Stock Futures Decline, SP500 Limit Down Treasuries Soar After Fed Move
Fed cuts key rate by 1 percentage point; S&P 500 futures drop
U.S. broadens its travel ban; Spain increases restrictions
The Federal Reserve swept into action on Sunday to save the U.S. economy from the fallout of the coronavirus, slashing its benchmark interest rate by a full percentage point to near zero and promising to boost its bond holdings by at least $700 billion.
In remarks underlining the sense of urgency, Fed Chairman Jerome Powell told a hastily assembled press briefing by telephone that the disruption to lives and businesses meant second quarter U.S. growth would probably be weak and it was hard to know how long the effects would last. That left a clear role for fiscal policy to help cushion the blow.
“The thing that fiscal policy, and really only fiscal policy can do, is reach out directly to affected industries, affected workers, and we’ve seen some of that so that’s an important job,” he said. “We do know that the virus will run its course and that the U.S. economy will resume a normal level of activity. In the meantime, the Fed will continue to use our tools to support the flow of credit.”
Treasuries surged and U.S. equity futures tumbled at the start of another volatile week as investors responded to a rapidly escalating economic hit from the coronavirus and a massive emergency move by the Federal Reserve to ease policy.
Benchmark Treasury yields declined more than 30 basis points. Futures on the S&P 500 Index hit trading limits and fell about 5%, following Friday’s rally for Wall Street stocks. Japanese shares erased losses after the Bank of Japan strengthened its stance on asset buying and said it would take additional easing measures as needed, commenting at a policy meeting brought forward to Monday from later this week. Equities elsewhere across Asia sank.
Wild swings have become an almost daily occurrence as investors assess the efficacy of actions by authorities to contain the coronavirus, which has had a crippling economic impact. China reported Monday that output and retail sales plunged the past two months.
Australian equities fell more than 7%, while the Reserve Bank of Australia said it stands ready to buy bonds, sending yields tumbling. The yen soared after the Fed cut its key interest rate by a full percentage point to near zero and said it will boost its bond holdings by $700 billion. Oil resumed declines.
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