Economy remain strong. The unplanned rate has been near halfcentury lows for more than a year. Job gains solid in wages have been rising. These strong labor Market Conditions have underpinned solid household spending, which has been the key driver of Economic Growth over the past year. Fomc meetingf our in january, prospects for growth remain favorable. Judge that monitoring policy was wellpositioned to support that outlook. Since then, the spread of the coronavirus has brought challenges and risks. The virus has afflicted many communities around the world and our thoughts and prayers go out to those who have been harmed. The art break has disrupted Economic Activity in many countries and has prompted movement in Financial Markets. To virus and measures contain will weigh on Economic Activity, both here and abroad for some time. We are seeing effects on tourism and travel industries and hearing concerns from industries that rely on Global Supply chains. The magnitude and persistence of the overall effect the economy remain highly uncertain and the situation remains a fluid one. Against this background, the committee judged that the risks to the u. S. Outlook have changed materially. In response, we have eased the stance of Monetary Policy to provide more support to the economy. The ultimate solutions to this challenge will come from others, particularly help health professionals. We will do our part to keep the u. S. Economy strong as we meet this challenge. As always, our actions are guided by our congressional mandate to promote promote profitability. We will monitor the implications for the Economic Outlook and we will use our tools and act as appropriate to support the economy. Thank you, and i will be happy to take a few questions. Thank you. The wall street journal. First, what changed between last week when many of your colleagues seem to indicate it was till still too soon to tell how this might influence the outlook . What changed between last week and today . And then how much confidence do you have there will be a quick and relatively complete recovery of economic recovery after the peak of this virus has passed . Chm. Powell what changed . We have been carefully monitoring the situation since it first became known and waiting to see how it would evolve. Is time toe that it act in support of the economy. When she reads the decision, we decided to go ahead. Madet once we the decision, we decided to go ahead. The virus spread in the United States but what matters is not the epidemiology, but the risk to the economy. We saw a risk to the outlook to the economy and chose to act. In terms of my what was your question . How do you expect the economy to recover from this . Will it be persistent or shortlived . Chm. Powell dont think anyone knows how long it will be u. S. Economy is strong and we will get to the other side of this and i fully expect we will return to solid growth and a solid labor market as well. You said that the ultimate solutions will come from others and i have two questions about that. First, is this a coordinated action with other Central Banks, and should we expect more as part of that . And second, what would you like to see from american fiscal policy makers in response to these new threats . Chm. Powell first question we are in active discussion with Central Banks around the world on an a ongoing basis, as you might expect. I have been talking with them around the world and that will continue. Central banks are doing what makes sense. Our action represents what we think is the right policy for us in our particular context under mandate. In the g7is morning statement of finance ministers and governors and that reflects coordination at a high level in the form of a commitment to use all available tools, including health care, fiscal, and Monetary Policy as appropriate. , weerms of fiscal policy have a full plate with monetary to give advice but you mentioned the g7 statement as appropriate as well. Heather scott. The statement seem to indicate that policymakers would use tools but were not going to do anything imminent. Does this contradict that or is this in keeping with the statement by the g7 this morning . What would cause you to take another step . What would you be looking for in terms of Economic Outlook or data . To well the g7 is have seven countries and different policies and severance situations and we get together as a group and say at a high level that this is what we will do and we will use all of our tools to try to support the economy. That is the statement of general support. You will see actions. You have seen our actions. It is up to individual countries and individual fiscal policy and Central Banks to do what they do. It is possible there will be more formal coordination as we move forward. , iterms of moving forward would say that we do like our current policy stance. We think it is appropriate to support the goals. As i said in my statement, we are prepared to use our tools and act appropriately depending on the flow. Are you watching something that would change that . Chm. Powell it is a range of things. Heather long from the washington post. There has been rising concern on credit markets and insolvencies from businesses or individuals from the coronavirus. Can you speak to if the fomc is talking to this or will we see emergency provisions activated or things you normally do during a hurricane or that type of disruption to the