The U.S. stock futures market fell at the open Sunday evening, not long after the Federal Reserve cut interest rates to zero to 0.25%, the first time interest rates have been that low since the 2008-2009 financial crisis.
"The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. Available economic data show that the U.S. economy came into this challenging period on a strong footing," the Fed said in a statement.
So, what now?
"Restoring market functioning will not be easy and it is possible that despite the significant intervention back into capital markets today that it will not change the minds of risk averse market participants," said Joe Brusuelas, Chief Economist, RSM US LLP.
The Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve and Swiss National Bank announced a coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. "This should address growing dollar funding stress in global markets," Brusuelas said.
RSM thinks this is "one of many steps that the Fed in conjunction with the Fiscal Authority will have to take in coming days to stabilize financial market and target risk averse market participants."
"We expect Congress and the Treasury to work with the Fed to put a floor under both financial markets and the economy. In our estimation that will require the Fiscal Authority to put forward a sizeable and creative set of policies to deal with the monumental demand shock that is on the way. We think that the ultimate cost of such a move will be equal to 1.5% to 2% of GDP."
Bankrate.com chief financial analyst Greg McBride said the Fed is "dusting off the financial crisis playbook, returning to bond buying, coordinating with other global central banks to provide access to U.S. dollar liquidity, cutting interest rates to zero and opening the Fed’s discount window to ensure the flow of credit through banks to consumers and businesses."
“Desperate times call for desperate measures," McBride said, "and the Fed is doing just that in an effort to keep credit markets functioning and prevent the type of starving of credit that nearly toppled the global economy into a depression in 2008.”
At time of publication, Dow and S&P futures pointed to a 3% lower open.