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Stocks - S&P Shrugs off Fed Cut, Sinks led by Slump in Financials, Tech

Stock MarketsMar 03, 2020 04:15PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P fell sharply on Tuesday as the Federal Reserve rate cut was largely shrugged off amid an ongoing spread of the coronavirus in the U.S.

The S&P 500 slumped 2.8%, the Nasdaq Composite lost 3% and the Dow Jones Industrial Average fell 2.95%, or 789 points.

Washington state authorities now report nine deaths from Covid-19, while North Carolina reported its first case and New York reported its second.

The update on the spread of the virus in the U.S. arrived hours after the Federal Reserve cut its benchmark rate by half a point to a 1%-to-1.25% range.

But after brief rally, stocks reversed and followed Treasury yields lower.

"A move of this size, at or before the committee's next meeting on March 18, was already fully priced in financial markets after a statement from Chair Powell late last week suggested the Fed was ready and willing to take action," RBC said.

In afternoon trading, bonds saw a huge rallying, pushiing yields to unprecedented lows. The 10-Year Treasury yield fell below 1% for the first time ever to a low of 0.906% before paring some losses.

JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), and Bank of America (NYSE:BAC) fell sharply, with the latter down more than 5%.

Lower interest rates are typically a headwind for banks, weighing on net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to their lenders.

Technology stocks also led the move lower in the broader market, paced by a slump in chip stocks, which entered correction territory amid fears a slowdown in global growth could weigh on demand.

Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC) and Micron (NASDAQ:MU) ended the day in the red.

Elsewhere in tech, Alphabet (NASDAQ:GOOGL) canceled its annua Google developerl conference and also confirmed it has halted international employee travel amid concerns over the coronavirus impact.

Energy stocks, meanwhile, shrugged off a 1% rise in oil prices to close about 3% lower.

Homebuilders bucked the trend, however, as investors bet the Federal Reserve will continue to cut rates, pushing mortgage rates lower and boosting home demand.

KB Home (NYSE:KBH), Lennar (NYSE:LEN) and PulteGroup (NYSE:PHM) were up more than 1% today.

