Stocks plunge in latest reversal despite rate cut
NEW YORK — Fear and uncertainty continue to control Wall Street, and stocks fell sharply Tuesday after an emergency interest-rate cut by the Federal Reserve failed to reassure markets wracked by worries that a fast-spreading virus will slam corporate profits and the economy.
The Dow Jones Industrial average sank 785 points, or 2.9%. It had surged 5% a day earlier on hopes for aid from the Fed and other central banks. In another sign of the market’s caution, the yield on the 10-year Treasury sank below 1% for the first time in history.
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.
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.
Stocks rallied briefly in the morning following the Fed’s surprise move, but it took just 15 minutes for the gains to evaporate. Treasury yields fell to more record lows as investors ratcheted back expectations for the economy and inflation.
“I don’t believe that market participants woke up this morning thinking we were facing a crisis similar to the global financial crisis,” said Kristina Hooper, chief global market strategist at Invesco. “But that’s what the Fed’s actions suggested to some.”