economy . Chm. Powell we have not seen that happening yet. We are thinking about what we can do should those things happen. The economy is performing well. We do here concerns, particularly from those directly exposed. There is nothing in the nature of the Financial Markets or functioning. When it comes to those sorts of issues, we will the supervisors will work with banks to ensure they work with their borrowers and that sort of thing. I can imagine doing those sorts of things. I cant imagine not doing those sorts of things. Brendan greeley, financial times. Have you discussed any other monetary tools in addition to rate cuts and pacing and timing of when they may be appropriate . Chm. Powell we are in the middle of a review of all of our tools. We have talked about what our toolkit is and put that in the minutes. But in the current context, no. What we discussed is what is appropriate and it came appropriate to make a change in did it today. Thank you for having the press conference. Can you take us through the reasoning behind the rate cuts a little more in depth . Some economist say this is supplyside shock, rate cuts not suitable for this. Others say it is more due to demand shock. Can you give us more depth on the reasoning behind the rate cut . Thank you. Chm. Powell i would be glad to. The fire was outbreak is something that will require a multifaceted response. That response will come in the first instance from Health Care Officials and health experts. It will also come from fiscal authorities should they discern determine a response is appropriate. It will come from private and public sectors, businesses, school, state and local governments. There is also a role for Monetary Policy. It can support Economic Activity. We recognize a rate cut will not reduce the rate of infection or fix a broken supply chain. We get that. We do leave our action will provide a meaningful boost to the economy. It will support accommodative financial conditions and avoid a tightening of financial conditions and help boost household and business confidence. You are seeing Central Banks responding as they see appropriate in a institutional context. Can you tell us what you would do if the virus ends up being contained . The fedu envision actually raising rates in short order if the economic damage doesnt occur the way that you potentially fear . My second question is, President Trump was tweeting about you this morning and talking about cutting rates. It did you feel any political pressure to make this move . Chm. Powell on the first question we will always set Monetary Policy at a given time in a way we think best serves our domain goals. If we get to a place where it is an inappropriate time to change the stance, we wont hesitate to do that. It is veryo say that important that people understand that we will always pick our decisions based on the best thinking we have based on what we learn from our outreach to businesses, nonprofits, educational institutions, that we get every cycle through the reserve banks. The best analysis, we will always make it in the interest of the American People to Carry Forward and try to achieve the mandate congress has given us. We will never consider any Political Considerations whatsoever. We will not do that and it is very under important that the public understand that. Associated press. I know you noticed noted outreach and some banks were talking about how they would listen to contacts. Have you gotten reports from the ground from your business contacts, nonprofits, that have affected your decisionmaking . What are you hearing from those folks . Thank you. Chm. Powell we are hearing i would just say the effects are at a very early stage. You are hearing concerns from people in travel business or Hotel Business and things like that. That is what you are hearing. You do not see think showing up in actual data. You see them showing up in forecast indicators and things like that. We expect that will continue. That is one of the reasons why we came to the view that it would be appropriate for us today to move to support the economy, and that is what we have done. Thanks very much. You have been listening to fed chair jay powell speaking at a News Conference following this mornings 10 00 a. M. Eastern emergency Interest Rate up several basis points. Markets were down 8 aps per index and then they went higher per index andcent then they went higher. Now down by a percent. The nasdaq is down. 9 . 1. 0394. Ear back to lets bring in bloombergs Michael Mckee. Strategy,ad of global Marilyn Watson. Some call it an emergency rate cut. And chairman powells comments that there was never any political consideration. This is in keeping with the mandates and there will be aggressive moves Going Forward from the g7. This is just the fed acting as it should. Marilyn when you look at the statement from friday of last week and from the g7, it was clear the fed and Central Banks are willing and able to do as much as possible. We were expecting some form of cut. I also think when you heard the statement just now from jay powell i think he was very clear that you have three facets of addressing the outbreak. There is the response in terms of health care, fiscal policy, and to a lesser extent a blunt tool, Monetary Policy. He was very clear and sissy uccinct that he wanted to stabilize fiscal conditions it was just one of three things. Vonnie he says there are other policy tools in