Why Stocks Are Tumbling Despite the Fed’s Surprise Rate Cut

Monetary policy has limited ability to counter the supply shock investors fear as coronavirus continues to spread

by William Watts
Market Watch

Stock-market investors weren’t taking comfort Tuesday in the Federal Reserve’s decision to cut its benchmark rate by half a percentage point in a rare, inter-meeting move aimed at cushioning the economy from disruptions from the global spread of COVID-19.

[…] Stocks initially jumped after the announcement, but gains proved short-lived. The Dow Jones Industrial Average DJIA, -2.59% was down nearly 950 points, or 3.5%, while the S&P 500 SPX, -2.43% and Nasdaq Composite COMP, -2.68% also fell more than 3%. Stocks had bounced back sharply on Monday, taking back a chunk of the previous week’s steep losses that were tied to growing fears the spread of the coronavirus would deliver a global economic shock.

Meanwhile, investors piled into haven assets, including Treasurys, driving the yield on the benchmark 10-year note TMUBMUSD10Y, -12.64% below 1% for the first time ever. Yields fall as debt prices rise.

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