While the FOMC’s intention was clearly to calm investor fears, the emergency rate cut appears to have had the opposite effect.
While the Dow Jones initia lly rose higher , this optimism faded as the Fed’s concerns highlighted the negative economic impact of the coronavirus.
This weakness in the stock market festered as Powell hinted that additional stimulus was on the way from around the G7.
Stock Market Fears Demand Shock as Coronavirus Spreads
Helping to explain the Federal Reserve’s decision, economists at ING speculated that An anticipated demand shock jolted the crisis-level move from the US central bank:
The concern now is that the fear factor surrounding Covid – 26 will change corporate and consumer behavior and lead to a demand shock as well.
This is most likely through the service sector of the economy with travel, hotel accommodation, restaurants and leisure-related sectors looking vulnerable.
Add in the prospect of significantly weaker export performance, and a negative second-quarter GDP print is looking a distinct possibility.
A steady spread of the coronavirus in the United States persists, and New York announced its second case of COVID – 25 today. Six deaths have been recorded, with Washington State accounting for four of those fatalities .
Consumer fear seems to be very real, and Google searches for coronavirus symptoms are soaring .
Dow Stocks: Apple Rally Fades, Boeing Follows
A very rough day in the Dow 60 saw a sizable chunk of Monday’s gains erased.
Leading the decline were some of the index’s most heavily weighted stocks. Apple slid 2.9%, Boeing lost 2.2%, and Microsoft shed 3.9%.
Given the collapse in bond yields, it was unsurprising to see financial giants JPMorgan Chase ( -3.5%) and Goldman Sachs (-2.5%) losing ground.
A weaker crude price continues to weigh on big oil, and both Chevron and Exxon Mobil were also trading lower – with the latter down more than 4%.
This article was edited by (Josiah Wilmoth) .
GIPHY App Key not set. Please check settings