Dow plunges 3% as Fed’s emergency rate cut spooks Wall Street

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Dow plunges 3% as Fed’s emergency rate cut spooks Wall Street

Wall Street stocks fell further Tuesday afternoon as markets reacted skeptically to the Federal Reserve’s surprise interest rate cuts to boost the US economy.

Near 1905 GMT, the benchmark Dow Jones Industrial Average stood at 25,837.44, down 3.2 percent or 865 points.

The broad-based S&P 500 shed 3.1 percent to 2,993.84, while the tech-rich Nasdaq Composite Index slid 3.3 percent to 8,653.23.

Stocks initially rallied after the Fed’s surprise rate cut announcement, but equities later pulled back as investors questioned whether the move suggested the US economy was on shakier ground than previously thought.

It was the Federal Reserve’s first emergency rate cut since the 2008 financial crisis, underscoring how grave the central bank views the fast-evolving situation.

“The market reaction now is negative because the Fed sent the wrong message to the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“All of a sudden the Fed is really worried about the economy and this is the reason why we are having this volatility.”

Earlier in the day, Fed Chair Jerome Powell took part in a Group of Seven conference call, which pledged appropriate actions to support the economies.

The US central bank cut rates three times in 2019 and has since held fire amid signs of improving growth after a Phase-1 trade deal between the United States and China.

Bank stocks, which tend to outperform when interest rates are higher, dropped 3.4%, while the broader financials sector fell 2.6%. Five of the 11 major S&P sectors were trading higher.

“The rate cut underscores the magnitude of the problem that the global economy is facing,” said Peter Kenny, founder of Kenny’s Commentary LLC and Strategic Board Solutions LLC in New York.

“Normally, markets would welcome a rate cut, and they were hoping for it. Now that we’ve got it, the question is what’s next.”

Healthcare equipment maker Thermo Fisher Scientific, rose 3% after it launched a $11.6 billion bid for German genetic testing company Qiagen.

Electric-car maker Tesla rose 3% after brokerage JMP Securities upgraded the stock to “market perform”.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.