The Dow Jones Industrial Average (DJIA) plunged by almost 786 points, while the S&P 500 dropped by almost 87 points. The Nasdaq Composite, which follows common stocks and other securities, fell by 268 points.
The stock drops come after US stocks rebounded on Monday, following last week's trillions of dollars' worth of losses due to the coronavirus. On Monday, the Dow Jones shot up by more than 1,200 points after the World Health Organization noted that the coronavirus “can also be contained with the right measures.”
In a Tuesday statement, the US Federal Reserve revealed that it would be cutting interest rates by half a point.
"The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1–1/4%," the Federal Reserve's statement reads.
“It’s great that the Federal Reserve recognizes that there’s going to be weakness, but it makes me feel, wow, the weakness must be much more than I thought,” CNBC’s Jim Cramer said on “Squawk on the Street” after the move. “I’m now nervous. I’m more nervous than I was before," he added, CNBC reported.
The Federal Reserve's move comes after US President Donald Trump has repeatedly criticized it for increasing interest rates. Following the Reserve's Tuesday cut, Trump urged the US central banking system to continue to cut rates.
— Donald J. Trump (@realDonaldTrump) March 3, 2020
As the threat of a coronavirus outbreak in the US continues to increase, G7 finance ministers and central bank governors issued a statement Tuesday.
"G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase," the group said after an emergency conference call Tuesday. However, the G7 statement did not include a list of potential actions the group may take.
"G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system," the statement added.
"This is a disappointment compared to previous hopes of an immediate and coordinated fiscal package and interest rate cuts," Jennifer McKeown, an economist at Capital Economics in London, is quoted as saying, referring to the G7's statement and its lack of detail.
The G7 is an international economic organization consisting of seven countries: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.