Wall Street’s slide deepened March 23 as an unprecedented move by the U.S. Federal Reserve to shore up credit across the economy proved insufficient to soothe investors’ fears about the swiftly spreading CCP virus.
After recently cutting interest rates to near zero, the Fed will now lend against student loans and credit card loans, as well as back the purchase of corporate bonds and make direct loans to companies.
With the addition of Maryland, Indiana, Michigan, and Massachusetts, 13 out of 50 U.S. states have imposed restrictions on people’s movements to curtail the CCP virus, putting the country on a track similar to those of the most devastated European countries, such as Italy and Spain.
The threat posed by those actions foreshadowed a near-halt in economic activity and more pain for U.S. equities, and prompted several analysts to slash their growth forecasts.
“What the Fed did is important because it does help in the credit markets. But it’s not enough from an equity market perspective,” said Willie Delwiche, investment strategist at Robert W. Baird in Milwaukee. “What we now need is leadership out of Congress to pass some sort of stimulus bill, because what the Fed’s doing is relieving some problems, but it doesn’t do enough to solve to solve what’s out there.”
Investors had hoped the U.S. Senate would clear a far-reaching coronavirus economic stimulus package over the weekend.
But Democrats and Republicans failed to reach agreement and on March 23, the $2 trillion package failed to advance in the Senate as Democrats said it contained too little money for states and hospitals and not enough restrictions on a fund to help big businesses.
Goldman Sachs expects an outright contraction in global real gross domestic product in 2020 on the back of a 24 percent plunge in U.S. real GDP in the second quarter: 2-1/2 times as large as the previous postwar record.
The S&P 500 has experienced a $9 trillion wipeout to its value since the benchmark index hit a record high last month. A rush for safe-haven assets like government bonds caused U.S. Treasury yields to fall on March 23.
The S&P 500 is down about 34 percent from its February record high, its lowest level since fears of the CCP virus swept across Wall Street.
Volume on U.S. exchanges was 15.7 billion shares, just shy of the 15.8 billion-share average for the full session over the last 20 trading days.
“What we really need to turn things around is a sense of closure—not on the virus, but on the response to the virus,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco. “Once the market sees that, I think the market will rebound considerably.”
The S&P energy index slumped about 6.7 percent, the most among the 11 major sectors, tracking a plunge in oil prices.
The S&P consumer discretionary index rose about 0.4 percent, the only sector index in positive territory.
Declining issues outnumbered advancing ones on the NYSE by a 3.18-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 224 new lows; the Nasdaq Composite recorded two new highs and 525 new lows.
