False Alarm? Panic over Fed’s Statement Causes Stock Markets to Plunge!

The Fed had made a rate cut by 25 basis points, but in the trading session on July 31, 2019, Dow Jones fell by 1.2%, S&P 500 plunged 1.1%, and the Nasdaq dropped about 1.2%. Only 13 stocks in the Nasdaq 100 showed gains.

A huge selloff came right after the confusing statement from the Fed’s Chairman Jerome Powell by stating that the cut might be the only cut, saying the rate cut was just a “mid-cycle adjustment.” Afterward, he corrected the earlier statement by saying that there might be more cuts coming. However, the confusion from the first statement had sent the Dow that had been moving stably to plunge as much as 478 points before buying came in to pull the index back.

At the end of the conference, he also indicated more hikes were on the table. He wouldn’t say how many ,and the market still closed in negative territory.

 

Bank of America stated that Powell did not deliver clear direction for what the near term path of additional Fed easing will be, and that’s why the market reacted negatively.

“Let me be clear: What I said was it’s not the beginning of a long series of rate cuts,” Powell said. “I didn’t say it’s just one or anything like that. When you think about rate-cutting cycles, they go on for a long time and the committee’s not seeing that. Not seeing us in that place. You would do that if you saw real economic weakness and you thought that the federal funds rate needed to be cut a lot. That’s not what we’re seeing.”

 

As of 8:45 on August 1, 2019, local time in Thailand, Nikkei fell 0.10%, SSEC lost 0.40%, HSI dipped 0.70%, ASX 200 plunged 0.26% and Kospi skidded 0.04%.

On July 31, 2019, SET closed at 1,711.97 points, rose 5.48 points or 0.32% with a trading value of THB 50.85 billion.