U.S. stock index futures indicated a lower open on Tuesday after a statement by the G-7 failed to assuage investor concerns over how the biggest global economies will curb the economic impact of the coronavirus.
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As of 7:39 a.m. ET, Dow Jones industrial Average futures indicated a drop of about 136 points at the open. Futures on the S&P 500 and Nasdaq 100 also pointed to a decline.
The G-7 said in a statement they will use policy tools to curb an economic slowdown. However, the statement contained no specific actions.
Investors have been fretting over a potential economic slowdown as the coronavirus spreads around the world. More than 89,000 coronavirus cases have been confirmed globally along with more than 3,000 deaths related to the virus.
The virus’ fast spread led investors to price in easier monetary policy from the Federal Reserve.
The premarket moves follow a roaring comeback rally in the previous session that saw the Dow post its biggest percentage gain since March 2009. The index also recorded its largest-ever point surge on Monday.
The Reserve Bank of Australia announced on Tuesday a cut in its cash rate by 25 basis points to 0.5%, a new record low.
In a statement announcing the decision, the Australian central bank’s governor acknowledged that the coronavirus outbreak overseas is having a “significant effect” on the country’s economy and said the move to ease monetary policy was done to “provide additional support to employment and economic activity.”
Monday saw U.S. stocks snap a losing streak that had gone on for over a week. Some investors are skeptical that the rally has legs without a significant central bank response. Even if that comes to fruition, investors have their doubts the market has seen the end of its tumultuous trading of the last six days.
Jeff Mills, the chief investment officer at Bryn Mawr Trust, said on “Power Lunch” that he was not advising clients to buy back into the market and that Monday’s rally was just a “technical snapback.”
“I think the spectrum of outcomes is so wide here that one trading day is not going to resolve all of our issues, so we’re telling our clients just to sit tight for now,” Mills said.
The U.S. stock market saw a historic bounce back on Monday, with the Dow gaining nearly 1,300 points. The Dow finished up 5.1% on the day, while the S&P 500 gained 4.6%.
Some expect central banks around the world to announce a coordinated policy response to fight the coronavirus. Goldman Sachs chief economist Jan Hatzius said on “Closing Bell” that he expects most central banks for G-10 countries to cut rates, with only the Bank of Japan abstaining.
Futures traders are expecting aggressive action from the Federal Reserve in particular, with the CME Fed Watch tool showing that the market has priced in 75 basis points of cuts through April.
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March 03, 2020 at 05:30PM
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Dow futures higher on hopes of global monetary stimulus CNBC - msnNOW
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