The stock market halted trading Monday morning for the third time in just two weeks. The S&P 500’s 8.1% drop crossed the 7% threshold, triggering “circuit breaker” rules. These rules were designed to give investors some breathing room after big moves in the major indices.
And just like last week, this early morning drop is raising big questions. The coronavirus from China continues to spread, escalating global panic. As Italy remains under a nationwide quarantine, experts in the U.S. are urging social distancing.
While this set of practices — like cancelling events and remaining indoors or in isolation — is good from a public health perspective, many worry about its economic impacts.
Small business owners are worried about bankruptcy. Many workers fear they can’t afford to stay at home. As states shut down public schools across the country, many are facing a child-care crisis.
Federal Reserve Rate Cut Sparks Selloff
And it’s not just the common man who’s worried about the economy, either.
In a shocking Sunday move, the Federal Reserve slashed interest rates to 0%, which sent stock market futures down hard. Why? Although early headlines declared this decision as “bold,” not everyone is buying it.
Some on Wall Street view the Fed rate cut as desperate. Remember that the Fed had just announced an emergency rate cut and caused a similar level of panic. But now with rates at 0%, what else can the Fed do?
“It’s basically using up all of their ammunition within a three-week span,” Azure Capital CEO Terence Wong told the Wall Street Journal. “There’s nothing left. They can’t use monetary loosening as part of their arsenal anymore.”
For investors, it’s unclear how much farther the major indices will fall. And like Wong said, it’s unclear how the Federal Reserve will next intervene as the coronavirus continues to impact the global economy.
For today, a drop of 13% would trigger another 15-minute halt. A drop of 20% would completely end trading.
Sarah Smith is a Web Editor for InvestorPlace.com. As of this writing she did not hold any of the aforementioned securities.