Stocks tumble after Fed's emergency rate cut, 10-year Treasury yield breaks 1%

Coronavirus 'will weigh on economic activity for some time,' Fed chairman says

The Federal Reserve's emergency rate failed to calm skittish investors.

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U.S. equity markets tumbled and the 10-year Treasury yield hit a record low after Chairman Jerome Powell explained the intra-meeting rate cut was designed to cushion the economy from any coronavirus-related fallout.

The Dow Jones Industrials sank nearly 800 points or 3 percent and traded in a more than 700-point range, swinging between gains and losses, as investors digested the Fed's move.

The S&P 500 and the Nasdaq also lost close to 3 percent.

TickerSecurityLastChangeChange %
SP500S&P 5003335.47-16.13-0.48%
I:DJIDOW JONES AVERAGES27452.66-131.40-0.48%
I:COMPNASDAQ COMPOSITE INDEX11085.248416-32.28-0.29%

The rate cut, which came hours after G7 leaders pledged to use "all appropriate policy tools" to safeguard against downside risks caused by the outbreak, lowered the central bank's key interest rate by 50 basis points to a range of 1 percent to 1.25 percent. The benchmark 10-year yield fell by 10 basis points to a new low of 0.984 percent.

"My colleagues and I took this action to help the U.S. economy keep strong," Powell said at a news conference. "The virus and the measures being taken to contain it will surely weigh on economic activity both here and abroad for some time."

Financials took a hit as lower rates mean banks and other lenders are forced to offer lower borrowing costs which may impact profits at some point. The flip side is consumers can borrow at cheaper rates.

TickerSecurityLastChangeChange %
XLFFINANCIAL SELECT SECTOR SPDR ETF23.75-0.30-1.25%
JPMJP MORGAN CHASE & CO.95.35-0.81-0.84%
WFCWELLS FARGO & COMPANY23.26-0.56-2.35%

The coronavirus has sickened at least 88,948 people worldwide and killed 3,043, according to the latest figures from the World Health Organization.

As traders keep an eye on any coronavirus-related developments, they will also be monitoring the results of Super Tuesday primaries that will award 1,357 delegates to the Democratic Party’s presidential contenders.

Looking at stocks, Delta Air Lines gained after Warren Buffett’s Berkshire Hathaway raised its stake by about 1 million shares. The stock had lost as much as 20 percent during the market’s recent seven-day selloff. Competitors American Airlines and United Airlines were unable to maintain early gains on the news.

Electric-car manufacturer Tesla soared after a JMP analyst upgraded its shares to “outperform” and set a $1,060 price target, citing sustainable growth for the next four to five years.

TickerSecurityLastChangeChange %
DALDELTA AIR LINES INC.30.61-0.73-2.33%
AALAMERICAN AIRLINES GROUP INC.12.25-0.51-4.00%
UALUNITED AIRLINES HLDG.34.51-1.43-3.98%
TSLATESLA INC.419.07-2.13-0.51%

On the earnings front, Target reported mixed fourth-quarter results and issued a disappointing full-year profit forecast.

Clothing retailer Kohl’s reported a stronger-than-expected quarterly profit, however, and raised its dividend. The company’s 2020 earnings forecast also exceeded estimates.

Meanwhile, cannabis producer Tilray was under pressure after reporting a bigger fourth-quarter loss than estimated.

TickerSecurityLastChangeChange %
TGTTARGET CORP.156.94+0.48+0.31%
KSSKOHL'S CORP.18.41-1.07-5.49%
TLRYTILRAY INC4.83+0.01+0.21%

Commodities rallied as West Texas Intermediate crude rose to the $47 per barrel level and gold spiked 3.2 percent to $1,636 an ounce.

In Europe, markets were higher across the board, with Germany’s DAX gaining 2.1 percent while Britain’s FTSE and France’s CAC were both higher by 1.8 percent.

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Overnight, Asian markets ended mixed as China’s Shanghai Composite added 0.7 percent and Japan’s Nikkei fell 1.2 percent. Hong Kong’s Hang Seng was little changed.