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Circuit Breakers for Stocks Triggered a Third Time in a Week
Published on: 2020-03-17
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Trader Michael Capolino works on the floor of the New York Stock Exchange Tuesday March 3 2020

Trader works on the floor of the New York Stock Exchange

The hyper-turbulent American stock market plunged Monday, with the S&P 500 triggering a market-wide trading halt for the third time in a week.

An exchange-mandated circuit breaker stopped action for 15 minutes after the S&P 500 fell 7% from its Friday close to 2,521.24 after markets opened at 9:30 a.m. in New York. The biggest exchange-traded fund that tracks the U.S. equity benchmark plunged 9% in early trading. Futures on the index sank 4.8% overnight before hitting levels that prevent further losses.

stock 01The pummeling is a continuation of one of the darkest periods in markets since the financial crisis, with rattled investors trying to figure out how to value companies whose earnings forecasts have become unreliable. The virus has spread to more than 3,000 Americans and has ground activity in Europe to a virtual standstill.

Emergency action by the Federal Reserve did little to calm nerves, with investors clamoring for a fiscal response to combat the economic effects that come with unprecedented disruptions to social interactions.

The central cut interest rates on Sunday and boosted liquidity to support markets rattled by the virus. The Fed will keep interest rates near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” Jerome Powell’s policy board said.

stock 02“It’s largely inconsequential,” said Peter Mallouk, president of Creative Planning, which manages about $45 billion. “The bottom line is this is a health issue.” The Fed’s actions “will have a limited effect, short-term effect until we turn the tide here.”

Another 15-minute pause would occur should S&P losses reach 13% following a resumption in trading. Such a drop would put the index at 2,358.58. If the drop hits 20%, markets would close for the day. A 20% decline would bring the S&P to 2,168.81, which would be its lowest level since November 2016.

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