NEW YORK - Interest rate cuts won’t cure the coronavirus but investors are still hoping the Federal Reserve can take some actions to help soothe the roiled stock market.
A move like that could offer some comfort to investors after Thursday’s bruising decline, in which the Dow Jones Industrial Average notched its biggest one-day drop since 1987. Expectations for a more significant rate cut have increased this week as the market decline deepened over fears about the economic fallout of the coronavirus crisis. As of Thursday, the S&P 500 had fallen more than 26% from its Feb. 19 record closing high, including a drop of more than 16% so far for the week.
Markets will respond “poorly” should the Fed fail to cut rates, said Nela Richardson, investment strategist at Edward Jones, but added that “the risk of aggressive action now is that you sacrifice valuable ammunition in the short term to boost short-term market sentiment.” Boston Fed President Eric Rosengren said last week that the central bank needed “to think broadly about what tools we would use” if the virus continues to weigh, and that it “could be important” to let the Fed buy assets other than U.S. Treasury and mortgage-backed securities.
FILE PHOTO: Traders work on the floor of the New York Stock Exchange near the close of trading in New York, U.S., March 12, 2020. REUTERS/Brendan McDermid
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