Wall Street Close: Benchmarks in the red as Fed steps up QE

Following a bearish pre-open in the US stock futures overnight and on a day where the New York Stock Exchange went all-electronic on Monday, marking the first time the exchange has operated without floor traders, US benchmarks were tumbling into a sea of red on Monday. Investors are watching a worsening situation around the world with the rising number of coronavirus cases sending fear into the markets. consequently, all three index futures had hit their 5% daily limit at the open of trade.

Despite additional stimulus from the Federal Reserve where it announced a QE programme that would buy unlimited bonds and bolster emergency lending facilities. The Dow Jones Industrial Average, DJIA, went on to lose 582.05 points, or 3%, to settle at 18,591.93, its lowest reading since Nov. 9, 2016. The S&P 500 lost 67.52 points, or 2.9%, to close at 2,237.40 points while the Nasdaq Composite dropped 18.84 points, or 0.3%, to end at 6,860.67.

Fed pulls out its last bazooka

Analysts at ANZ Bank explained that the Fed’s new plan includes purchasing unlimited quantities of Treasury bonds and mortgage-backed securities, direct purchases of corporate bonds, and direct loans to companies, though Congress clearance is required for the latter.

Under the new program, the Fed will also lend against student loans, credit card loans, and government-backed loans to small businesses. The new plan moves central banking still further out of its traditional role. Meanwhile politics have got in the way of the USD2tn economic stimulus package – Democrats blocked the bill through the Senate arguing it focuses on the corporate sector and does little to help everyday people. However, eventually the bill is expected to be passed.

DJIA levels