Santelli Exchange: The Fed cuts rates

Neuberger Berman's Chief Investment Officer, Fixed Income Brad Tank and CNBC's Rick Santelli discuss the Fed's first unscheduled policy meeting rate cut since 2008.

Stocks fell sharply in volatile trading on Tuesday as an emergency rate cut by the Federal Reserve failed to assuage concerns of slower economic growth due to the coronavirus outbreak.

The decision to cut rates by half a percentage point came two weeks before the Fed’s scheduled meeting as the central bank felt it was necessary to act quickly to combat the effect of the virus spreading worldwide. It’s the first such emergency action coming in between scheduled meetings since the financial crisis.

The Dow Jones Industrial Average closed 785.91 points lower, or nearly 3%, to 25,917.41; it rose more than 300 points earlier in the day. The 30-stock average gyrated between sharp gains and solid losses after the decision was announced. The S&P 500 fell 2.8% to 3,003.37 while the Nasdaq Composite pulled back 3% to 8,684.09.

Investors, in turn, loaded up on U.S. Treasurys, pushing the benchmark 10-year yield below 1% for the first time ever. Gold, meanwhile, jumped 2.9% to settle at $1,644.40 per ounce.

“It’s great that the Federal Reserve recognizes that there’s going to be weakness, but it makes me feel, wow, the weakness must be much more than I thought,” CNBC’s Jim Cramer said on “Squawk on the Street” right after the sudden cut. “I’m now nervous. I’m more nervous than I was before.”

Traders had already priced in a rate cut of 50 basis points by this month’s policy meeting. Fed Chairman Jerome Powell noted the central bank was not prepared to use any additional tools to stimulate the economy aside from rate cuts. This may have disappointed some on Wall Street who were expecting something more from the central bank.

Bank shares fell broadly as the benchmark 10-year Treasury yield hit a record low. Bank of America dropped more than 5.5% while JPMorgan Chase and Citigroup slid 3.8% each. The 10-year rate hit a low of 0.906%.

“The market is still trying to find its footing,” said Adam Crisafulli, founder of Vital Knowledge, in a note. “The panicked collapse of the last week isn’t something that will be quickly forgotten, and it will take a couple of weeks (at least) before stocks are on firmer ground.”



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[ari_is_faded]

Looks like the fed poured gasoline trying to put out a fire

[douginorlando]

Fed cut of 0.5% to between 1.25% and 1.75% means a cut in interest costs by 29% to 40%. Still, when millions are laid off due to companies losing 90% of their customers, many people & companies will be cash crunched into bankruptcy. The cut does nothing to prevent a severe recession. The only salvation is if the Fed provides guarantees to loans to cash crunched people and companies. Don’t hold your breath. Banks were bailed out and home owners were forced out and hedge funds now own those homes. Since hedge funds control our government, they will again force out more owners in order to take their assets

[keedybrown]

The market turned deeply red as he kept talking... LOL.

[youKnowWho]

DING DING DING! Correct. Don called Powell and he folded. Should have saved those bullets when we Have 50k Corona Cases US. Markets were roaring back, but now I think these rallies were word on the street confirmation of the cuts (pre knowledge).

[sunnycheba]

So Rick, should AI control the federal fund rate?

[buzzevermore]

It seems like Rick would be a nerve racking person to live with. Yikes.