broad consideration of what the federal is her can do but fed can do. Michael, what have you learned from this solvency is that talked about westmark doesnt nd like the 50 basis point talked about. Does it sound like the 50 basis points was . Michael they cut 40 to 50 basis points. By doing this, it will help loosen conditions. Rising stocks would help loosen the conditions. It is not clear that was completely necessary. Have seen Inflation Expectations drop and maybe they would come back. He also said the fed recognizes it is not going to have an impact on the supplyside, but it will give a lift overall activity on the demand side eventually. Rate cuts will work their way in and maybe nine to 10 months. If we come out the other side of the virus, then the economy should get a boost. The question of the political impact happening, because we could see a boost coming in november, when people are going to the polls. Those are the reasons. What i saw earlier in what he endorsed, if you decided you are going to do it, then just do it. Dont keep people waiting for something you already promised and then priced in. Vonnie and he was asked what changed between last week and that it hase said come to the view now that it is time for us to at but what we have seen is the broader spread of the virus and we know the economy is strong and we will get to the other side. Michael it was interesting he did is that tease that we might get Something Else from other people. He didnt want to go that far, but said each has pledged to act in their own interest. When he was asked if that meant a coordinated response, he said we promise a coordinated response but i will let them speak from themselves. Vonnie he said they are talking to the ongoing Central Banks on an ongoing basis. Im in a ring in the economic chief economist. We are back to where i am going to bring in the economic chief economist. We are back to where we were. Was it successful . Costs isk lowering important and it shows they are on top of the situation and responding forcefully. What we did hear from the brief press conference was that this is based on what they are hearing from different contacts. The fed is talking to the private sector and responding swiftly. The fact that he is talking to responding to the spreading in the u. S. Means that the case count and containment measures will be a very important barometer of what comes next. This 50 basis point move, it expects to be followed by 50 basis points of easing come and not in one fell swoop. We think 25 basis point back to back moves will follow whether it is in march or april and that will depend on headlines related to case counts. There have been issues with the number of test kits available. Once the test kits are out there and we get the results and find out what happens to domestic transportation and quarantine measures and social distancing measures, we would find the forecast. Isnie if what he is saying true, and i will ask you do you also foresee that . That would mean by mid summer we would be to a 50 to 75 basis point shortterm Interest Rate how tenable is that . Marilyn he opened the door for other rate cuts. Ishink at the moment it showing how far the containment and the impact on the economy itself. He said the u. S. Economy continues to do incredibly well. We have the jobs reports coming out on friday. We have not seen in the u. S. The real impact of the virus. We are seeing it in elsewhere elsewhere in places like italy and japan and seeing economic consequences coming through. In terms of the u. S. , if and when they cut rates be much more determined on a casebycase basis going through the different decisions. Vonnie how long before we hear something from the ecb . Marilyn given the statement and what we have heard that the ecb will do anything they can, have a meeting scheduled for next week already. It is likely may see something before then. If we see something from the ecb in rate cuts, they are much more limited but they can do more in qe and we do expect to see something from the ecb. Vonnie the fed chair also pointed out in the future, there are other things that can be done in terms of the u. S. Economy. It will be interesting to see. Fixedlobal fundamental income strategy had at blackrock planss your team and your are they advising they do something aced on this . Marilyn we have been managing something based on this . Marilyn we have been managing funds. We have been hedging funds. We have taken down forms of risk appearing in prudent in a riskadjusted approach. It is a tough time for clients and they want to know what we are doing and what we think knowing forward. Clientsot advising that rush to exit or add on, but keep risk relatively low. Of also take advantage opportunities as they come through. Isnie Marilyn Watson sticking with us and Michael Mckee as well. Andnomics and corsi policy correspondent is also sticking with us. God has been at a conference and speaking to see guy has been speaking at a conference and has been at a conference and speaking to ceos. Guy there was a sense that the aviation ceos in europe sibley dont know what is going to happen next. There is a lack of transparency and understanding about how this will progress. There is an expectation that by the summer things will have settled back down, simply because the weather will improve. They are very much aware of what is happening in italy right now the huge impact that has