Dow sinks about 3%, or more than 780 points, after a surprise rate cut by the Federal Reserve fails to calm fears that the coronavirus outbreak will hurt the economy.
William O'Keefe, left, and Peter Tuchman work on the floor of the New York Stock Exchange, Tuesday, March 3, 2020. The Dow Jones Industrial Average dropped 785 points and bond prices surged after an emergency interest-rate cut by the Federal Reserve failed to reassure markets racked by worries that a fast-spreading virus outbreak could lead to a recession.
Through it all, markets are still faced with the same quandary that has sent stock prices tumbling 11% since they set a record just two weeks ago: No one knows how far the virus will ultimately spread before authorities can get it under control, and by how much companies’ profits will be shorn because of it.
“Confidence in markets is crucial,” said Quincy Krosby, chief market strategist at Prudential Financial. “Without confidence, you don’t have a market.” The high stakes pushed the Fed to cut rates outside of a regularly scheduled meeting for the first time since the 2008 financial crisis, when investors were considering a complete meltdown of the world’s financial system as possible if not likely. That in itself may have spooked the market, as some investors wondered if the Fed saw things as worse than they were led to believe.
“To get a floor on the markets, realistically, what we need to see is not so much a cut in the number of new coronavirus cases, but at least a slowdown in the acceleration,” said Salvatore Bruno, chief investment officer for IndexIQ.
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