The Dow S and P 500 the NASDAQ all fell into correction Torrey Correction territory last week, but the market surged yesterday following the Federal Reserve statement on Friday pledging support for the markets access Chief Financial correspondent Felix Salmon is joining us now to talk more about just how the markets are responding to the outbreak.

Well, how are they responding?

They've been sort of up and down and all over the place.

But let's start with what's happening with the U.

S markets.

What happened last week, right?

They fell into correction territory.

That's what people say to me.

I don't know what that means.

What does that mean?

It doesn't Okay, Technically, all the correction means is that stocks or 10% or more lower than they were at the very, very peak of the market.

Now it happens that the peak of the market was post Corona virus was actually in about mid February.

We started hitting new highs and then they felt back from those new hive.

So now they're like a little bit more than 10% below those highs.

That means that stocks are in a correction now, as we know, if you've been paying any attention at all to the stock market start actually incredibly volatile, they could go up or down three or 4% in a single day.

They did that yesterday.

They and and so it's really hard to get a very strong impression of what the markets are telling us from day to day when they can move around so much, or at least when the stock market could move around.

So much the more interesting in the more sober market.

The market we should really probably be looking at instead of the stock market is the bond market on the bond market is saying we have problems here.

The 10 year bond is an absolute record lows.

The yield you can get by holding government that is lower than it was even at the height of the financial crisis, when everyone wanted the safety with the U.

S.

Government debt and that a riel vote of no confidence in the American in the global economy.

So their limits, though Felix is you know, I mean so the feds have cut the feds cut rate today.

Market has been responding to that.

But there really are limits to what a rate cut can do, especially when rates are already so low.

Certainly taken bolster confidence in the markets, at least in the short term.

But a rate cut is not going to keep workers from going to work.

It's not going to rebuild supply chains.

It's not gonna allow the economies in Asia and some other European countries to recover as rapidly as people would like them, too.

And I mean the economy.

I don't mean the market.

So now absolutely, you're 100% right.

And you know, people are saying on Twitter right now.

If you go, if you go to your doctor and say I've got Corona virus and he says he'll have a 50 basis point Great cat, you're like great.

Thanks, right.

It doesn't help anything real in the economy if if people aren't traveling, if people are shopping, If people aren't committing that kind of economic activity, especially in China, even in the United States, then that's going to cause a massive economic slowdown.

The way that faith fed rate cuts normally help the economy is by saying, Well, what will happen is the Fed will lend money to the banks.

The banks will lend money to businesses the businesses will hire.

People spend more money.

That kind of stuff is not the problem.

The problem is not the businesses on spending enough money.

The problem is that people aren't spending, people aren't traveling, people aren't going out.

And that kind of problem is not really something that the feds could do anything about.

So then what if I say this?

Felix?

I mean, this is not the first time we've seen something like this, you know, there were stars one and two and they even avian flu.

I mean, you name it.

We've sort of seen these sort of illnesses.

Don't call it a pandemic, is nobody is before, and the markets bounce back.

Correct on day could easily bounce back this time and again, we have to just treat the markets as a symptom is telling us like how healthy is the global economy looking rather than like as the main thing that we're trying to address, you know, whether the markets go up and down ultimately doesn't matter that much.

Whether the economy grows or shrinks matters much more.

And that is a function of how Corona virus spreads.

The thing about SARS and murders and avian flu and Ebola and all of those is they didn't cause any significant slowdown in the American economy.

They didn't cause any significant change of behavior by the American consumer.

We're already seeing a very different story playing out in Corona virus but seeing empty shelves in supermarkets that we're seeing the kind of things that we used to see only in places like Hong Kong now happening in places like San Francisco.

And that means that Corona virus has already hit the American economy much more than any of the previous epidemics that you talked about.

So Felix want to things, I guess.

Going, as you recall, going into the 7 4009 recession, the Fed cut rates from above 5%.

Right?

If this doesn't work, if the economy, if the markets continue to weaken, if the economy's continue to weaken around the world, how much room is left?

We've already slashed rates.

I don't believe that there's a lot of room left for the Fed to maneuver.

If we continue to see weakness.

Correct.

The Fed doesn't have much room to cut rates.

European and Asian central banks don't have a lot of room to cut rates.

The U.

S government, the other side of the coin being fiscal policy how much the government spends.

The government already has a trillion dollar deficit, so it's not clear that the government has much room to spend more to borrow more.

So you're absolutely right that the fiscal stimulus and the monetary stimulus the economic policy makers can do is decidedly limited.

The rial activity that we really need to be concentrating on honestly is epidemiological and medical and trying to make sure that the virus does not spread in the real world really important information.

Felix Salmon.

Always great to have you, my friend.

Thank you.

Thank you.