The Federal Reserve will cut interest rates by a half-percentage point in its first emergency rate cut since the Great Recession in response to the spreading coronavirus.
Fed Chair Jerome Powell said Tuesday that the coronavirus “poses evolving risks to economic activity."
The Fed's statement Tuesday also said that it is “closely monitoring developments.”
The Dow, which had fallen sharply after the opening bell, swung almost 700 points into positive territory after the Fed announcement.
Seven major economies earlier pledged to use “all appropriate tools" to deal with the spreading coronavirus but announced no immediate actions.
The group of major industrial countries, referred to as the G-7, said Tuesday that it was “ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy.”
The joint statement from the United States, Japan, Germany, Britain, France, Italy and Canada was issued after an emergency conference call among the finance ministers and central bank presidents, led by U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell.
The G-7 has issued similar joint statements during periods of extreme market turmoil, such as the Sept. 11, 2001, terrorist attacks and the 2008 financial crisis.
Last week, the Dow plunged 14% from recent highs, its worst week since the 2008 global financial crisis.
“Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks,” the G-7 said.
Global agencies have indicated this week that there will be a significant economic impact as the virus spreads.
On Monday, the Organization for Economic Cooperation and Development said that the coronavirus, which was first detected in China but has now spread to 60 nations in Europe, the U.S., Latin America and other parts of Asia, could cause the world economy to shrink this quarter for the first time since the international financial crisis more than a decade ago.
The OECD lowered its forecasts for global growth in 2020 by half a percentage point, to 2.4% — and said the figure could go as low as 1.5% if the outbreak is sustained and widespread. There are signs that the outbreak has begun to ebb in China.
Economists at Capital Economics said Tuesday it was lowering its U.S. GDP forecast to 1.8% this year, down from a previous 2% with an expectation that the Fed will cut rates by one-half percentage-point by mid-year.
In an effort to calm markets that had become turbulent as the virus spread, Powell said Friday that the Fed will “use our tools" to support the economy, a strong signal that the central bank was prepared to resume interest rate cuts if the U.S. economy is threatened by the spread of the virus.
President Donald Trump, a frequent critic of the Fed chairman that he appointed, tweeted again on Tuesday that the Fed was not lowering benchmark interest rates fast enough.
The G-7 statement was also criticized by many economists for the lack of specifics.
Chris Rupkey, chief financial economist at MUFG in New York, said the G-7 has "nothing but a statement issued with vague promises.” Analysts at High Frequency Economics said the statement was "'utterly and entirely devoid of action verbs" and offered financial markets ”nothing new."
Jennifer McKeown, head of global economics at Capital Economics said, “”The statement falls short of hopes of a coordinated policy response and raises the risk that central banks will disappoint markets'expectations in the months ahead.""
AP Economics Writer Christopher Rugaber contributed to this report.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
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