In spite of the Feds Sunday rate cut, stock futures tend not to be affected so much as they dropped sharp on Monday. The stock market futures hit “limit down” levels of 5% lower as established by the CME Group daily to prevent market panic and other severe losses.
As at Monday morning, the three major benchmark index futures all hit their “limit down” levels with the Dow Jones futures down 1,041 points, or 4.6%, S&P 500 futures down 128.5 points, or 4.8%, and Nasdaq futures down 359.7 points, or 4.5%.
However, the SPY ETF (SPY) which tracks the S&P 500 continued to trade during the pre-market session indicated a 9% drop by market open. The SPY ETF 9% plunge in pre-market trading indicated the trigger of a “circuit breaker” in only a short while after regular trading sessions begin. The ETF that tracks the Dow Jones, the SPDR Dow Jones Industrial Average ETF Trust (DIA) was also down 8%, together with the ETF that tracks the Nasdaq 100, Invesco QQQ Trust.
As expected, the US stock market isn’t the only market affected as other markets across Asia, Australia, and Europe were equally affected. London’s FTSE 100 (UKX) dropped 7% in early trading, Germany’s DAX (DAX) fell nearly 9%, France’s CAC 40 (CAC40) dropped almost 9%, while Australia’s benchmark index fell nearly 10%.
Being the starting point of the outbreak, the Chinese economy and markets greatly suffer the impact of the novel coronavirus compared to other nations. Between January and February, China’s retail sales plummeted 20.5%, industrial output dropped 13.5%, and fixed asset investments dropped 24.5%. The Asian stock market has also suffered its fair share with Japan’s Nikkei 225 (N225) down 2.5%, Hang Seng Index (HIS) down 4%, and China’s Shanghai Composite (SHCOMP) down 3.4%
Still, on Monday, airline stocks sharply dropped following the large numbers of flight cancellations that happened as a result of global travel restrictions. IAG (ICAGY) of British Airways, dropped 16% while Air France KLM (AFLYY) opened 12% lower.
US investors are not moved by the Feds rate cut as the reality of the coronavirus seems to worsen as the days roll by. There are officially at least 3,000 confirmed cases the novel coronavirus in the US according to the CDC and other government agencies. The uncertainty that surrounds the outbreak and its further economic impact is what has kept a lot of investors and traders in fear. Although, many analysts concur with the Federal Reserve’s action towards slashing rates to zero.
Though many commend the Feds and US lawmakers’ decisions and actions towards fighting the coronavirus outbreak, many investors would rather put a hold to all investments and trading until they were certain that the coronavirus outbreak would be history in a short while. Peter Boockvar, chief investment officer at Bleakley Advisory Group in a comment about the Feds action said, “this better work because I don’t know what they have left and no amount of money raining from the sky will cure this virus. Only time and medicine will.”