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Stocks tanked on Monday, triggering a key market-wide “circuit breaker” designed to prevent the market from falling through the floor.
The circuit breaker has kicked in multiple times in the past few weeks as investors exited the market with the coronavirus outbreak disrupting global supply chains and fueling fears of a recession.Â The stock market has tumbled into a bear market, or down more than 20% from their recent highs.Â – Li
Stocks cratered at the open, with the major averages dropping more than 5% and leading to a 15 minute halt in trading after the circuit-breaker threshold was triggered.
According to the New York Stock Exchange, a market trading halt occurs at “three circuit breaker thresholds” on the S&P 500 due to large declines and volatility. The exchange classifies this at three levels based on the preceding session’s close in the S&P 500.
Before trading was halted, the Dow Jones Industrial Average fell 2,250 points, or 9.7%. The S&P 500 fell 8%, while the Nasdaq Composite was down 6%. – Stevens
Following the Fed’s surprise move to cut rates to near zero and vow to boost its bond holdings aggressively, the yield on the benchmark 10-year Treasury noteÂ dropped 18 basis points to 0.76%. The yield on the 30-year Treasury bond fell 13 basis points to 1.38%. Bond yields move inversely with prices. Still, yields’ plunge following the Fed’s emergency move was less dramatic than many had thought. “To some extent the rate cut and eventual return to QE were anticipated,” said Ian Lyngen, BMO’s head of U.S. rates. “For the time being there is an underlying reluctance to press longer rates lower given the experience of last week… investors prefer to hold cash and very front-end securities.” â Li
Economist Mohamed El-Erian said Monday the Federal Reserve wasted a large part of its monetary policy arsenal to fight the economic fallout of the coronavirus by doing things backward.
“There’s a problem with both what the Fed did and what the Fed did not do. As result of that, … you saw that clearly in how the futures traded,” the Allianz chief economic advisor said on CNBC’s “Squawk Box.”
“We should have been more laser-like focused on areas of market failures … and then followed up with more general interest rate cuts when that can have an impact,” El-Erian argued, stressing that lowering rates and making loans cheaper won’t change the spending behavior of consumers who are not leaving their homes.Â â Belvedere