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Stocks and Bond Yields Sink, Capping a Week of Wild Trading Stocks and Bond Yields Sink, Capping a Week of Wild Trading
(32 minutes later)
Wall Street was gripped by another wave of worry over the spreading coronavirus on Friday. Stocks tumbled, investors rushed into the safety of government bonds, and oil prices nose-dived.Wall Street was gripped by another wave of worry over the spreading coronavirus on Friday. Stocks tumbled, investors rushed into the safety of government bonds, and oil prices nose-dived.
Financial markets have traded wildly for more than two weeks, as investors have tried to come to grips with the sudden rise in the number of virus cases, and the threat to the economy posed by measures to contain them.Financial markets have traded wildly for more than two weeks, as investors have tried to come to grips with the sudden rise in the number of virus cases, and the threat to the economy posed by measures to contain them.
Friday was no exception. The S&P 500 fell nearly 4 percent at its lowest point before recovering those losses and ending down less than 2 percent. Friday was no exception. The S&P 500 fell about 4 percent at its lowest point before recovering somewhat and ending down less than 2 percent.
Perhaps the most notable move in financial markets was a slide in yields on government bonds to levels that would have been considered unthinkable just two weeks ago. The yield on the 10-year Treasury note fell to as low as 0.68 percent in early trading Friday. Such a steep drop reflects near panic, analysts said, given that there was little news overnight.Perhaps the most notable move in financial markets was a slide in yields on government bonds to levels that would have been considered unthinkable just two weeks ago. The yield on the 10-year Treasury note fell to as low as 0.68 percent in early trading Friday. Such a steep drop reflects near panic, analysts said, given that there was little news overnight.
Oil prices slid 10 percent as the world’s major producers failed to reach an agreement to reduce production as demand falls.Oil prices slid 10 percent as the world’s major producers failed to reach an agreement to reduce production as demand falls.
A strong report on the American job market on Friday did little to assuage investors concerns. Employers added 273,000 jobs in February, but the data is a snapshot of a point when the prevailing sentiment was that the United States would remain relatively unaffected by the coronavirus. A strong report on the American job market on Friday did little to assuage investors’ concerns. Employers added 273,000 jobs in February, but the data is a snapshot of a point when the prevailing sentiment was that the United States would remain relatively unaffected by the coronavirus.
Nor did it help that President Trump signed a $8.3 billion emergency spending bill aimed at funding efforts to contain the spread.Nor did it help that President Trump signed a $8.3 billion emergency spending bill aimed at funding efforts to contain the spread.
The downdraft already reflects a growing recognition that the Federal Reserve on its own will not be able to offset drags on the economy from the spreading coronavirus. The central bank already cut rates by a half point this week, and investors expect the Fed to do so again at its meeting later in March.The downdraft already reflects a growing recognition that the Federal Reserve on its own will not be able to offset drags on the economy from the spreading coronavirus. The central bank already cut rates by a half point this week, and investors expect the Fed to do so again at its meeting later in March.
“The most essential policy response is the public health one — testing, treatment, quarantine, contact tracing, social distancing, lockdown,” John Normand, a cross asset strategist at JPMorgan Chase, wrote in a note Friday.“The most essential policy response is the public health one — testing, treatment, quarantine, contact tracing, social distancing, lockdown,” John Normand, a cross asset strategist at JPMorgan Chase, wrote in a note Friday.
Get an informed guide to the global outbreak with our daily coronavirusGet an informed guide to the global outbreak with our daily coronavirus
newsletter. newsletter.
Economists on Wall Street have slashed growth forecasts for this year, and warned the economy could at least briefly slip into recession, over rising fear of the effects of the virus on supply chains, tourism and other economic activity. Analysts said on Friday that the Fed would be unlikely to offset that damage on its own.Economists on Wall Street have slashed growth forecasts for this year, and warned the economy could at least briefly slip into recession, over rising fear of the effects of the virus on supply chains, tourism and other economic activity. Analysts said on Friday that the Fed would be unlikely to offset that damage on its own.
“The Fed’s emergency rate cut this week made it clear that officials are taking the economic risks posed by the coronavirus outbreak seriously,” analysts at Capital Economics said in a note Friday. “But with the number of new cases rising sharply, we don’t think lower interest rates will prevent activity growth from slowing over the next few months.” For many, the question now is how much damage the virus can do to the global economy and growth prospects for the year. The uncertainty over that impact has produced big swings in the market. Although it ended Friday with a loss, big gains on Monday and Wednesday meant that the S&P 500 was actually slightly higher for the week.
For many, the question now is how much damage the virus can do to the global economy and growth prospects for the year. The uncertainty over that impact has triggered big swings in the market. Although it ended Friday with a loss, big gains on Monday and Wednesday meant that the S&P 500 was actually slightly higher for the week.
