The stomach-turning ride on financial markets continued on March 16, with Wall Street suffering its biggest drop since the coronavirus crisis began, as the central bank stimulus failed to ease investor anxiety over the outbreak’s impact on the U.S. economy.
In volatile trading, the blue-chip Dow Jones Industrial Average fell 2,997.1 points, or 12.93 percent, to 20,188.52, its second-worst points decline ever.
Other Wall Street hallmarks also suffered sharp losses. The S&P 500 fell 324.89 points, or 11.98 percent, to 2,386.13—its lowest point since the 2008 financial crisis. The Nasdaq Composite had its worst day ever by dropping 970.28 points, or 12.32 percent, to 6,904.59.
Wall Street’s fear gauge, the VIX, or volatility index, surged to its highest level in history, jumping by about 44 percent in a single session to close above 82. The VIX typically spikes during selling or buying frenzies.
Safe-haven government paper saw refuge-seeking inflows, with the benchmark 10-year U.S. Treasury note falling by more than 26 percent to a yield of 0.725 percent, according to TradingView data.
Jeffrey Kleintop, chief global investment strategist at Charles Schwab, told The Telegraph: “It’s a market adrift with nothing to hold on to. There’s nothing that can really give us a sense of when the full extent of the virus’ impact will be known.”
The rout in stocks came even as the Federal Reserve slashed its rates to near zero on March 15 and announced a range of financial crisis management measures, including $700 billion in quantitative easing.
The Fed action was joined by other central banks, which also cut rates and announced stimulus measures. The moves were reminiscent of the sweeping steps taken more than a decade ago to staunch a meltdown of the global financial system.
President Donald Trump said he was pleased with the Fed’s announcement, saying, “I think that people in the markets should be very thrilled.”
But the Fed’s move failed to soothe investor anxiety, with stock futures plummeting after the announcement in overnight trading and triggering a “limit down” circuit breaker.
All three major stock market futures exchanges—the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 futures—hit their downside limits in overnight trading, predicting March 16’s market rout.
Investors worried that the central bank actions may be insufficient for companies facing a sharp slide in demand.
“Sunday’s policy measures communicated pure panic, so the markets are rightfully panicking,” said Allen Sukholitsky, chief macro strategist at Xallarap Advisory, in an emailed statement to The Epoch Times, adding that for some time he has been warning investors to expect weaker growth, lower rates, and turbulent markets.
“Unfortunately, that time has arrived,” he said.
The big downside moves in risk assets came in spite of the Fed’s massive campaign to stimulate the economy in the face of the coronavirus slowdown and to prevent broader financial contagion.
Vowing to use the “full range of tools” to support the flow of credit to households and businesses, the Fed announced a broad range of crisis measures March 15, including ones relating to the discount window, intraday credit, bank capital, and liquidity buffers, as well as reserve requirements.
The central bank is also coordinating its response internationally, including by activating dollar swap lines with five other central banks to prevent a global dollar-denominated liquidity crunch.
The Fed already cut interest rates by half a percentage point on March 3 at an emergency meeting—the first rate cut outside of a regularly scheduled policy meeting since the financial crisis in 2008.
Fed policymakers weren’t due to hold their next interest-rate setting meeting until March 17–18.