Dow set to drop 500 points at the open following Wednesday’s surge
U.S. stock futures were sharply lower Thursday morning, following a massive relief rally in the previous session, as markets remained choppy in the face of the fast-spreading coronavirus.
Dow Jones industrial average futures dropped about 450 points, indicating a loss of nearly 600 points at the open. S&P 500 and Nasdaq-100 futures were also both lower.
Fears about the coronavirus disrupting the global economy continued to grip Wall Street as countries around the world extended quarantines and travel restrictions. California declared a state of emergency after a coronavirus-related death in the state, while confirmed cases climbed to 53.
“Futures are sharply lower and they are giving back more than half of yesterday’s rally as coronavirus continues to spread throughout the U.S.,” Tom Essaye, founder of the Sevens Report, said in a note Thursday.
The premarket moves after days of wild swings on Wall Street, which saw the 30-stock Dow swinging 1,000 points or higher twice in the past three days. The Dow posted its second-biggest point gain on Wednesday as major wins from former Vice President Joe Biden during Super Tuesday sparked a relief rally, especially in the health-care sector. Investors also cheered signs of a global response to the outbreak, including a more than $8 billion in emergency funding from the Congress.
Earlier in the week, the Federal Reserve cut its benchmark interest rate unexpectedly by 50 basis points, citing that coronavirus which “poses evolving risks to economic activity.” It was the central bank’s first such emergency cut since the 2008 financial crisis.
The move failed to assuage stock market concerns about the potential economic impact of the coronavirus outbreak while triggering sharp movements in the bond markets, with the yield on the 10-year Treasury note dropping below 1% for the first time ever. The benchmark rate remained below the threshold as of Thursday morning.
“We’re nowhere near the sort of situation where the Fed should be acting like this,” Richard Harris, chief executive at Port Shelter Investment Management, told CNBC’s “Street Signs Asia” on Thursday morning.
“You have to wonder why (the Fed’s) acting like this and you have to wonder especially why they’re using their very, very sparse ammunition up — a 50 basis point cut — very early in a crisis,” Harris said.
—CNBC’s Fred Imbert and Michael Bloom contributed to this report.