuts.
Use to be republicans were up for tax increases to pay down the debt when the economy was good. Then came.... "Deficits don't matter" republicans in the 1980s.
At least the economy since the 2008 drop is on a better foundation based upon banks being required to hold higher levels of reserves.
It seems to me they are wanting big banks to take out more loans themselves. I don't see how that could be helpful as the banks themselves would be more in debt.
Do not forget this either. Our economy is into its forty plus years of Supply Side Economics and Supply Side thought and reaction. Everything is geared to move the wealth upward.
Note, "The markets have been juiced...…………….."
But not the Main Street taxpayers, workers and most, if not all of the 'businesses'. This last sentence is mine.
Funny they are back to doing what they did under the Obama administration. Some considered it bad then yet will probably be silent now.
It seems they want banks to take out more loans to have cash on hand and in turn give out more loans to small business and people. That to me seems like a dangerous road to take as if a downturn continues for a while these entities and people that needed cash would have just put themselves more into debt with no way to get out of it.
Then I read that donald want the rates to go into the negative territory which would basically pay people to take out loans and fine people that just deposited cash instead of making interest. That seems like it could be dangerous as well, making people and business more into debt and discourage savings.
Now they are also calling on congress to get rid of the Dodd-Frank legislation. Another dangerous road, imo.
Then to top it off, I read the legislation passed by congress that would give people paid sick leave has restrictions. Any company with 500 or more employees would be exempt as would small business. That basically leaves out most of the population. So no help there.
If they get their way and a slowdown continues, I see massive bailouts in the future, at our expense and without any help for average folks.
Woke up at 03:00 for some reason, and decided to check the pre-open numbers on the Dow. Says it will open down 2,120ish. The clicks you hear will be the trading circuit breakers tripping this morning.
Yes, QE is back with a bang. Next up will be bailing out corporations and gasp, more of those socialist programs.
It's unMurican I tell ya.
With state Governors closing public businesses there will be law suites for wage and profit loss coming very soon. Airlines and Entertainment companies are already lobbying Congress for bailout plans.
At 10:00 Eastern, the Dow is down 2200 points. All that rate cut did was to ensure unrest in the markets by showing that the highest levels our government are spooked and don't really have a long term plan to deal with the effects of the pandemic.
Color me shocked.....
They did the same thing during the recession. End the Fed they do more harm than good.
An excellent book on the topic.
Goldman Sachs, JPMorgan, and 6 other banks suspend share buybacks to deal with 'unprecedented challenge' from the coronavirus outbreak
Looks like the banks have decided they want to stay cash-rich under the circumstances.
I'm trying to figure out the point at where stocks were over-valued, and where the impact of the Corona virus starts.
I'm thinking about a 19,800 Dow mark is where we would be prior to the market being artificially juiced by tax cuts and interest rate cuts.
And about where it was when Obama left the WH.
For the past 3 1/2 years I could not understand why the markets had their upward trend. My thoughts were that tax cuts and deregulation should not have such effect on the markets alone and I wondered if other factors were involved----like increased opportunity for more SSE wealth concentration. And, supposing my thoughts were even only one half correct, then the possibility of at least a portion of the 'markets' were in effect a subtle form of a Ponzi. And if this true, then much of 'the Trump economy' is resting in a perilous place.
So much winning, now they will need to cancel the "wall". They won't need the wall, Mexico and Canada are beginning their own closed borders with no need for a wall. They don't want us.