(Reuters) – Wall Street tumbled in a volatile session on Tuesday after the US Federal Reserve surprised investors with a half percentage point drop in interest rates, amplifying the fears about the magnitude of the impact of the coronavirus on the economy.
The top three U.S. stock indexes closed almost 3% lower after the Fed's first emergency rate cut since the 2008 financial crisis.
The drop in rates underscored the concern of the US central bank over the new coronavirus, which spread worldwide after it appeared at the end of last year in China. He intervened two weeks before a scheduled policy meeting, during which traders had fully assessed the price at a reduction of 50 basis points.
Shares initially jumped more than 1% but then fell as traders wondered if pumping more money into the financial markets would solve the central problem – a drop in trading activity then that workers and consumers stay at home.
"The rate cuts underscore the magnitude of the problem facing the global economy," said Peter Kenny, founder of Kenny’s Commentary LLC and New York's Strategic Board Solutions LLC.
"The markets would normally welcome a rate cut and they hoped for it. Now that we have it, the question is, what is the next step? "
The 10-year Treasury yield fell below 1% for the very first time as nervous investors withdrew money from the stock market.
The S&P Financials index fell 3.7%, reflecting the difficulty banks have in making profits in low interest rate environments.
On Friday, Wall Street experienced its biggest weekly decline in more than a decade, as growing cases of influenza virus outside of China fuel fears of a global recession.
Earlier on Tuesday, finance ministers and central bank governors from the Group of Seven pledged to take appropriate measures to support their economies.
"There is a real fear that things will get worse and there is no point in waiting for these fears to materialize," said Jim Bianco, president of Bianco Research in Chicago, about the Fed rate cut. . "You can always cancel the rate cut if it does not materialize."
The Dow Jones Industrial Average fell 2.94% to end at 25,917.41 points, while the S&P 500 lost 2.81% to end at 3,003.37.
The Nasdaq Composite fell 2.99% to 8,684.09.
As with other recent sessions, the volume has been heavy on the US stock exchanges, with 14.7 billion stocks changing hands versus an average of 9.8 billion stocks in the past 20 days.
The top 11 S&P sectors all fell, with the Information Technology index falling 3.8%. Apple and Microsoft fell 3.2% and 4.8% respectively.
Tuesday's liquidation left the S&P 500 down about 11% from its record high on February 19.
Healthcare equipment maker Thermo Fisher Scientific rose 1.8% after launching an $ 11.6 billion offering for German genetic testing company Qiagen.
Protective mask maker Alpha Pro Tech has jumped nearly 20%.
Declining issues outnumbered rising ones on the NYSE by a ratio of 1.67 to 1; on the Nasdaq, a ratio of 2.45 to 1 favored the decliners.
The S&P 500 posted two new 52-week highs and 32 new lows; Nasdaq Composite recorded 19 new highs and 185 new lows.
Additional reports from Medha Singh, Sanjana Shivdas and Sruithi Shankar in Bengaluru, and Caroline Valetkevitch in New York; Editing by Sandra Maler and Jonathan Oatis
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