happened there. They have cut capacity and there is a lack of demand. They were talking about a fiscal response, which is interesting as well. They said there could be some physical help, maybe not for their sector but more broadly for the european economy. Marilyn, is Monetary Policy the right response here . My understanding is the real problem with coronavirus is not a 30,000 feet level, it is right down at the supply chain level, where companies are maybe not getting paid or a cash flow shortage. What is 50 pace 50 basis points going to do . Marilyn Monetary Policy is not the most appropriate toll for the aviation and slide chain and a supply chain and Small Companies as well. We need to see more in a fiscal response. We see in italy, is how the package there and we expect to see more coming through from a range of different governments. Anna terry policy can help to a certain extent and can Monetary Policy can help to a certain extent that it may not help for Smaller Companies and will not help when you have lack of demand coming through that we are seeing in the airline industry. You need to see much more of Monetary Policy and fiscal policy and tweaks in regulation to help the companies. I am seeing the biggest bounce in btps. Italy has been front and center in the outbreak and how it has progressed in europe. But it is fascinating to see the btps getting the biggest bounce. ,o what extent is the fed doing not just for the United States economy but the Global Economy . Marilyn they are sending a message to the Global Economy that they are willing to do as much as they can from a Monetary Policy stance. When you look at the messages coming out of the ecb or the bank of japan and other Central Banks, it is that they want to support financial conditions. When you look at italy in theicular, we think action will be determined Going Forward in the short term i the ecb measures they might implement. Beentalian government has when weng stimulus, but see some sort of response from the ecb, it will help support btps and italy. Vonnie Michael Mckee, the other isngs have been focused on super tuesday and the delegates being awarded. 14 states voting and a territory. What do markets do tomorrow to digest the possibility of maybe . Sanders campaign it looks like he may be in the lead . Michael there is a lot to digest in the markets. They are pricing in right now the fed move and then they will have to digest the results tonight. The issue will be how much of a lead given the polls that we know Bernie Sanders might have over joe biden tomorrow. If it is a very big lead, there is the possibility that has some effect on the markets. It will be hard to tease all of that out, because there is so much going on at this point. Vonnie and so much that can happen between now and november on various fronts. Michael mckee, thank you. I want to address similar questions to marilyn and carl. Super tuesday ongoing and markets trying to wrap their heads around this if the basis point cut, the dow down 2. 1 how much will super tuesday impact mavs trading . Marilyn that is the milliondollar question. There is so much going on with the rate cut. In terms of people following the progression of the coronavirus as it spreads throughout the u. S. And other countries, on super tuesday, the elections may be taking a backseat in terms of markets. Tomorrow might be a different story. On may see impact depending what happens with the democrats or whether there is a clear front runner. Certainly, today is about the fed and the spread of the virus itself. Guy in terms of what is left for the fed and the Monetary Policy take, if we get more instability about the year, what is your sense of how the monetary and fiscal authorities will Work Together . The president is going to be speaking very shortly. Do you think he will be backing powell up . I have heard his criticism from the president of jerome powell. He just delivered a 50 basis point cut. Do you think a president and the fed chair can get on the same page . Carl the president wants more aggressive moves from the fed in this regard. I think he will welcome it but also castigate them for not even doing more aggressive measures at this time. You bring up an important point this notion of coordination with fiscal authorities. That tends to be a slow process. It is not appropriate at these times. Vonnie lets get to the president deliveringhe is delivn washington. The great people of tennessee in the wake of the vicious tornado that killed at least 19 people and injured many more. We are working with the leaders in tennessee, including their great governor to make sure everything is done properly. Fema is already underground and i will be going there on friday. Our hearts are full of sorrow for the lives that were lost. It is a vicious thing. Those tornadoes. I have seen many of them and ive got to see the results. If youre in their path, bad things happen. Bad things happen. I went to alabama nine months ago and i saw the devastation that left in alabama. Everybody was so incredible, the people were so incredible. 