Wall Street dropped on Tuesday in a volatile session after the U.S. Federal Reserve surprised investors with a half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus’ impact on the economy. All three major U.S. stock market indexes dropped more than 3% after the Fed’s first emergency rate cut since the 2008 financial crisis.
The rate reduction underscored the Fed’s concern about the coronavirus that has spread around the world after emerging late last year in China. It came two weeks ahead of a scheduled policy meeting, where traders had fully priced in a 50 basis point cut.
“The rate cut underscores the magnitude of the problem that the global economy is facing,” said Peter Kenny, founder of Kenny’s Commentary LLC and Strategic Board Solutions LLC in New York. “Normally, markets would welcome a rate cut, and they were hoping for it. Now that we’ve got it, the question is, what’s next?”
Ten of the 11 major S&P sectors fell, with the information technology index slumping 4.6%. Apple and Microsoft fell 5% and 4%, respectively.
MacDailyNews Take: In a nutshell, the widely-expected Federal Reserve’s rate cut came a bit early, spooking the markets. The market doesn’t like surprises of any kind.