Dow and US stocks plunge again: March 16, 2020

Sunday's central bank action was about more than the Federal Reserve's dramatic slashing of interest rates.

The US central bank also struck a deal with central banks around the world -- the European Central Bank, Bank of England, Bank of Japan, Bank of Canada and Swiss National Bank -- to shore up liquidity and keep financial markets functioning smoothly.

The banks agreed to lower their rates on currency swaps, which helps keep lower cost of US dollars to ease market stress. The dollar is the world's major funding currency and in times of uncertainty those funding costs can spike.

"The US dollar dominates the global payments system and given signs that the economic fall-out from the coronavirus is worsening, the Fed may have to resort to further emergency measures to fully convince global businesses that the supply of the greenback will remain ample," wrote Jane Foley, senior FX strategist at Rabobank.

So much for central banks to the rescue. Investors clearly are not soothed by the Federal Reserve slashing interest rates to zero on Sunday, or the global coordinated central bank action that came along with it.

Stock markets are flashing red across the world and US equity futures once again have hit their "limit down" overnight, meaning they cannot fall any further. This happened twice last week, and on both days stocks also tripped a circuit breaker that led the New York Stock Exchange to halt trading for 15 minutes.

The NYSE circuit breakers depend on drops in the S&P 500, with the first triggered at a 7% decline.

We could be in for another one of those today as traders are flying blind into the open.

Dow futures are down 1,041 points, or 4.5% at their limit down, while S&P 500 futures are off by 4.8%. Nasdaq Composite futures are down 4.5%.

ETFs tracking the three major indexes are painting a much gloomier picture: the S&P 500 tracker SPDR S&P 500 ETF Trust (SPY) is down 9.7%.

Many Americans might be tempted to believe the assurances of the President and his Treasury Secretary that the negative economic impact of the Coronavirus outbreak will be short, and that the US economy and stock prices will recover quickly. 

But if that were the case, the Federal Reserve would not have taken action of cutting rates near 0% to stabilize the financial system.

The US central bank took these extraordinary steps in part because investors in specific corners of the credit markets have been panicking. 

Although these aren’t markets that average Americans follow, they can still impact them in ways they can see and feel like money market funds, mortgage rates and small business lending.

But the volatility in these critical credit markets is unlikely to end any time soon.

While the Fed’s actions may have soothed the credit markets, it led to a pullback in the stock markets—futures sold off violently right after the Fed’s move.

But even if the Fed succeeds in stabilizing markets, the government will still need to do much more to help average Americans, including putting actual cash in the hand of consumers and other forms of financial assistance to stave off or minimize a recession.

Trump has made the economy—and the stock markets—a signature part of his re-election campaign, so we can expect to see him pressure Congress in the near term to pass a fiscal stimulus package. His re-election may depend on it.

MGM Resorts International (MGM) and Wynn Resorts (WYNN) will close their Las Vegas properties as of March 17 in light of the coronavirus pandemic.

Wynn Resorts indicated Sunday that it would close Wynn Las Vegas and Encore "as part of its continuing effort to reduce the spread" the coronavirus.

The company said it expects the closures to be in effect for two weeks, beginning at 6 p.m. Tuesday, at which point the company will assess the situation.

Similarly, MGM Resorts said in a news release Sunday that it will close casino operations on Monday, March 16, and then hotel operations. It said it will not accept reservations before May 1.

MGM Resorts operates a number of Las Vegas properties, including the Bellagio, the MGM Grand, and The Mirage — among others.

MGM's shares sank 14% in premarket trading, while Wynn's stock plunged 17%.

Read more here.

United Airlines (UAL) is slashing its flight schedule by 50% for the next two months and is seeking deep cost savings from its unions.

United's top management executives will have a 50% cut in their pay, according to a letter from United CEO Oscar Munoz and President Scott Kirby to the company's 100,000 employees — which was made public Sunday night.

The letter indicated that United management began discussions with the airline's unions on Sunday about lowering compensation costs.

Employee furloughs, layoffs or a reduction in pay rates are among the options for cost cutting being considered. United and other airlines have already allowed employees to take unpaid leaves during this crisis.

Read more here.

Global stock markets plunged Monday as investors were unnerved by drastic action from the US Federal Reserve to cushion the blow from coronavirus and as data showed the outbreak has caused an unprecedented economic collapse in China.

Markets were battered across Asia, with Australia's benchmark index crashing nearly 10% in its worst day on record.

Across Europe:

US markets were poised to suffer heavy losses:

Investors bailed out of stocks despite a massive intervention by the US Federal Reserve on Sunday.

The central bank slashed rates to close to zero at an emergency meeting, and said it would purchase another $700 billion worth of Treasury bonds and mortgage-backed securities.

Markets in Asia Pacific were rocked by data showing the Chinese economy has been hit harder than expected by the coronavirus outbreak.

Retail sales in China plunged 20.5% in the January-to-February period from a year earlier, much worse than the forecast 0.8% rise by analysts polled by Reuters, according to the National Bureau of Statistics.

Industrial output also fell 13.5% during the same period, while fixed asset investment plunged 24.5%, both widely missing estimates.

That failed to calm investors:

The People's Bank of China on Monday pumped 100 billion yuan ($14.3 billion) into the financial system by offering loans to banks.

Read more here.

In a bold, emergency action to support the economy during the coronavirus pandemic, the Federal Reserve on Sunday announced it would cut its target interest rate near zero.

The swifter-than-expected rate cut is designed to prevent the kind of credit crunch and financial market disruptions that occurred the last time the Fed had to cut rates all the way to the bottom, during the global financial crisis just over a decade ago.

The Fed's board of governors had been set to meet this week and report on the results of its meeting on Wednesday. Central bankers were widely expected to cut rates to zero at that meeting, after they slashed rates to a half a percentage point in another emergency cut on March 3.

Sunday's latest emergency action suggests the Fed believed the cogs of the US economic machine were getting gummed up, and it was concerned that waiting even three more days could be too late to prop up the economy. The Fed will no longer meet later this week.

Read more here.

A growing number of retailers have announced they are temporarily closing stores in an effort to prevent the spread of coronavirus.

Nike (NKE), Urban Outfitters (URBN), Abercrombie & Fitch (ANF) and more have announced that they are shuttering many or all of their retail stores around the globe through late March because of coronavirus.

Apple (AAPL) last month closed retail locations in China during the peak of the outbreak there. On Friday, the company said that while its China locations had reopened, it was closing stores in all other areas of the world.

Read more here.