Markets are in for another rollercoaster week, as policymakers continue to ramp up their responses to the global coronavirus outbreak.
Stock futures opened sharply lower Sunday evening even after the Federal Reserve unleashed a massive stimulus package including a full percentage point rate cut and plans for large-scale asset purchases. Contracts on each of the Dow, Nasdaq and S&P 500 were off more than 2.4%, suggesting the three major indices would add to losses that last week sent them into bear market territory.
Sunday evening, the Federal Reserve unexpectedly slashed benchmark interest rates rates by 75 basis points to a band of between 0% and 0.25%. The surprise announcement came just days before the Fed was set to hold its scheduled March monetary policy meeting on Tuesday and Wednesday, and less than two weeks after the Fed had also unexpectedly cut rates by 50 basis points to a range of 1.00-1.25%. Many market participants had expected the Fed would vote to cut rates to a zero lower bound for the first time since the financial crisis at the end of the meeting this week.
In a statement, the central bank said it intends to maintain the new target interest rate band “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
The Fed also unleashed a further set of tools to address economic impacts arising from the COVID-19 pandemic, announcing a quantitative easing program that would include purchases of $700 billion in assets, comprising $500 billion worth of treasuries and $200 billion in agency-backed mortgage securities.
“The Fed is dusting off the financial crisis playbook, returning to bond buying, coordinating with other global central banks to provide access to U.S. dollar liquidity, cutting interest rates to zero and opening the Fed’s discount window to ensure the flow of credit through banks to consumers and businesses,” Greg McBride, Bankrate chief financial analyst, said in an email.
The Federal Reserve’s move deepens the monetary policy response to the COVID-19 outbreak, which has so far sickened more than 3,200 people in the U.S. as of Sunday afternoon, according to data from Johns Hopkins. Last week, the Fed had aggressively boosted its liquidity injections in repo operations by more than $1.5 trillion, and expanded its monthly purchases of Treasury securities to include those across all maturities.
The federal government too has stepped up its response to the coronavirus, with President Donald Trump on Friday announcing a waiver on federal student loan payments until further notice, and massive crude oil purchases by the Department of Energy to fill the U.S. Strategic Petroleum Reserve “to the top,” to aid shale producers hit by the recent slump in oil prices.
In Congress, the House of Representatives passed a bipartisan bill to help provide further support in response to the coronavirus. The legislative package, which passed with a vote of 363-40, broadens access to free testing, expands sick leave benefits and helps provides food aid for vulnerable populations, including children whose schools have closed due to the coronavirus.
The Senate is expected to vote on the bill this week, and could take it up as soon as Monday.
At the state level, the response has similarly escalated with every passing day. New York Governor Andrew Cuomo announced Sunday that New York City’s public school system – the largest in the country comprising more than 1,800 schools – will begin closing this week in effort to slow the spread of the coronavirus. New York joins other states including California, Florida, Illinois, Louisiana, Pennsylvania, Rhode Island, Utah, Virginia, Alabama and Washington state in closing some or all public schools in recent days amid the outbreak.
In California, Governor Gavin Newsom on Sunday called for the closure of all bars, nightclubs, wineries and brewpubs, and directed restaurants to slash their occupancy in half.
Countries outside the U.S. have instilled even more drastic measures to try and contain the outbreak. In Spain, individuals are now banned from leaving their homes except for work and purchasing food and medical supplies. Spain is the worst-hit European country for coronavirus deaths outside of Italy with a death toll of 289 as of Sunday, according to Johns Hopkins data. In France, another country facing a rising death toll from COVID-19, most shops, cafes, restaurants and movie theaters are temporarily closed.
U.S.-based companies have also increasingly announced retail closures in effort to encourage social distancing among consumers, and as states including California and New York announce bans on public gatherings of large numbers of people.
Nike (NKE) was one such company, announcing on Sunday that it will close all its Nike-owned stores in countries including in the United States, Canada, Western Europe, Australia, and New Zealand from March 16 through March 27. Peer retail giant Abercrombie & Fitch (ANF) also said it will be closing its stores outside of the Asia-Pacific region until March 28.
In another sweeping move from a major corporation, Apple (AAPL) said over the weekend it would be closing all of its retail stores outside of China until March 27. The announcement came just a day after the iPhone-maker reopened its stores in China, which had been closed for more than a month as COVID-19 spread across the country.
6:01 p.m. ET Sunday: Stock futures sink after Fed cuts rates to zero
Stock futures sank at the start of overnight trading, showing few signs of respite from selling even after the Federal Reserve’s unexpected rate cut.
Here were the main moves in markets, as of 6:01 p.m. ET:
S&P 500 futures (ES=F): 2,598.00, down 86 points or -3.2%
Dow futures (YM=F): 22,289.00, down 550 points or -2.4%
Nasdaq futures (NQ=F): 7,628.5, down 272.25 points or -3.45%
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