By Kim Khan
Investing.com – Wall Street lost its enthusiasm for the Federal Reserve fairly quickly Tuesday and stocks slumped in morning trading after a short press conference from Fed Chairman Jerome Powell ended.
The major indexes were slightly in the red when Powell started speaking and selling began in earnest when he suggest the FOMC was now in wait-and-see mode.
The fell 1.75%, the lost 1.7% and the dropped 1.5%.
Shortly before the press conference President Donald Trump tweeted that the Fed than its emergency half-point cut today to pull rates down in line with other countries.
But Powell again dismissed politics playing any consideration in Fed action and also opened the door to a possible rate hike if Covid-19 is contained, saying the Fed would act if the situation were appropriate to change policy.
While acknowledging the Fed move will have no impact on the transmission of the virus or impact on supply chains, he said the cut will have a meaningful impact to the economy.
“The Fed panicked which they’re very good at doing and it was a mistake,” said Michael O’Rourke, a strategist with Jones Trading in Stamford, Connecticut.
“The Fed cutting rates by 50 basis points now is not going to get people to go to the movies or to conferences, sporting events or any large gatherings.”
The U.S. central bank cut rates three times in 2019 and has since held the fire amid signs of improving growth after the striking of a “Phase One” trade deal between the United States and China.
The main U.S. stock indexes had closed more than 4% higher on Monday after their worst week since 2008, as central banks in Japan and the European Union joined the Federal Reserve in signaling further monetary easing.
— Reuters contributed to this report.
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