Dow sinks 2.9% after rate cut
NEW YORK — Fear and uncertainty continue to control Wall Street, and stocks fell sharply Tuesday after an emergency interestrate cut by the Federal Reserve failed to reassure markets wracked by worries that a fast-spreading virus will cause a recession.
The Dow Jones Industrial average sank 785 points, or 2.9%. It had surged 5% a day earlier on hopes for a broader set of stimulus measures.
While the cut gave some investors exactly what they had been asking for, Federal Reserve Chairman Jerome Powell acknowledged that the ultimate solution to the virus challenge will have to come from health experts and others, not central banks. Some traders are also questioning whether more aid is on the way to stabilize the market, while others called the Fed’s move premature to begin with. For more than a few, the Fed’s steepest rate cut since 2008 recalled the dark days of the financial crisis and only added to the dread.
Through it all, markets are still faced with the same quandary that has sent stock prices tumbling 11% since they set a record just two weeks ago: No one knows how far the virus will ultimately spread before authorities can get it under control, and by how much companies’ profits will be shorn because of it.
That uncertainty led to jagged trading across markets on Tuesday. Stocks rallied briefly in the morning following the Fed’s surprise move, but it took just 15 minutes for the gains to evaporate. The yield on the 10-year Treasury fell below 1% for the first time in history as investors ratcheted back expectations for the economy and inflation. A gauge measuring traders’ fear of upcoming swings for stocks jerked wildly up and down through the day.