70 people get killed if you are in the path. People getso many killed if you are in the past. We will be going to tennessee on friday. We send our love and prayers of the nation to every family affected. We will get there and we will recover and we will rebuild and we will help them. Condolences. Situation. It is bad news. I am honored to be here with the National Association of counties at your annual legislative conference. It is a great group of people. I have dealt with you for a long time. Everyone said i will every once in a while i will find one i do not like. [laughter] it is true. When one of you are in the way, it is tough to get that job done. Easy,oure helpful, it is and we get it done and we produce a lot of jobs and good results. You are important and people doing what i do before i got here, we realized how important you are. Incredible job. Some of the most incredible people doing exactly what you do. Thank you very much. [applause] pres. Trump in this room there 1200 who directly improve the lives of millions of americans every day. I want you to know my administration will always be your friend and partner and ally and resource as you work to deliver an amazing future for your counties and your communities and for the country itself. As i said in my state of the ago ddress three years i have had a number of state of the unions already, can you believe it . Three years ago we launched the Great American comeback. A certaind it with splash that nobody has seen in a long time. What we have done in our country has been incredible. Our country is so strong. Vonnie President Trump speaking at the National Association of counties legislative conference. Well keep you apprised of anything he says relative to the markets. European markets just closed. Lets get to kailey leinz. European stocks managing to close in the green after the surprise 50 basis point cut from the fed. 600ftse 100 up, the stoxx up more than 1 . In the u. S. It has been a whipsaw session. Stocks downg u. S. About 1. 7 on the s p 500. We are seeing dramatic options in the bond market while yields plunge across the curve. We are on 1 watch on the u. S. 10 year. I want to focus on the shorter end. That is what is controlled by the fed. U. S. 10 year yield down 17 basis points. We are right around session lows. 74 basis points on the two year yield. When you look at the equity market using the imap function, it is financials the most under pressure. 10 of the 11 sectors are in the red. A risk off sector composition. Financials bearing the brunt of the losses, down 3 . Lower rates putting pressure on bank profitability. We know the only sector in the green is real estate. Followed byp. 1 , material and utilities. There are movers to the upside in the equity market, typically homebuilders but lower rates, lower Mortgage Rates may be more people want to buy houses. You also have the likes of dr portman keeping homes higher by more than 1. 5 . Interest in Toll Brothers has slipped into the red. Homebuilders could be some of the beneficiaries of a fed rate cut. Guy thank you very much, indeed. Kailey leinz wrapping up the european session, finishing in positive territory. As she says, we are starting to see a different situation in the United States. We are back with Marilyn Watson of blackrock and bloombergs Carl Riccadonna. Let me talk about where we are in the cycle. If the three rate cuts we saw previously were a midcycle adjustment, is this the end of the cycle . Presumably that is the logic. Carl it is the end of the cycle if we have a quick containment of the virus situation, which based on what we are seeing abroad does not look like a likely scenario for the u. S. It seems that there is an expectation of significant increase in the case count once more testing equipment is available. That will play into the containment measures, which also end up being economic containment measures. That is why my team anticipates an additional 50 basis points of probably 225 basis point cuts at meeting unless things really become destabilized. Thatimportant to consider Monetary Policy easing acts with a long invariable lag. I would argue we are not feeling all of the easing in the second half of last year. It will take time for that to work through to the economy. The fed senses Downside Risks are increasing not much more so they are taking out that much more insurance against the Downside Risks. Jay powell did emphasize the economy remains on sound footing. Lets explore that a little bit. The midcycle adjustment to keep the cycle going. This rate cut obviously is related to what is happening with the coronavirus. Is this rate cut designed to stave off a recession . What is the economic impetus for this rate cut if that is not the case . Marilyn one of the key objectives jay powell laid out as they want to extend the current cycle of Economic Growth we have. We are in the mature end of the cycle. It is one of the longest we have seen in history. They do want to extend that. They want to promote stable, sustainable growth. That is one thing. When you look at this rate cut, and the market is pricing in further cuts on a casebycase basis, i think it will be hard to see, even when you do see an economic rebound, if you do see of the virus and a resurgence in global growth, it is hard to see the fed increasing rates back to where they were before. In terms of extending the cycle, we ought to lower rates faster and i think we wouldve expected to be extended from here. We expect to see lower economic we will seethen resurgence in Economic Growth. Vonnie it gets more and more complicated for the Federal Reserve as we go through this year as well, to look like they not being impacted by the political machinery and so on. Jay powell very clearly said we do not take politics