No Shock and No Awe

Kelly Evans's afternoon commentary & top market stories

VIEW IN BROWSER | SUBSCRIBE TUE, MAR 03, 2020 YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC AS OF TUE, MAR 03, 2020 • 11:35 ET DJIA 26281.82 -1.58% -421.50 S&P 500 3046.35 -1.42% -43.88 NASDAQ 8836.88 -1.29% -115.28 EDITOR'S NOTE The Fed just cut rates inter-meeting for the first time since the terrible, dark days of December 2008, and stocks are selling off. The Dow is down more than 550 points as I write this. The president is already tweeting that "More easing and cutting!" is needed. And frankly, the market agrees.    If you're going to do something extraordinary to quell a financial panic--and it's not clear this approached that level yet--you have to do something extraordinary. You have to do "shock and awe."   But (a) the Fed's statement Friday signaled an intermeeting cut might be coming, so it lessened the shock value of this morning's move, and (b) markets had priced in 75 basis points of rate cuts at the meeting in two weeks, and the Fed only cut rates by 50 bps today. So, no awe.    And that's how you get stocks to throw a temper tantrum. So what's the Fed's next move? Another quarter-point cut at the meeting on March 18? Or not? The benchmark overnight rate which they just cut is now back to just a 1-1.25% range. That means we only have four "normal" quarter-point cuts left until we're back. At. Zero.    MUFG's Chris Rupkey may have a point when he said, in reaction to the emergency cut, that "The Fed's reckless move risks taking them out of the picture for good as an institution that can alter the course of the economy." I wrote about the risks of using monetary policy as the primary response to coronavirus yesterday.    I simply don't buy the argument that the Fed has to lower rates because the neutral rate has plunged because coronavirus is going to whack U.S. GDP. You know what else could get the neutral rate back up and help prevent a recession? Fiscal stimulus. Like I said yesterday, President Trump should come out with a jam-packed bag of really helpful goodies like a payroll-tax cut, business relief, loan forbearance, you name it. That would actually help companies and citizens cope with any interruptions from coronavirus.    Instead, to reiterate, we now have only four rate cuts left until zero. That's a pretty sobering thought. Maybe the Fed could have achieved its goals if it came out with more than the market expected, but then you're talking about what, a full percentage-point rate cut? We're venturing into absurd territory here.    Much, much, MUCH more at 1 p.m.   See you soon!   Kelly   P.S. The Exchange is now a podcast! Click to subscribe.        Kelly Evans Twitter: @KellyCNBC Instagram: @realkellyevans KEY STORIES  Fed cuts rates by half a percentage point to combat coronavirus slowdown Markets had been widely expecting the U.S. central bank to take some type of action, with anticipation of a 50 basis point cut by the next Federal Open Market Committee meeting later this month. At least two New York high schools close after suspected coronavirus case in local community SAR Academy and SAR High School said in a statement that it was a precautionary measure, following guidelines from the New York City Department of Health. Coronavirus live updates: Fed cuts interest rates, COVID-19 almost a global pandemic As of Tuesday, more than 91,300 cases of coronavirus have been reported, resulting in at least 3,110 deaths. G-7 countries promise to use policy tools but offer no specific actions to combat coronavirus "We reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks," the G-7 statement said. Trump demands 'more easing and cutting' after Fed slashes rates amid coronavirus outbreak President Donald Trump on Tuesday demanded that the Federal Reserve cut rates even more after the central bank announced it would slash rates by 50 basis points in an effort to combat the economic impact of the coronavirus outbreak. Stock market live updates: Dow down 500, surprise Fed rate cut, Powell says US economy is 'strong' After a volatile few days of trading, stocks jumped on Tuesday after the Federal Reserve said it was cutting rates by half a percentage point. Super Tuesday live updates: Bloomberg lowers expectations, bets on contested convention Super Tuesday is the most pivotal day yet in the Democrats' campaign for the right to take on President Donald Trump in November. The 'stranded employee' is a coronavirus problem the work world has never seen Many U.S. workers fear that taking time off or working from home, even when sick, can damage a career. Can the coronavirus COVID-19 permanently change workplace norms? Trading app Robinhood experiencing 'major outage' for a second day amid heavy volume market action Robinhood was still reporting technical issues a day after an outage kept clients from trading on a historic rally for stocks. Cramer: 'I'm more nervous than I was before' about coronavirus economic risks after Fed rate cut "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.     IN CASE YOU MISSED IT White House capping number of Chinese state media reporters in US How these manufacturers deal with coronavirus disruption Why economist says oil's seeing its biggest hit in more than a decade   Unsubscribe Manage Newsletters Terms of Service Join the CNBC Panel Digital Products Feedback Privacy Policy   © 2020 CNBC LLC. All rights reserved. A property of NBCUniversal. 900 Sylvan Avenue, Englewood Cliffs, NJ 07632 Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes and Market Data and Analysis. Data also provided by THOMSON REUTERS