Wall Street tumbled in a volatile session on Tuesday after the Federal Reserve surprised investors with a half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus' impact on the economy.
All three major US stock market indexes dropped more than 3% after the Fed's first emergency rate cut since the 2008 financial crisis.
The rate reduction underscored the Fed's concern about the coronavirus that has spread around the world after emerging late last year in China. It came two weeks ahead of a scheduled policy meeting, where traders had fully priced in a 50 basis point cut.
Stocks had initially jumped more than 1%, but then dropped as traders worried whether pumping more money into financial markets would address the central problem - a drop in business activity as workers and consumers stay home.
"The rate cut underscores the magnitude of the problem that the global economy is facing," said Peter Kenny, founder of Kenny's Commentary LLC and Strategic Board Solutions LLC in New York.
"Normally, markets would welcome a rate cut, and they were hoping for it. Now that we've got it, the question is, what's next?"
The 10-year Treasury yield fell below 1% for the first time ever as nervous investors moved money out of the stock market.
The S&P financials index <.SPSY> tumbled 3.7%, reflecting banks' difficulty in making profits in low-interest rate environments.
Wall Street on Friday had its biggest weekly decline in more than a decade as growing cases of the flu-like virus outside China fanned fears of a global recession.
Earlier on Tuesday, Group of Seven finance ministers and central bank governors pledged appropriate actions to support their economies.
"There is a real fear that things are going to get worse and there is no point in waiting for these fears to be realized," Jim Bianco, president of Bianco Research in Chicago, said of the Fed's rate cut. "You can always undo the rate cut if it fails to materialize."
At 2:28 p.m. ET, the Dow Jones Industrial Average <.DJI> slumped 3.35% at 25,810.05 points, while the S&P 500 <.SPX> lost 3.25% to 2,989.76.
The Nasdaq Composite <.IXIC> dropped 3.54% to 8,635.25.
Ten of the 11 major S&P sectors fell, with the information technology index <.SPLRCT> slumping 4.6%. Apple and Microsoft fell 5% and 4%, respectively.
Healthcare equipment maker Thermo Fisher Scientific , rose 1.3% after it launched a $11.6 billion bid for German genetic testing company Qiagen .
Protective mask maker Alpha Pro Tech jumped 19%.
Declining issues outnumbered advancing ones on the NYSE by a 2.08-to-1 ratio; on Nasdaq, a 3.10-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 30 new lows; the Nasdaq Composite recorded 17 new highs and 154 new lows.