Market futures plunged Sunday night following a dramatic announcement of monetary policy easing from the Federal Reserve, suggesting that investors thought that the actions were insufficient in light of the threat posed by the coronavirus pandemic.
S&P 500 futures fell 5%, hitting a market limit, following the Fed’s emergency announcement earlier Sunday evening that it would lower its interest rate target to zero and buy $700 billion of government bonds.
The expected market drop would add to the recent wild volatility that has gone along with investors’ efforts to gauge the fallout from the pandemic, which has resulted in a sudden stop to certain kinds of commerce, such as air travel and cruise vacations.
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Last week, markets plunged into bear territory. On Friday, however, stocks surged 10% to recoup some of those losses, one of the biggest single-day rallies in history.
Federal Reserve Chairman Jerome Powell said that the effects of the pandemic were likely to cause an economic contraction in the short term, because of “appropriate choices” to limit human contact to prevent the spread of the disease.
“After that, it’s very hard to say how big the effects will be or how long they will last,” he said at a press conference. He noted that the extent of the economic damage would depend on how well the virus can be contained.
