Dow dives 600 points even after new Fed stimulus, traders await Senate resolution on coronavirus bill
- Major US stock indexes slid on Monday, even after the Federal Reserve announced plans to further support economic activity amid the growing coronavirus threat.
- The central bank's new programs include unlimited bond purchases and facilities to keep consumers and small businesses afloat as the coronavirus drastically slows spending activity.
- Traders remain uncertain following the Senate's failure to pass a fiscal stimulus package.
- Monday's losses follow a limit-down trading halt for US equity futures on Sunday evening.
- Watch major indices update live here.
Major US stock indexes slid on Monday, even after the Federal Reserve revealed plans to bolster the economy.
The Fed pledged to keep both Main Street and Wall Street afloat as the coronavirus hampers economic activity. The central bank lifted its bond-buying limit and created three facilities to strengthen lending to large employers and individual consumers.
The Monday open for US indexes followed sharp selling when futures trading commenced on Sunday evening. Those contracts triggered a limit down trading halt after the Senate failed to agree on a trillion-dollar fiscal stimulus package.
US futures erased losses and traded in positive territory briefly in the last hour of premarket trading, immediatley following the Fed announcement.
Here's where the major US indices stood shortly after the 9:30 a.m. ET market open on Monday:
- S&P 500: 2,233.71, down 3.1%
- Dow Jones industrial average: 18,564.80, down 3.2% (609 points)
- Nasdaq 100: 6,755.24, down 1.7%
"While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate," the Fed said.
The Fed's newest plans place even more importance on Congress's next move, Ian Shepherdson, chief economist at Pantheon Macroeconomics, told Markets Insider in an email. The firm's base case sees the economy rebounding from the coronavirus slump as early as the third quarter if infections slow and Congress passes a $2 trillion fiscal stimulus package.
The economy cannot rely solely on the Fed but its latest actions should prop up US businesses until additional aid arrives, the economist said.
"This is an all-out effort to ensure that the business sector can continue to exist even as economic activity temporarily collapses," Shepherdson said. "The Fed is now effectively the direct lender of last resort to the real economy, not just the financial system."
The announcement also hit Treasury yields Monday, pushing the 10-year down to roughly 0.7% and the 30-year yield to 1.34%. Yields fall as bond prices increase, and the fresh expectation of Fed purchases to come likely boosted bill prices.
The S&P 500 declined nearly 5% on Friday as investors continued to wait for fiscal relief from the White House and Congress. The drop completed US stocks' worst week since 2008.
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