into consideration, but they try not to move around elections. Carl the fed tries not to move around elections but obviously they will not sit on their hands and fiddle while rome burns. Had we have a status quo for this year and no change for the trade war and the economy meandering along in the vicinity of 2 growth or little bit last, the fed would have tried to stay in the shadows until beyond election day. Our expectation was they decide mythspond to the ongoing on the inflation side of their mandate, they would wait until december. What is happening now is responding to a Fast Breaking crisis. To make one more note about the issue of the fed not deal with the supply shock, that may be true, the priority at the moment is to avoid a destabilizing drop in income, whether it is Household Income or corporate income. By lowering the cost of financing you can help to prop up growth to some degree. Is that enough . We will see. Certainly we have seen the last couple of months as Interest Rates have come down that we have seen a positive impact on consumer spending, on durables, on the housing sector. If you try to stoke those engines of the economy to help seeing in drag we are other sectors like transportation and whatnot. Vonnie will any of this matter if we get a Bernie Sanders candidacy or if it becomes obvious that trump will not get a second term, will markets then be trading on something entirely different . Or do we go back to the questions of trade and Earnings Growth . Marilyn it is a combination of all of them. We have the underlying fundamental Economic Growth that will continue to feed through into market prices. To a certain extent, as you do face a different regime, different government, essentially a very different fiscal situation that will also feed through into expectations of Economic Growth and expectations of expenditure. It is a combination of all of them. I do think that ultimately the economic fundamentals will play through, whether it is in terms of being impacted by policy, the government being impacted by policy from the fed. It is a combination of both of them. Carl i think it is little bit of shoddy analysis to try to attribute the market moves to a changing dynamics in the democratic race at this point in time. I know the president did that last week. Obviously what is driving the markets is the big unknown, the black swan event of covid19 and what that means for the economy. I agree with everything marilyn said. We have to remember a potential Bernie Sanders presidency Means Nothing if Mitch Mcconnell still has his seat in the senate as the Senate Majority leader. It will be roadblock after roadblock between the white house and congress. Not a lot can get done. There can be executive orders and some moves around the periphery in terms of medicare changes, but you will not see medicare for all if Mitch Mcconnell is sitting in the senate seat. We have to think, as we look at the results from super tuesday, lets suppose it is a Sanders Warren ticket. Someone will have to fill that senate seat. That is picked by the governor in those states. We have republican governors in massachusetts and vermont. Sanders winning the presidency would make it all the more likely republicans maintain control of the senate. It is very close, which way the senate will flip. If we have two republican picks from those governors, that it almost certainly stays in republican hands. Vonnie excellent point. Guy . Guy as i watch u. S. Rates go lower and lower on the market this afternoon, carl, i want to check in with you about the cost of capital. Are you suggesting the cost of capital in the United States, given the economic backdrop, is too high . I am wondering what effect another basis points of cheaper money will do other than give a further boost the housing market, which has been juiced up already . Carl i am not saying it is too high, but if you love mortgage at 3. 5 , you will love a mortgage at 2. 5 . The marginal changes in the cost of financing have very material Macro Economic consequences. We were not in restrictive territory. Given the outbreak and the development of events to move further into accommodative territory, absolutely. What what is this guy is this going to do . If i am a bbb company experiencing cash flow problems, what does this do for me . Carl it makes it cheaper for you to refinance debt. Consequences, and for the healthy crowd, it makes it more viable for them to take on debt, whether it is buying a new home, new car, or building a new factory. By helping the healthy operators, that will make a more positive operating environment more broadly. This goes back to the notion of a fed toolkit in general. Even though we are getting closer to the zero bound, by no means do we think the fed is running out of ammunition they are running out of conventional ammunition. Qe4,ings turn pearshaped, qe five, and six will be lined up and ready to go for the fed. Vonnie marilyn, we could ask you the same question. Marilyn i agree with everything carl said. Certainly the fed has by no means run out of ammunition. When you look at the economy, one of the key things to focus on now as we have seen the Services Sector has been much stronger than the Manufacturing Sector and it is held up incredibly well over the past few years, not necessarily in the short term. Now we are seeing an impact on services in terms of hospitality, in terms of travel, and terms of spending