The joy of a surprising US rate cut to fight the consequences of the
Coronavirus epidemic quickly vanished on the New York stock exchanges. Previously, hopes of immediate economic stimulus from the large industrialized countries had dampened the buying mood.
The Volatility on Wall Street is back – the Dow Jones index moved in a daily range of just under 1,400 points, A surprising interest rate cut by the US Federal Reserve only briefly lifted the stock higher. In the end, levies dominated the US stock market, but the market closed above the daily low. For the first time since 2008 financial crisis the Fed cut interest rates outside of a regular meeting – by 50 basis points. This prompted skeptics who warned of the state of the US economy under the sign of Corona. “What do the Fed actors know that we don’t know?” Asked portfolio manager Kevin Preloger of Perkins Investment.
Federal Reserve President Jerome Powell fueled these concerns. He spoke of Risks to the economic outlook and at the same time emphasized the Limits of monetary policy against the backdrop of the corona epidemic. Many stock marketers did not believe that the economic downturn due to the epidemic could be stemmed using monetary policy. “Monetary policy is not well positioned to deal with delivery shocks,” said chief economist Joseph Brusuelas of RSM US. He lowered his US growth forecast for the first quarter. “Rate cuts help build investor confidence, but they won’t help sick or quarantined people get back to work,” added China Renaissance Securities market strategist Bruce Pang.
The Dow Jones index lost 2.9 percent on 25,917 points, S&P-500 and Nasdaq Composite made 2.8 and 3.0 percent, respectively. The 1,025 (Monday: 2,474) winners on the NYSE were matched by 1,955 (546) losers. 52 (31) shares closed unchanged. The G7 finance ministers and central bank heads caused disappointment. Because they could not bring themselves to a concerted action that stock marketers had hoped for.
US bond prices soared with the Fed’s rate hike, the yield on ten-year US government bonds plummeted to an all-time low and was below the 1 percent barrier for the first time. In late trading, the ten-year yield plummeted 16 basis points to 1.01 percent. At the short end of the market, which is more sensitive to interest rate cuts, the drop in yields was even more severe. Traders spoke of panic buying – also against the backdrop of an impending economic downturn.
The gold Price posted the highest daily premium since June 2019. The price for the troy ounce rose by 3.4 percent $ 1,643, Falling interest rates, rising inflation and an economic downturn are the natural allies of the precious metal, it said.
The oil prices came back from their daily highs with the lack of concerted action by the central banks. The Fed’s rate cut was seen more as an alarm signal that the economy and therefore demand are worse off than expected. Crude oil prices were somewhat supported by speculation, the Petroleum cartel Opec Together with other oil producing countries, additional production cuts will be decided in the course of the week. The price of a barrel of US grade WTI rose by 0.9 percent $ 47.18after hitting $ 48.66 a day high. North Sea oil the Brent variety lost 0.1 percent $ 51.86,
On the foreign exchange market, the ICE dollar index lost 0.3 percent with the key rate cut in the USA. The euro rose to $ 1.1214 during the day’s highs – most recently the common currency cost $ 1.1180.
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Under the single values Apple lost 3.2 percent, The technology company had agreed to pay up to $ 500 million to settle a class action lawsuit related to its iPhones. The plaintiffs accused the technology company of slowing the performance of older iPhones to encourage customers to buy new models.
The shares of Microchip Technology fell 6.1 percent. The company reported weak demand in Asia, particularly China, due to the epidemic. Therefore, sales should stagnate in the fourth quarter. So far, Microchip had expected growth of 2 to 9 percent compared to the previous quarter. The company received the earnings forecast per share. Target gave 3 percent in business. The retailer disappointed in terms of sales in the fourth quarter – despite good earnings figures.
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