Due to the evolving coronavirus situation, the Federal Reserve said Tuesday it would slash its benchmark rate by half a percentage point.
The cut, which lowers the rate to the range of 1% to 1.25%, is the first of its kind since the 2008 financial crisis. It comes a week after all three major U.S. stock benchmarks — the Dow Jones Industrial Average, the Nasdaq Composite and the S&P 500 — fell into correction territory, with the Dow taking its biggest point loss since 2008 and the S&P 500 shedding $3.4 trillion in market value.
“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity,” the Fed’s statement said. “The [Federal Open Market Committee] is closely monitoring developments and their implications for the economic outlook, and will use its tools and act as appropriate to support the economy.”
Jerome Powell, the chairman of the Federal Reserve, was expected to hold a press conference at 11 a.m. to discuss the benchmark cut.
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News of the Fed interest rate cuts sent the S&P 500, Dow and Nasdaq indices upward, with the S&P immediately rising by over 1%. However, those gains have appeared to level off across all benchmarks as of 10:45 a.m.
Concerns over the coronavirus have already led several footwear and fashion companies to issue revenue and profit warnings for the year, among them Skechers, Wolverine World Wide and Tapestry Inc. Companies warned their fiscal-year bottom lines may be dented due to widespread store closures in heavily affected regions and decreased sales.
Coronavirus cases in the U.S. have risen to over 100, with six fatalities reported. There are confirmed cases in 15 states, mostly in Washington and California. Internationally, there have been over 90,000 cases and upwards of 3,000 deaths reported. While the majority of the outbreak has been contained to China, where it originated, there has been a spike in cases outside of the country, particularly in South Korea, Iran and Italy.
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