Trading halted as stocks open to early plummet despite rate cuts
MANHATTAN (CN) — As regulators took more deliberate steps to rein in the financial impact of the coronavirus, stock markets plummeted Monday morning, hinting at another historic loss.
The Dow Jones Industrial Average fell almost 10% at the opening bell, with the S&P 500 and Nasdaq not far behind though with lesser drops. Trading was almost immediately halted.
The Dow Jones is now hovering around 20,900 points.
The Federal Reserve announced Sunday it would lower the interest rate from as high as 1.25% to as high as 0.25%, their lowest rate since 2015. The move is designed to open up borrowing to corporations and is the Fed’s main tool to combat a recession.
The Fed also said it would purchase $500 billion worth of Treasuries and $200 billion worth of mortgage-backed securities.
During a press conference Sunday minutes after the rate cute, President Trump — who had railed against Federal Reserve Chairman Jerome Powell for weeks — said he was very pleased.
“They did it in one step, and I think that people in the market should be very thrilled,” Trump said during a press conference, later adding: “I’m very happy they did it, and you’ll not hear anything bad about me unless it’s a month or two from now.”
Markets, however, did not react positively to the news.
Overnight stock futures all hit their “limit down” circuit breakers of 5%, halting all further downward trades.
European markets also suffered in early trading, with the Stoxx 600 plummeting more than 8% and Germany’s DAX down more than 8% at one point. Asian markets were not immune, either, with the Nikkei down 2.4% and markets in Shanghai down 3.5%. Australia’s ASX 200 index suffered a massive 9.7% hit to its market.
Last week markets ended on an upswing following the president’s announcement of a national emergency, with the markets all closing about 9% higher than their opening and the Dow Jones closing at about 23,185 points.
Those gains followed a rollercoaster of highs and lows. On Monday, U.S. markets saw their sharpest drop since the 2008 financial crisis, falling 7% in early morning trading that day before a circuit breaker temporarily halted trading.
Trading on Thursday was similarly dire and hit another benchmark: the largest drop in the Dow since 1987’s Black Monday market crash.
Sandwiched in between on Tuesday, the markets recouped some losses, with the Dow closing about 600 points higher than when it opened.
COVID-19, the new strain of coronavirus responsible for a global pandemic, has affected well over 170,000 worldwide and more than 3,700 confirmed in the United States, according to data compiled by Johns Hopkins University.
An estimated 6,500 — at least 69 of whom are in the United States — have died globally from the virus, data show.
But some officials claim the numbers are likely higher. A leading health official in Ohio estimates at least 100,000 people in the state already have coronavirus, while one estimate from the Centers for Disease Control and Prevention estimates 160 million Americans could end up infected over the course of the epidemic.
Over the weekend the CDC, recommended limiting social gatherings to no more than 50 people. Several states, including New York, California and Ohio, have either mandated or recommended that bars and restaurants close or stay open only to provide take-out and delivery service.
Many schools have temporarily shuttered, including the largest in the United States: the New York City public school system.
Despite the bans, some have sworn to defy the calls to isolate. David Clarke Jr., the self-styled “America’s Sheriff,” wrote on Twitter that citizens should demand their restaurants and schools be reopened. “GO INTO THE STREET FOLKS,” he wrote. “STAY IN THE STREETS. END GOVERNEMNT CONTROL OVER OUR LIVES. IF NOT NOW, WHEN? THIS IS AN EXPLOITATION OF A CRISIS.”
Even some government officials have not taken the calls to self-quarantine seriously, with Representative Devin Nunes urging healthy citizens to visit “their local pub.”
Some restaurants have also vowed to buck orders to close. In Washington, D.C., the Hill Restaurant Group — which operates seven bars and restaurants around Capitol Hill — said it would not abide by an order by D.C.’s mayor to limit patrons.
“We understand the gravity of effects that the Corona Virus has or will have on our community especially the hospitality industry,” the Hill Restaurant Group said in a statement. “However, we will not bow down to pressure from the Mayor’s Office or any group for that matter who covertly is attempting to shut us down.”
The government has taken several steps to try to curb the financial pain inflicted by coronavirus, with the House passing legislation to provide free testing and paid sick leave or employees. Another legislative package is in the works, which may include broader tax-relief measures.
In an interview Monday morning on CNBC, Securities and Exchange Commission Chairman Jay Clayton said that “things have been functioning well in our markets the last few weeks,” and stressed that U.S. markets should remain open during the coronavirus outbreak. “People should expect bumps in the road, we are going to deal with them.”
The president’s national-emergency declaration on Friday included several steps, including waiving interest on all student loans held by federal agencies until further notice and purchasing “large quantities” of crude oil for the strategic reserve.
During the press conference Friday, Trump said, “No resource will be spared, nothing whatsoever” in combatting the spread of coronavirus.