Stocks fell sharply on Monday even after the Federal Reserve embarked on a massive monetary stimulus campaign to curb slower economic growth amid the coronavirus outbreak.
The S&P 500 dropped 8.14% shortly after the open, triggering a “circuit breaker” trading halt that will last for 15 minutes. The Dow Jones Industrial Average fell 9.7%, or 2,250 points. The Nasdaq Composite slid 6.1%.
Before the open, futures contracts tied to the major averages hit their “limit down” levels, meaning they could not trade below that threshold. Those limits are imposed by the CME Group to maintain orderly market behavior.
While the central bank’s actions may help ease the functioning of markets, many investors said they would ultimately want to see coronavirus cases peaking and falling in the U.S. before it was safe to take on risk and buy equities again.
“The Fed blasted its monetary bazooka for sure,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “This better work because I don’t know what they have left and no amount of money raining from the sky will cure this virus. Only time and medicine will.”
Fed announces QE
The Fed cut interest rates down to basically zero, their lowest level since 2015. The U.S. central bank also launched a massive $700 billion quantitative easing program. President Donald Trump said he was “very happy” with the announcement, adding: “I think that people in the markets should be very thrilled.”
“This, coupled with an important fiscal package, should help cushion the economic downside from the virus’ effect on economic activity,” said Quincy Krosby, chief market strategist at Prudential Financial. “It’s going to be positive, but the market is at the mercy of the virus and at the mercy of whether the containment policies work.”