BRIEF COMMENT ON THE FED'S "EMERGENCY" RATE CUT (3:00 pm EST)
Jerome Powell and the Fed to the rescue!
In an attempt to limit more economic harm from the COVID-19 epidemic (and to avert more losses on Wall Street), Jerome Powell and the FOMC today delivered a rare emergency interest rate cut of 1/2 a percentage point. It is unusual for the Fed to alter interest rates between their normally scheduled meetings. Because of recent dovish rhetoric from Powell, investors were anticipating a rate cut to be announced at the next FOMC meeting March 17-18 so today's cut surprised Wall Street traders. Oddly, equity markets are not reacting well. Yesterday the markets surged on news of a potential rate cut. Perhaps we are seeing the classic "buy the rumor, sell the news" trading behavior play out here. Or perhaps frightened investors realize that an interest rate cut is not going to stop the coronavirus, and the Fed's emergency cut is exacerbating their fears. At the time of this writing (3 pm EST), the DOW is down over 700 points.
We will have to wait several days to see if the Fed's cut has any significant impact on markets. We are watching for either a significant high or a significant low over the next seven trading days. Stay tuned for updates.
Jerome Powell and the Fed to the rescue!
In an attempt to limit more economic harm from the COVID-19 epidemic (and to avert more losses on Wall Street), Jerome Powell and the FOMC today delivered a rare emergency interest rate cut of 1/2 a percentage point. It is unusual for the Fed to alter interest rates between their normally scheduled meetings. Because of recent dovish rhetoric from Powell, investors were anticipating a rate cut to be announced at the next FOMC meeting March 17-18 so today's cut surprised Wall Street traders. Oddly, equity markets are not reacting well. Yesterday the markets surged on news of a potential rate cut. Perhaps we are seeing the classic "buy the rumor, sell the news" trading behavior play out here. Or perhaps frightened investors realize that an interest rate cut is not going to stop the coronavirus, and the Fed's emergency cut is exacerbating their fears. At the time of this writing (3 pm EST), the DOW is down over 700 points.
We will have to wait several days to see if the Fed's cut has any significant impact on markets. We are watching for either a significant high or a significant low over the next seven trading days. Stay tuned for updates.
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