US stocks fell sharply enough Monday to halt trading for the third time in six sessions as the Federal Reserve’s latest interest-rate cut failed to quell Wall Street’s growing coronavirus fears.
The S&P 500 plunged 8.1 percent at the opening bell to 2,490.47, triggering a so-called circuit-breaker that stops trading for 15 minutes after a 7 percent drop. The benchmark index extended its losses after trading resumed, falling as much as 11.4 percent to an intraday low of 2,401.57.
The Dow Jones industrial average dropped 2,250.46 points, or 9.7 percent, before trading stopped and lost as much as 2,798.52, or 12 percent, when the market reopened. The Nasdaq composite plunged 6.1 percent before the halt and slid as much as 11.7 percent afterward.
The massive drops came after the Fed slashed its benchmark interest rate to near zero on Sunday and pledged to buy at least $700 billion in Treasury and mortgage-backed securities — moves that suggest the central bank is bracing for a recession.
“The stock market continues to try and price in how much of a drop in consumer spending and economic activity we are likely to see and for how long that will last,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
The selloff started what’s likely to be another week of volatile trading in the stock markets. The Dow posted its biggest-ever point gain on Friday, but not before falling 20 percent from its recent high into bear-market territory in a week that saw trading halted twice.
Sunday marked the Fed’s second emergency rate cut this month aimed at blunting the economic effects of the coronavirus pandemic, which has led officials around the US to shutter restaurants and bars, ban large public gatherings and urge people to stay inside as much as possible. Those drastic measures have raised concerns about layoffs and a slowdown in consumer spending.
“Economics isn’t a science and if the public stops spending then the economy will go into a recession, and frankly, the market’s steep losses are saying that day isn’t just coming, it is now,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in a Monday note.
Wall Street is still waiting for a fiscal stimulus package to get through Congress now that President Trump has declared a national emergency to enable the federal government to combat the outbreak. The House of Representatives and the White House reached a deal Friday for a bill that includes free coronavirus testing and funding for paid sick leave, but it awaits a vote in a Senate.
The Fed’s moves “reflect the view that a recession is a virtual inevitability,” said Curt Long, chief economist and vice president of research for the National Association of Federally-Insured Credit Unions. “With such a comprehensive stimulus package, all eyes now turn to Congress for the fiscal response.”