Coronavirus vaccine more important than Fed lowering rates

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The cure for the stock market’s coronavirus-driven volatility is not lower interest rates from the Federal Reserve, CNBC’s Jim Cramer said Monday.

“Unless the Fed can create a vaccine or beat the virus, then it really doesn’t matter,” Cramer said on “Squawk on the Street.” 

The “Mad Money” host was speaking as U.S. stock futures, which saw wild swings overnight, were pointing to a higher open Monday, which then happened.

Last week, Wall Street saw its worst weekly performance since the 2008 financial crisis as the Dow Jones Industrial Average, S&P 500 and Nasdaq sank into a correction territory, defined as moves of 10% or more from recent highs. 

Cramer said he believes the optimism is related to the belief that the Fed could soon cut rates to help insulate the U.S. economy from the negative effects of the outbreak.

Goldman Sachs thinks the Fed will likely announce a 0.5% rate cut at, or even before, its March 17-18 meeting. Goldman then sees the central bank cutting another 0.5% later this year.

The current fed funds rate range is pegged between 1.5% and 1.75%. The Fed reduced rates three times last year.

Monday morning, traders in the futures market were indicating about a 9% probability that the fed funds rate, which serves as benchmark for other very short-term rates, will fall to a range of zero to 0.25% by December.

That’s according to the CME’s FedWatch tracker.

On Friday afternoon, Fed Chairman Jerome Powell said, in a statement, that the central bank will “act as appropriate” to support the economy during the coronavirus outbreak.

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