The Market Pulse
March 16, 2020
By Timothy Speiss
After the 9:30 a.m. EST Dow opening this morning, March 16, the index plunged 8.1% at the open, triggering a 15-minute trading halt as investors fled risk assets amid the mounting economic toll of the coronavirus outbreak. Treasuries surged despite dramatic moves from the Federal Reserve and other central banks. Unfortunately, markets are expecting another rollercoaster week, as policymakers continue to ramp up their responses to the global coronavirus outbreak. Pre-market opening Monday morning, S&P 500 futures were down 128.5 points or 4.8%; Dow futures were down 1,041 points or 4.6%; and Nasdaq futures were down 359.7 points or 4.5%. Futures for each index were pinned to their “limit-down” levels established by CME Group daily to prevent further extreme losses. These moves, as proposed by financial analysts, suggest the three major indices would add to declines that plunged them into a bear market just days ago, or more than 20% below their recent highs. The SPY ETF tracking the S&P 500, which continued to trade during the pre-market session, suggested a drop of more than 9% by market open for the blue-chip index.
Stock futures opened sharply lower Sunday evening, even after the Federal Reserve launched a massive monetary stimulus program — by cutting rates to effectively zero and unveiling plans for large-scale asset purchases. The Fed has slashed benchmark interest rates by 100 basis points to a band of between 0% and 0.25%. To combat growing fears of a worldwide recession, the surprise announcement came just days ahead of the Fed’s scheduled March monetary policy meeting on Tuesday and Wednesday — March 17 and 18 — 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, but anticipated it would happen at this week’s meeting. The Fed will no longer hold its previously scheduled meeting, Fed Chair Jerome Powell said during a press conference Sunday evening. 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.”