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Wall Street plunges as Federal Reserve fails to allay coronavirus worries

More states under lockdown raise fears of hit to economy


Wall Street
A trader reacts as he works on the floor of the New York Stock Exchange (NYSE) in New York City. Reuters

Wall Street slipped on Monday as the still rapidly spreading forced more US states into lockdown, eclipsing optimism from an unprecedented round of policy easing by the Federal Reserve.

After cutting interest rates to near zero and offering to purchase more Treasury bonds and mortgage-backed securities last week, the central bank now decided to lend against student loans and credit card loans as well as buy bonds of larger employers.

The unprecedented moves briefly lifted the US stock index futures more than 3%, but the mounting death toll from Covid-19 and growing evidence of the economic damage to Corporate America quickly sent the main indexes back into the red.

"They are throwing everything in the kitchen sink," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"(But) these efforts alone are not going to do anything against the virus - that's the big problem. It will help but we still need fiscal stimulus and we need a lot of it. We need it geared towards the people who are going to be really suffering." Investors had hoped the US Senate would clear a $1 trillion-plus stimulus package over the weekend, but Democrats and Republicans were still scrambling to come to an agreement.

Ohio, Louisiana and Delaware have now joined New York and California in asking people to stay home, foreshadowing a near halt in economic activity and more pain for US equities, which have already lost more than $9 trillion in value in the biggest selloff since the financial crisis.

Goldman Sachs expects an outright contraction in global real GDP in 2020 on the back of a 24% plunge in US real GDP in the second quarter: two-and-a-half times as large as the previous post-war record.

Boeing was the biggest gainer on the Dow, rising 6.1%, as shareholders received an unusual piece of good news from Goldman Sachs upgrading its rating on the planemaker to "buy", expecting the company to recover from its recent woes.

At 9:57 a.m. ET the Industrial Average was down 217.61 points, or 1.13%, at 18,956.37, the 500 was down 28.20 points, or 1.22%, at 2,276.72 and the Nasdaq Composite was down 3.01 points, or 0.04%, at 6,876.51.

Danaher Corp jumped 4.4%, as its molecular diagnostics company received the US Food and Drug Administration approval for the first rapid diagnostic test.

Declining issues outnumbered advancers more than 3-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The index recorded no new 52-week high and 165 new lows, while the Nasdaq recorded two new highs and 248 new lows.

First Published: Mon, March 23 2020. 21:40 IST