US Market tumbles after Fed delivers emergency rate cut

The US equity market finished volatile trading session steep lower on Tuesday, 03 March 2020, as a surprise inter-meeting interest-rate cut from the Federal Reserve failed to restore investors confidence in a market that has been rocked by worries about the spread of coronavirus world-wide and its impact on the global economy. At closing bell, the Dow Jones Industrial Average stumbled 785.91 points, or 2.9%, to 25,917.41. Meanwhile, the S&P 500 fell 86.86 points, or 2.8%, to 3,003.37. The Nasdaq Composite Index retreated 268.07 points, or 3%, to end at 8,684.09.

The fall in US market came as investors reacted skeptically to the Federal Reserve's surprise interest rate cuts to boost the US economy. The Federal Reserve announced a surprise decision to cut interest rates by 50 basis points to 1 to 1-1/4%. In an accompanying statement, the Fed said the fundamentals of the U.S. economy remain strong but noted the coronavirus poses evolving risks to economic activity. The central bank added that it is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.

It was the Federal Reserve's first emergency rate cut since the 2008 financial crisis, underscoring how grave the central bank views the fast-evolving situation. The US central bank cut rates three times in 2019 and has since held fire amid signs of improving growth after a Phase-1 trade deal between the United States and China.

Earlier in the day, Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin led a conference call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus. In the statement released following the call, the G7 finance chiefs reaffirmed their commitment to use "all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."

The magnitude of the COVID-19 outbreak and its effect on the economy and supply chains remain the biggest questions for investors. The Paris-based Organization for Economic Cooperation and Development on Monday forecast that the global economy would grow by 2.4% in its best case scenario, compared with 2.9% expansion projected before the viral outbreak. The OECD urged governments to act swiftly and forcefully to boost the world economy.

In Commodity news: Gold for April delivery jumped 2.5% to settle at $1,644.40 an ounce, while the price of a barrel of oil gained 0.9%, to end at $47.18 a barrel on the New York Mercantile Exchange.

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