Staying Fit
The Dow Jones Industrial Average dropped 785 points and bond prices surged after an emergency interest-rate cut by the Federal Reserve failed to reassure markets racked by worries that a fast-spreading virus outbreak could lead to a recession.
The Dow industrials lost 2.9 percent to 25,914. The Dow had surged 5 percent a day earlier on hopes for a broader set of stimulus measures. The S&P 500 index fell 2.8 percent and is now 11 percent below the record high it set two weeks ago. The Nasdaq fell 3 percent. The yield on the 10-year Treasury note briefly dropped below 1 percent for the first time.
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The Fed's rate cut was the first outside of a regularly scheduled meeting since the 2008 financial crisis. The central bank cut the target of its key fed funds rate by a half of a percent, to between 1 percent and 1.5 percent, the largest cut since December 2008.
Stocks had rallied briefly in the morning following the Fed's surprise move, but it took just 15 minutes for the gains to evaporate. While the cut helped raise confidence for some investors — and gave exactly what some had been calling for — Federal Reserve Chairman Jerome Powell acknowledged that the ultimate solution to the health crisis will come from health experts and others, not central banks.
The Fed has a long history of coming to the market's rescue with lower rates and other stimulus measures, which has helped this bull market in U.S. stocks become the longest in history. Some analysts said the Fed's latest cut should provide some more confidence. “Confidence in markets is crucial,” said Quincy Krosby, chief market strategist at Prudential Financial. “Without confidence, you don't have a market."