Monday's Stock Market Close: US Equities Crater Despite Fed Stimulus, Dow Drops 3,000, Oil Slides

U.S. stocks plummeted on Monday despite a globally coordinated effort by major central banks to provide more liquidity and relax monetary policies. Traders also shrugged off some proposals by U.S. politicians to ease the crisis.

The Dow Jones Industrial Average dropped 2,999.1 points to 20,188.52 while the S&P 500 fell 324.89 points to 2,386.13 and the Nasdaq Composite Index tumbled 970.28 points to 6,904.59.

The Dow logged the biggest one-day drop in its history.

Volume on the New York Stock Exchange totaled 6.59 billion shares with 128 issues advancing, zero setting new highs, and 2,917 declining, with 1,966 setting new lows.

Active movers were led by Bank of America (BAC), Ford Motor (F) and General Electric Co. (GE).

A few days after injecting more than $1 trillion in stimulus, on Sunday the Federal Reserve essentially cut interest rates down to zero (a range from zero to 0.25%), the lowest level since 2015. The central bank also introduced a huge $700 billion quantitative easing program. The Fed also cut the rate of emergency lending at the discount window for banks by 125 basis points to 0.25% and increased the term of loans to 90 days.

“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed stated.

The Fed joined Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and the Swiss National Bank in a globally coordinate effort to ease monetary conditions and increase liquidity.

“We will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” Fed Chairman Jerome Powell said. “That’s the test ... some things have to happen before we consider ... we’re going to be watching, and willing to be patient, certainly.”

Meanwhile, U.S. coronavirus cases have increased to 3,774, along with 69 deaths.

U.S. airlines are seeking more than $50 billion in government aid to alleviate its losses. Sen. Chuck Schumer, D-NY, reportedly will propose stimulus package valued at least $750 billion.

Analysts were generally unimpressed by the Fed’s actions.

“Markets are still in turmoil, despite another emergency action from the Federal Reserve,” said Greg McBride, chief financial analyst for Bankrate.com. “The Fed’s work is not done as further efforts to backstop credit markets will remain necessary, beyond their current initiatives to buy Treasuries and mortgage-backed securities.”

“This entire market would turn around in one second if the government came out and said, we’re going to provide business interruption insurance to companies that lose money in the second quarter if they don’t fire any workers,” said Ricky Sandler, CEO of Eminence Capital CEO.

“The Fed blasted its monetary bazooka for sure,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “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.”

“This [new action by the Fed], coupled with an important fiscal package, should help cushion the economic downside from the virus’ effect on economic activity,” said Quincy Krosby, chief market strategist at Prudential Financial. “It’s going to be positive, but the market is at the mercy of the virus and at the mercy of whether the containment policies work.”

On Sunday, Jan Hatzius, Goldman Sachs’ chief economist, reduced his first-quarter gross domestic product growth forecast to zero from 0.7%. He also predicted a 5% contraction in the second quarter, followed by a rebound in the second of the year.

In U.S. economic data, the New York Fed said its Empire State Manufacturing Index plunged in March to negative-21.5 -- the lowest since March 2009.

Overnight in Asia, markets closed lower. China’s Shanghai Composite tumbled 3.4%, while Hong Kong’s Hang Seng fell 4.03%, and Japan’s Nikkei-225 dropped 2.46%.

In Europe markets dropped but rebounded from early losses as Britain’s FTSE-100 fell 4.73%, France’s CAC-40 plunged 5.48% and Germany’s DAX dropped 4.71%.

Crude oil futures plunged 9.58% at $28.69 per barrel, Brent crude dropped 1% at $29.75. Gold futures dropped 1.51%.

The euro gained 0.65% at $1.1176 while the pound sterling fell 0.3% at $1.2247.

The yield on the 10-year Treasury plunged 23.45% to 0.728% while yield on the 30-year Treasury dropped 14.05% to 1.334%.