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Market Scoffs at Emergency Rate Cut
03-Mar-20 16:20 ET
Dow -785.91 at 25917.41, Nasdaq -268.07 at 8684.09, S&P -86.86 at 3003.37

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The stock market endured another volatile day that had the S&P 500 (-2.8%) traverse a 160-point range before settling back below its 200-day moving average (3049).

Yesterday's broad-based rally was followed by more gains in most Asian equity markets while central banks from the region lined up to offer support. The Bank of Japan announced readiness to purchase another JPY500 bln worth of JGBs while the Reserve Bank of Australia cut its cash rate to a record low of 0.50% and signaled willingness to go back to the easing well once again.

Stocks began the cash session on a modestly lower note with the early weakness blamed on a joint statement from G7 finance ministers and central bankers, which did not call for immediate easing measures. Strikingly, a mid-morning announcement of an emergency fed funds rate cut invited a 76-point spike in the S&P 500, which vanished in just over an hour.

The Federal Reserve acquiesced to the bond market's recent screams for a sharp rate cut, slashing the fed funds rate range by 50 basis points to 1.00-1.25%. The news was met with a brief dip in the bond market, followed by a vicious rally that lifted the 10-yr note and the long bond to fresh record highs, pressuring their yields to fresh record lows of 0.908% and 1.508%, respectively. Late afternoon trade saw some backtracking from highs, which left the 10-yr yield down eight basis points for the day, at 1.01%.

All eleven sectors ended the day in negative territory, with six sectors losing 2.0% or more. Technology (-3.8%), financials (-3.7%), and communication services (-3.3%) finished at the bottom of the leaderboard while lightly weighted real estate (-0.1%) and materials (-0.8%) outperformed throughout the day.

Travel-related stocks remained among the biggest movers as the number of new coronavirus cases continued mounting in the U.S. and elsewhere. Airlines tried staging a morning recovery, but they ended among the biggest laggards with American Airlines (AAL 17.85, -1.01, -5.4%) and United Airlines (UAL 58.29, -2.97, -4.9%) revisiting yesterday's lows. Alphabet (GOOG 1341.39, -47.72, -3.4%) reportedly cancelled its I/O conference and asked employees to avoid international travel.

Retailers Kohl's (KSS 37.43, -1.01, -2.6%) and Target (TGT 105.84, -3.22, -3.0%) exceeded quarterly earnings expectations, but could not avoid sharing the broader market's fate.

Newmont Corporation (NEM 49.73, +2.90, +6.2%) was the top performer in the S&P 500 as gold surged 3.1% to $1643.60/ozt. In other commodities, crude oil climbed $0.44, or 0.9%, to $47.23/bbl, recording its second consecutive advance. An OPEC+ panel recommended reducing oil output by 600,000 barrels per day in the second quarter, according to Reuters.

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index (prior 1.5%), February ADP Employment Change (Briefing.com consensus 165,000; prior 291,000) at 8:15 ET, February ISM Non-Manufacturing Index (Briefing.com consensus 54.8; prior 55.5) at 10:00 ET, and the March Fed Beige Book at 14:00 ET.

Nasdaq Composite -3.2% YTD
S&P 500 -7.0% YTD
Dow Jones Industrial Average -9.2% YTD
Russell 2000 -10.9% YTD

Market Snapshot
Dow 25917.41 -785.91 (-2.94%)
Nasdaq 8684.09 -268.07 (-2.99%)
SP 500 3003.37 -86.86 (-2.81%)
10-yr Note +24/32 1.010
NYSE Adv 922 Dec 1765 Vol 1.65 bln
Nasdaq Adv 960 Dec 2241 Vol 4.29 bln

Industry Watch
Strong: Industrials, Real Estate
Weak: Financials, Energy, Technology, Communication Services

Moving the Market

Federal Reserve makes emergency 50 bps rate cut but stocks can't hold their gains

G7 finance ministers and central bankers issue joint statement, pledging to support growth