New York
Interest rate cuts won’t cure the coronavirus but investors are still hoping the Federal Reserve can take some actions to help soothe the roiled stock market.
Only days after a rare emergency rate cut, the Fed is expected at its regularly scheduled meeting next Wednesday to slash its target rate another 75 to 100 basis points to near zero, according to the CME FedWatch website. The U.S. central bank also may announce measures to ensure sufficient liquidity and lending or to purchase assets by restarting the quantitative easing that the Fed employed during the financial crisis.
A move like that could offer some comfort to investors after Thursday’s bruising decline, in which the Dow Jones Industrial Average notched its biggest one-day drop since 1987. “If the market feels the Fed is responding appropriately and is helping investors and consumers, and feel like somebody is in charge, maybe that can help settle things down,” said Willie Delwiche, investment strategist at Baird in Milwaukee.
Indeed, stocks briefly pared losses on Thursday after the New York Fed said on it will introduce $1.5 trillion in new repo operations this week and start purchasing a range of maturities as part of its monthly Treasury purchases. But the rebound was short lived and the S&P 500 ended down 9.5% on the day.
Expectations for a more significant rate cut have increased this week as the market decline deepened over fears about the economic fallout of the coronavirus crisis. As of Thursday, the S&P 500 had fallen more than 26% from its Feb. 19 record closing high, including a drop of more than 16% so far for the week. Traders currently expect the Fed to cut its target rate from its current range of 1-1.25% to as low as 0-0.25%. Some market watchers wonder if the central bank could even eventually go into negative territory.—Reuters
