Stocks took heavy losses Tuesday after the Federal Reserve took emergency action to cut interest rates and boost the economy through a potential coronavirus slowdown.
The Dow Jones Industrial Average plunged 786 points, a 2.9 percent loss, while the S&P 500 and Nasdaq composite sunk 2.8 percent and 3 percent, respectively. Tuesday’s losses cut more than half the gains from a massive Monday rally that saw all three major indexes rise more than 4.5 percent each.
Trading kicked off with a volatile start Tuesday before the Fed announced it would cut interest rates by half a percentage point, more than double the typical monetary policy adjustment. It was the Fed’s first interest rate cut issued between policy meetings since 2008, and analysts expect another cut following the bank’s upcoming meeting on March 17 and 18.
Wall Street had clamored for the Fed to ease financial conditions amid mounting concern about the economic toll of the coronavirus outbreak. More than 3,000 people worldwide have died from the potentially lethal respiratory illness, including nine in the U.S.
“The virus and the measures that are being taken to contain it will surely weigh on economic activity both here and abroad for some time,” Fed Chairman Jerome Powell said in a Tuesday press conference, citing the early damage of the disease on the travel, tourism and manufacturing industries.
“In response, we have eased the stance of monetary policy to provide some more support to the economy,” he said.
Investors had bet on the Fed to cut its baseline interest rate range by 50 basis points as soon as Monday, but the bank following through did little to soothe financial markets. Yields on U.S. Treasury bonds also plunged past record lows, with the yield on the 10-year Treasury note slipping below 1 percent for the first time in history.
The Fed’s cut also failed to quell President Trump’s long-running pressure for lower interest rates, which has intensified as stocks plummet.
“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!” Trump tweeted shortly after the Fed’s announcement.