U.S. stocks fell early Monday as investors looked past the Federal Reserve’s announcement that there was no limit to its bond purchases as part of its so-called quantitative easing program.
The central bank’s unscheduled announcement comes as investors remain unhappy with a lack of government action to address the current and expected fallout from the COVID-19 pandemic.
How are market performing?
The Dow Jones Industrial Average
DJIA,
The weakness in equities confirmed the bearish overnight action on futures markets. All three index futures had hit their 5% daily limit at the open of trade, which began at 6 p.m. Eastern Sunday. Futures index moves that are greater than 5% trigger so-called limit-up and limit-down rules.
It’s important to note that the New York Stock Exchange is going all-electronic on Monday, marking the first time the exchange will operate without floor traders.
What’s driving the market?
The Fed unleashed its most aggressive action to date in saying it would purchase an unlimited amount of Treasurys and mortgage-backed securities, as needed, in order to support the financial market.
The Fed said it would buy assets “in the amounts needed” to support smooth market functioning and effective transmission of monetary policy. The Fed had previous set a $700 billion limit for asset purchases.
The U.S. central bank also launched and expanded several emergency lending facilities to prop up markets for corporate credit, municipal debt and asset-backed securities.
“There’s no doubting that the Fed is doing everything within its power to see the economy through this period of unbelievable turmoil. The coronavirus has wreaked havoc global and ground the economy to a halt forcing drastic action from the fiscal and monetary authorities. It’s time for Congress to get its act together as well,” said Craig Erlam, senior market analyst at OANDA, in a Monday note.
The central bank declaration struggled to boost sentiment as investors noted that an important Senate vote on coronavirus rescue package failed to gain sufficient traction. The vote was 47 to 47, but needed 60 votes to proceed. Senate Democrats voted against starting a 30-hour clock toward a vote.
Democrats have argued the details of the bill were geared toward helping Wall Street more than Main Street, as COVID-19, the infectious disease that has been contracted by more than 300,000 people globally, rapidly spreads and threatens to throw the domestic and global economy into a recession. The U.S. has seen more than 32,000 cases so far.
Sen. Chuck Schumer, a New York Democrat, on Sunday called the coronavirus bill a “corporate bailout” without protections for everyday workers.
President Donald Trump, during a Sunday news conference of the coronavirus task force, said he expects a package to get completed.
The failure of the bill highlights a lack of consensus between Democrats and Republicans to coalesce around a package at a crucial time for the economy and the financial market, which has been hammered as the virus has ground business activity to a halt.
Trump also said Sunday that he has activated the National Guard to help respond to the coronavirus outbreaks in California, New York and Washington, where much of those states are on lockdown.
On top of that, St. Louis Fed James Bullard told Bloomberg News during a Sunday interview that he is forecasting the U.S. unemployment rate to hit 30% in the coming months as the world continues to grapple with the coronavirus pandemic. “This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” he said.
Also on CNBC, Treasury Secretary Steven Mnuchin said that he was working on efforts to help small businesses that have been hammered by state and city closures due the viral outbreak. He urged Congress to pass the $2 trillion economic relief bill.
How are other markets trading?
The yield on the benchmark 10-year Treasury note
TMUBMUSD10Y,
West Texas Intermediate crude
CLK20,
The ICE U.S. dollar index,
DXY,
Global equities were mixed. The Stoxx 600 Europe
SXXP,