U.S. equity futures hit ‘limit down’ levels for a third time in seven days Sunday after the Federal Reserve slashed its key lending rate to a record low near-zero percent amid the ongoing coronavirus pandemic.
Futures contracts tied to the S&P 500 fell 5% just after opening for Sunday night trading in Asia, a limit down level that only allows for subsequent trades to take place at higher price. The current slide suggests the broadest benchmark of U.S. stocks would open 142.52 points lower when trading starts Monday.
Futures tied to the Dow Jones Industrial Average were last seen indicating an opening bell decline of 1,242.62 points while those linked to the Nasdaq suggest a 439.26 point slump for the tech-focused index.
The Fed Funds rate now sits in a range of between 0% and 0.25% after the surprise 100 basis point cut, which comes just two days before the Fed’s scheduled two-day policy meeting on March 17. The central bank also said it would re-start its quantitative easing program, with at least $700 billion in new bond and mortgage backed securities purchases over the coming weeks.
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement. “Global financial conditions have also been significantly affected. Available economic data show that the U.S. economy came into this challenging period on a strong footing.”
“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent,” the statement added. “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
In early Asia trade, the safe-haven yen rose 1.6% against the U.S. dollar to 106.05 while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 1% lower at 97.73.
Benchmark 10-year Treasury notes, meanwhile, rallied by 32 basis points to 0.6401% while 2-year notes were pegged 23 basis points lower at 0.2656%.
Brent crude futures contracts for May delivery, the global benchmark, were last seen $1.01 lower from their Friday close in New York and trading at $32.84 per barrel, while WTI contracts for April delivery were marked 60 cents lower at $31.13 per barrel.
The Fed’s rate move also comes just 24 hours after President Donald Trump threatened to remove Powell as head of the Federal Reserve and place him in another role within the central bank.
Speaking to reporters at the White House as part of a briefing on efforts to combat the coronavirus outbreak, Trump once again expressed his displeasure with the Fed and its Chairman, accusing them of “following, not leading” in terms of offering monetary support for the world’s biggest economy during the global pandemic.
Trump also said that he had “the right” to fire Powell, but wouldn’t do so, instead suggesting he could come the Chairman “into another role” at the Federal Reserve instead.
“I have the right to remove him … no, I’m not doing that,” Trump told reporters. “I also have the right to put him in a regular position and put someone else in charge, and I haven’t made any decisions on that.”