and other things. One of the key things to watch out for will be the impact on the Services Sector, not just on the Manufacturing Sector, where we are already seeing supply chain dislocation. Chair, carlfed ,iccadonna specifically said this will not fix your supply problems. Sideuch can the demand help . Carl the objective is to prop up the demand side or stoke it further to generate the income that helps to patch things over, paper things over until the supply issues can be resolved. Going into this, we had a global excess production capacity. There should be inability to relatively quickly reorient supply chains and networks to deal with this. It does not happen overnight. When there is excess capacity in the system, that is a favorable backdrop for that realignment to occur. It needs time, and in the interim you do not Want Companies going broke because they have no income. They prop up the homebuilders and the spending and the economy, and that gets you a shortterm fix to hopefully buy time for supply chains to reorient and potentially for fiscal authorities to step in. Given the u. S. Political landscape, it will be a challenging environment to see meaningful fiscal measures put in place. Maybe that is part of why the fed has to do what it did. About7 call, they talked coordinating measures on Health Care Operations and whatnot and fiscal operations. As we learned during the financial crisis, it can be very slow for authorities to step into play. When they do step in, it can be powerful, but this has to go through congress. To get President Trump, Mitch Mcconnell, and nancy pelosi in a room and get them to agree on something will take time and the fed was not willing to make that bet. Why do you think the fed just did 50 basis points . Why wasnt there a package of other measures . Is it that with this was done in a shortterm basis, or do you think therell be more to follow . Carl i think 50 basis points was a reasonably sized move. It is cognizant of them not having that much conventional ammunition in terms of Interest Rate policy, but a situation where we know Downside Risks are increasing, but we do not have a sense of the scope of that. Moving a full percent today would have potentially this . Hy was not there qe why didnt they get a we will buy some credit, we will make sure the companies not be going to the wall . Carl we dont know what the fallout is going to look like yet. We should still consider this to be an aggressive insurance move. It makes sense to going to conventional policy. The fed pulled out the stops on qe today before they exhausted the conventional policy, i think there could be a negative psychological impact to the marketplace where people would really start to ask those questions. What does the fed know that is not publicly available and may be counterproductive for them to do so. Feroli of jpel morgan out with his note, saying that jay powell did not offer much your bank. They think would rather cut all the way down to zero at the next meeting. For jp morgan, this is a Downside Risk. Lets get a market update. It has been quite the couple of hours. Kailey leinz will take us through. Kailey right now we are firmly in the red for all three major averages, although we are off the session lows. The dow down nearly 400 points, the s p 500 and the nasdaq down 1. 2 . Whipsawing between positive and negative territory as investors way how effective the rate cut will be. Selling, andors money pouring into the bond markets. The u. S. 10 year yield down 13 basis points. You are at 1. 03 . Fresh record lows, far lower than the previous records we saw in 2016. Since we are at 3 in 2018, we are down more than 200 basis points. We are on the 1 watch. This does not go for the 10 year, we are seeing those tumble all through the curve. A two year down by 16 basis points. That is putting a lot of pressure on faang stocks. The Financial Sector is the worst performer in the s p 500. When you look to the kbw bank index, it is down 3 , giving back a large chunk of the gains. Concerns about what lower rates will mean for net interest margins, specifically for the regional banks. The worst performers are comerica, the Smaller Banks that rely more on net interest income. Other than bank stops, another sector that is lacking is technology. That goes for the mega cap text like apple and microsoft. 2. 6 , apple down nearly 2 . Amid the ongoing coronavirus concerns, semiconductors under pressure. Down for percent. Down 4 . Guy thank you very much indeed. We are back with Marilyn Watson of blackrock and Carl Riccadonna of bloomberg economics. Also joining us is bloombergs matt bosler. What you think about what has happened . The fed cutting, the equity market going down. We do not have met yet. We will get him in a few minutes time. Just in terms of what happens next, im trying to figure out what the earnings season is going to look like. How do you think this will affect corporate americas ability to generate profits. We are probably going to wait some time before we get an understanding of what the effects of coronavirus is. If you are a ceo, will this change your view on your ability to make money at this point and mitigate some of the effects of the coronavirus . Marilyn it will take some time to see the economic consequences and to see if everything seeps through into profit margins. We have already heard from a wide range of companies that they expect a negative impact on their businesses from the coronavirus, whether it is through demand, whether it is through a broken supply chain, we would expect to see, to go forward into the Second Quarter that it will have a depressing impact on earnings. In this quarter we had a pretty decent earnings result at the start of this year. I think it will take some time to see the impact on corporate profitability. We would expect to see that feeding through. The s p is down 1. 