Benchmarks ended in the red on Tuesday as investors remained concern about the coronavirus outbreak, and subsequently it’s impact on corporate profits and the domestic economy. Meanwhile, Fed’s emergency rate cut to stimulate the economy failed to curb the day’s selling.
The Dow Jones Industrial Average (DJI) fell 785.91 points, or 2.9% to close at 25,917.41 and the S&P 500 shed 86.86 points, or 2.8% to close at 3,003.37. While, the Nasdaq Composite Index closed at 8,684.09, retreating 268.07 points, or 3%. The fear-gauge CBOE Volatility Index (VIX) decreased 11.1% to close at 36.82. Declining issues outnumbered advancing ones for a 2.08-to-1 ratio on the NYSE and a 3.10-to-1 ratio on the Nasdaq favored decliners.
How Did the Benchmarks Perform?
Ten out of 11 major sectors of the S&P 500 ended in the negative territory on Tuesday. Apple Inc. (AAPL - Free Report) and Microsoft Corporation’s (MSFT - Free Report) drop of 3.2% and 4.8%, respectively, weighed on the information technology index that sledded 4.6%. Microsoft sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, protective mask maker, Alpha Pro Tech, Ltd. was one of the major gainers, jumping 19.9%. Overall, the S&P index recorded two new 52-week highs and 30 new lows. On the other hand, Nasdaq recorded 17 new highs and 154 new lows.
Fed Cuts Interest Rate by Half a Percentage Point
On Tuesday, the Federal Reserve announced a 50-basis point rate cut to 1-1.25%, before the scheduled meeting on Mar 18. Fed’s action was based on the economic impact of coronavirus epidemic that lead to sharp selloff in U.S. equities, last week. In fact, this rate cut happens to be the Fed’s first emergency rate cut since the 2008 financial crisis.
However, the announcement only cheered up investors momentarily. Investors worried whether monetary easing would mitigate the demand-supply disruption caused by coronavirus. With workers and consumers remaining indoors due to quarantine and fears of infection spreading there has been a significant drop in business activities.
This virus driven selloff compelled the 10-year Treasury yield to drop below 1% for the first time ever. Eventually, shares of banks also dropped, as investors grew concerned about their profitability in a low-interest rate environment.
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