USA stocks crash as Fed action fails to calm markets

Andrew Cummings
March 18, 2020

The Dow Jones Industrial Average lost 2,997.10 points, or 12.9%, to 20,188.52, and the Nasdaq lost 970.28, or 12.3%, to 6,904.59.

The Nasdaq composite index also sprang back from its worst one-day percentage drop to open more than 2 percent higher.

The circuit breaker was also triggered for the third time in the last week, leading to a 15-minute halt in trading shortly after the opening. All three benchmarks have fallen into bear-market territory, having experienced declines of 20% or more from recent highs.

USA stocks jittered higher and then erased those gains at the start of trading Tuesday, the day after plunging to their biggest loss in more than three decades, as uncertainty about how badly the coronavirus pandemic will hit the economy continues to dominate markets.

Stephen Innes, global chief markets strategist at AxiCorp, said the pressure was on G7 leaders to find a way to end the carnage.

The Cboe Volatility Index, known as "Wall Street's fear gauge", ended the session at 82.69, its highest-ever closing level.

Monday's trading halt marks the third time since the coronavirus outbreak that USA markets have paused activity.

USA stock indexes fell sharply Monday, a day after the Federal Reserve aggressively cut interest rates to near zero in a bid to stop the economy from crashing.

President Donald Trump said he was pleased with the Fed's announcement, saying, "I think that people in the markets should be very thrilled".

Some analysts are concerned that the US Federal Reserve may have reached the limits of its power to fend off recession as the coronavirus spreads.

"The main problem this time [compared with] other market disruptions is the abrupt closure of economic activity", said Dan Deming, managing director at KKM Financial. "The speed of the impact to middle America, let alone the global community, is relatively unprecedented", he added. They're down more than 50% so far this year.

"Despite whipping out the big guns", the Fed's action is "falling short of being the decisive backstop for markets", said Vishnu Varathan of Mizuho Bank in a report.

Investors anxious that the central bank actions may be insufficient for companies facing a sharp slide in demand.

Investors also are not yet convinced that all the rushed, panicked responses are gaining traction.

Many parts of the economy have abruptly come to a standstill.

"We have to be careful that small businesses don't get forgotten", said Jason Pride, chief investment officer of private wealth at Glenmede.

Lower rates and increased asset purchases by the Fed will help ease tight credit markets, but the US government needs to do more to address the impact of the coronavirus, said David Joy, chief market strategist at Ameriprise Financial in Boston.

Equity markets have been whipsawed by the disease, which has now infected nearly 170,000 people and killed more than 6,000 with several countries going into lockdown as Europe becomes the new epicentre of the outbreak.

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