2 . What does that tell you about the Market Perception of what has just happened . I wouldve thought the worst reaction if it could be hoping for would be the s p would be down on a day at cut 50 basis points. Marilyn the market is still digesting and trying to work out what is going to happen with the virus and the actual Global Economy and the u. S. Economy in particular. It is only the past few days we are starting to see an impact on the u. S. In terms of the outbreak. We are not seeing the economic consequences as well. It will take time to feet through. If you think back to two weeks ago when the stock market was at record highs, we have seen a correction. Where announcing risk aversion fully priced in in terms of the treasury market and safe havens such as the japanese yen. At the moment market is trying to digest where it is finding opportunities. Maybe pricing and value opportunities. It is also trying to digest what the actual impact will be on earnings Going Forward. Vonnie citigroup is out with its reaction and people are saying what is next . Citigroup is expecting further cuts in march. March 18 would be that decision. ,hen possibly more after that potentially even a 50 basis point cut in march Carl Riccadonna, let me suggest to you that should there now be a physical response . Response . L carl they have to look beyond what the fed can do. I am not sure what we will be seeing abroad, what we can look for in the u. S. That is may be feasible in an election year, there two vehicles. One is money you are throwing of the problem. Already there seems to be agreement on a big package passing through. That does not move the needle on the macroeconomy, that type of spending. The type of fiscal policy that can move the needle at the macro level in a very rapid fashion is not the type of big package that would have to be passed through Congress Like we saw during the financial crisis. Where we have seen that in the past is Something Like a payroll tax holiday, where we relax the contributions into social employers oreither the actual workers, and then very quickly workers see a higher paycheck passing through the system. That is something we have done in the past. It would be easy to execute and both sides could get on board. Vonnie thank you. I want to bring matt bosler in now. He is a fed reporter at bloomberg news. We have had two hours of response in the market and on the street to these emergency rate cuts. 50 basis points. What is the takeaway . Matt it is interesting. Traders are still pricing roughly even odds for another 25 basis point reduction at the march meeting when the fed gathers in disco meetings for the regularly scheduled meeting. Reaction. Rting to see jp Morgan Michael feroli just pulled his car forward to the march meeting. He said there is a risk they could cut all the way to the zero bound as soon as march or april. We are starting to see the sentiment for lower rates as a result of what we have gotten today. Where are we in the Economic Cycle . What does this tell us . If the fed is going to cut and cut again, what does this tell us about how close we are to the end of the cycle . Matt theyre looking at this is similar to what they did last year, which is not about being at the end of the cycle and taking out more insurance against the Downside Risk to a good outlook for the economy. That is the message jay powell reiterated today. What you are looking at is the response to unexpected developments with the hope that doing this will extend the expansion for the for siebel future. Vonnie matt bosler, fed reporter, thank you for jumping on that. I also want to thank our panel of Carl Riccadonna, chief economic at bloomberg economics, and Marilyn Watson from blackrock. Many thanks to you coming on and spending all this time with us on an interesting day for markets. Coming up, it will be super tuesday on balance of power with david westin on Bloomberg Television and radio. This is bloomberg. David from bloomberg World Headquarters in new york to our tv and radio audiences worldwide, i am david westin. Welcome to balance of power, where the world of politics meets the world of business. The brief today is all about the fed. Peggy collins in washington on what the fed did and why jay powell says they did it, and Abigail Doolittle with me in new york on the strong reaction in the markets. Peggy, lay out for anyone who doesnt know what the fed did this morning. Peggy the fed did what is called an interim meeting cap. They did it at 50 basis points. This is the first cut outside of a scheduled meeting we have seen since the financial crisis. Essentially the fed came out and said we understand there are concerns in the economy about how the coronavirus could unfold and what that could do to the Economic Outlook. We are still monitoring the situation. We think the fundamentals of the u. S. Economy are still strong but we are adding cushioned insurance into the u. S. Economy by doing what we can and cutting 50 basiss