Today, in a surprise move, the US Federal Reserve cut its benchmark interest rate by a half-percentage point to help mitigate the impact of the coronavirus on the market and economy.
The officials were in unanimous agreement for an emergency cut to a range of 1% to 1.25%. The Fed also said the “fundamentals of the U.S. economy remain strong,” but added that Fed policymakers “don't think we have all the answers.”
The Fed just implemented an emergency 50bps rate cut. The last time the Fed did this was October 29, 2008.
Two days later, an unknown person or group of people going by the pseudonym Satoshi Nakamoto published a paper called "Bitcoin: A Peer-to-Peer Electronic Cash System."
— Travis Kling (@Travis_Kling) March 3, 2020
On Monday, the promise of the interest rate cut had the stock market surging, the Dow Jones Industrial Average jumped a record 1,294-points. Today, the Dow initially added to the gains after the Fed announced the rate cut but soon went down.
The Dow was down more than 700 points, or 2.7% after rising nearly 400 points at one point in the day. The S&P 500 was down 2.5% while the Nasdaq Composite dropped 2.5%.
According to investors, the Fed’s rate cut was bad news. This also means the market had already priced in a rate cut, aggressively.
The market was expecting an interest cut from the Fed in the March 18 meeting and even though the Fed officials spoke out against the cut right away last week, they made the first such emergency cut since the financial crisis.
I am still in shock that the Fed decided to make an emergency rate cut today. They have no idea what is coming, how bad the coronavirus will be, or how low the market could drop. Absolute premature ejaculation due to undue political pressure. It helped the market for 5 minutes.
— The Wolf Of All Streets (@scottmelker) March 3, 2020
However, President Donald Trump, who called for a rate cut today early in the day after Australia's central bank did, pushing its rates to a record low, yet again called out for another cut.
“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to the USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!,” Tweeted Trump.
The Fed just cut rates 50 basis points about an hour ago and Trump is already calling for more rate cuts and money printing.
What a time to be alive. https://t.co/DTrUmv6sma
— Pomp 🌪 (@APompliano) March 3, 2020
The crypto market is reacting the same way as the stock market. Bitcoin also jumped to about $8,870 but soon after followed stocks and dropped below $8,700. However, the volume is extremely low, only $400 million exchanged hands on the top ten exchanges in the past 24 hours.
However, stock markets are more volatile than bitcoin today and trader Crypto Micheal notes, “BTC is stabilizing, while some alts are gaining momentum already.”
However, traditional safe-haven assets like gold and silver are surging. Gold prices rose sharply, with April futures were last up $51.20 an ounce.
Lower Fed rates also have investors paying attention to treasury yields, with the 10-bond yield hovering above 1% near an all-time low.