Stocks - S&P Shrugs off Fed Cut, Sinks led by Slump in Financials, Tech
 

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Comments (11)
Dietmar Stahl
Dietmar Stahl Mar 04, 2020 2:55AM ET
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We got the italian strain in US now too. Death rate is 25-30%. It's much stronger then the Chinese one.
Nicolaas Ferreira
Nicolaas Ferreira Mar 04, 2020 1:22AM ET
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By cutting rates, the FED actually displays a economic crises and that they are concerned about future growth. In other words, the FED admits recession may be on the horizon.
Gary Friauf
Gary Friauf Mar 03, 2020 9:11PM ET
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Explain why for the past year all we have been hearing about is we need to cut rates. Now they get an extra cut thrown in and the market sells off. This is why the average retail investor like myself have no chance in the market.
John Mars
John Mars Mar 03, 2020 9:11PM ET
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Because rate cuts don't cure a pandemic.
Bronson Naab
Bronson Naab Mar 03, 2020 9:11PM ET
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Rate cuts do also not fix bad trade policy from the current administration.
rob finch
rob finch Mar 03, 2020 9:11PM ET
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But and hold.
Pwr Strk
Pwr Strk Mar 03, 2020 8:11PM ET
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House builders should not get that excited about rates... if the general economy is slowing, there will be less demand for houses and therefore they should actually lower prices instead of increasing them. Inflation in real state is senseless with the current state of economic affairs.
Chris Sundo
Chris Sundo Mar 03, 2020 6:41PM ET
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.. and 3rd last, not least, the indices futures (spx and ndx) are showing a bullish double bottom: Let's cross our telomeres for a gap-up LOL
Chris Sundo
Chris Sundo Mar 03, 2020 6:23PM ET
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.. and 2nd last, not least, most 30min charts show that we had a fibonacci .618 retrace_low today, measured from today's high to feb 28th low, meaning also that the pullback is more like a bull flag, and the related average are in bullish mode, and that the price action looks like a somewhat completed cup  and handle to me. Could be all CONFIRMATION BIAS though, LOL.
Jason Patcher
Jason Patcher Mar 03, 2020 6:23PM ET
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the problem is trying to use technical analysis for political action. last two days were caused by stimulus hope and selling the news. i see head and shoulders going back to September, but it's all up in the air right now. anything can happen
Chris Sundo
Chris Sundo Mar 03, 2020 5:55PM ET
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.. last, not least, the margin interest should be lower by half a percent, and we are right into spring right now where people are happy to open their wallet and come out of their winter/hibernation dens to enjoy the sunshine, which is all very supportive signs of an upside. If the gloom and doom media could see that instead of fabricating dooms-day hysteria then we could scoop up low values and move jollily forward :)
Chris Sundo
Chris Sundo Mar 03, 2020 5:47PM ET
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Doctor COPPER is making a double bottom with a higher low. Its 20dma is curling up. Indicator Curves that make buy signals just made a buy signal for copper. We went up 2 real fast days just now with one pullback today, so tomorrow we could put in another turn around day and Stephen Bigalow might call it a 'Doji sandwich' which is bullish in nature. Then there is this morning's spike up top. Spike up's usually get matched. If our governments wanted to be more positive and transparent about the virus then all they would have to do is INFORM AND EDUCATE RATHER THAN SCARE people with twisted stories by the press. And Dave Tran quoted the CDC which ".. has estimated (based on weekly influenza surveillance data) that at least 12,000 people have died from influenza between Oct. 1, 2019, through Feb. 1, 2020, or a thousand times multiple from the cv19. It beats me why the market has to selloff by 6Trillion$ when all it takes to avoid death is a mask to be worn, hand-washing, and good sleep.
Chris Sundo
Chris Sundo Mar 03, 2020 5:47PM ET
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.. by those who do not yet have 'PRE-EXISTING CONDITIONS'. Those who already have pre-existing conditions can still use these techniques and better their chances. -- Let's remember: the doc can't heal you! You have to heal yourself, so let's k..k a.. and git moving :) onto the road for better health. Cheers. -- In any case: any1 who thinks they won't get cv19 because they're young and invincible: Think again: you could become a NON-SYMPTOMATIC CARRIER and you could infect those elderly around you who depend on you !!
Dave Tran
Dave Tran Mar 03, 2020 5:23PM ET
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Flu season is hitting its stride right now in the US. So far, the CDC has estimated (based on weekly influenza surveillance data) that at least 12,000 people have died from influenza between Oct. 1, 2019 through Feb. 1, 2020, and the number of deaths may be as high as 30,000. The CDC also estimates that up to 31 million Americans have caught the flu this season, with 210,000 to 370,000 flu sufferers hospitalized because of the virus.
Christos Rammos
Christos Rammos Mar 03, 2020 4:56PM ET
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The oldest 98 year Chinese patient from corona virus self cured today.
Andris Štrāls
Andris Štrāls Mar 03, 2020 4:32PM ET
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So what is the plan now? How the stocks will go up in future? With no demand from consumers what else is there? lower the rate to 0 - can it help to *******virus? Looks like the market is going to be killed off to 50% and that would be gentle.
Peter BullMarket
Peter BullMarket Mar 03, 2020 4:32PM ET
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You can expect cut rates from Bank of Japan, ECB, Central Bank of Canada, China on the next few days. FED can also do quantative easing, the central banks and governments will push the recession and market crash for 2022
Brownhouse Farm
Brownhouse Farm Mar 03, 2020 4:32PM ET
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Just some profit taking and enticing gulable sellers. Think long, real long!
Eric Haberman
Eric Haberman Mar 03, 2020 4:32PM ET
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life goes on.  there is no real drop in demand.
 
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