Still, investors have plenty to worry about. Factories in China are still struggling to get back up and running. Thousands of flights around the world have been grounded. Supply chains have been snarled, shaking some of the world’s biggest companies and forcing an untold number of workers to stay home.Still, investors have plenty to worry about. Factories in China are still struggling to get back up and running. Thousands of flights around the world have been grounded. Supply chains have been snarled, shaking some of the world’s biggest companies and forcing an untold number of workers to stay home.
“Against this backdrop, we should prepare for a short-term but severe global recession,” said Nigel Green, chief executive of deVere Group, an investment firm.“Against this backdrop, we should prepare for a short-term but severe global recession,” said Nigel Green, chief executive of deVere Group, an investment firm.
Shares in Europe and Asia were also sharply lower, with benchmarks in Britain, Germany and France down more than 3 percent. In Tokyo, Hong Kong and Seoul, markets closed more than 2 percent lower.Shares in Europe and Asia were also sharply lower, with benchmarks in Britain, Germany and France down more than 3 percent. In Tokyo, Hong Kong and Seoul, markets closed more than 2 percent lower.
The Federal Reserve may need to buy assets other than government bonds to counter the next downturn, a Fed official said Friday, a suggestion meant to bolster the central bank’s increasingly depleted tool kit for fighting a downturn. The Trump administration continues to weigh options for stimulating the economy, but no decisions have been made and nothing is imminent, a situation that is stoking concern among investors, lawmakers, economists.
In coming years, “vision and boldness will be needed by all policymakers if we have to consider how policy should react to any large, adverse shock to the economy,” the president of the Federal Reserve Bank of Boston, Eric Rosengren, told a room full of monetary policymakers and economists in New York. Administration officials and President Trump have sent conflicting messages in recent days about what, if any, steps they might be willing to take to support growth. They have not opened active negotiations with leaders in the House and Senate over any sort of a large-scale stimulus bill.
Slumping longer-term interest rates leave the Fed with dangerously little room to stimulate the economy should things worsen. Its primary tool, the federal funds rate, lowers short-term rates and is already very low. Its backup measures, like mass bond-buying, work to push down longer-term rates. As those fall to rock bottom, the Fed has little room to maneuver. On Friday, congressional aides said administration officials were weighing tax relief for airlines and cruise ships, along with potential efforts to calm markets and reduce volatility in trading. That could include a possible bank holiday, in which financial institutions are closed.
Mr. Rosengren said that if the Fed cut its policy interest rate to near-zero, it was possible that the 10-year Treasury rate would follow. It could also include reinstating the “uptick rule” — a regulation created in the wake of the Great Depression to prevent short-sellers — who bet that a given stock will fall — from short-selling a stock whose price is falling. The rule, which was eliminated in 2007, allowed investors to short a stock only after the last trade was equal to or higher than the prior trade.
On Friday, the director of the National Economic Council, Larry Kudlow, said on CNBC that he, Treasury Secretary Steven Mnuchin and others in the administration have been discussing “a targeted approach, a more micro approach” to help the economy and not a “gigantic macroeconomic fix.” He suggested that could include aid to sectors that have suffered from virus-related setbacks, like tourism.
Mr. Mnuchin has been discussing a range of measures that Treasury could use to buttress the economy, including allowing some industries to defer tax payments, and he has been talking to financial regulators about ways to allow banks increase lending to specific industries.
Mr. Trump has suggested that he would be happy to see Democrats in Congress move to cut payroll taxes for a year. But asked repeatedly by reporters on Friday if the economy needed fiscal stimulus, Mr. Trump would only promote the strength of the latest jobs report — while calling on the Fed to continue cutting interest rates.
The president also suggested there was an economic upside to the virus, saying the U.S. economy was benefiting from Americans canceling travel plans abroad. “People are staying here and spending their money here, as opposed to going to Europe and other places,” he said.
A growing chorus of economists — in Washington, academia and on Wall Street — have called for the administration and Congress to pass stimulus measures to complement the interest rate cut that the Federal Reserve has already undertaken.
“There’s not very much that monetary policy can do in this situation,” Alan Blinder, a former Fed vice chairman, said in a call with reporters organized on Friday by the Brookings Institution.
Oil prices plummeted Friday after major producers meeting in Vienna failed to reach an agreement to reduce production, as concerns about the coronavirus’s impact on the economy spread across the globe.Oil prices plummeted Friday after major producers meeting in Vienna failed to reach an agreement to reduce production, as concerns about the coronavirus’s impact on the economy spread across the globe.
Brent crude fell by about 10 percent, while West Texas Intermediate crude, the U.S. benchmark, was down 10 percent to $41.21 a barrel.Brent crude fell by about 10 percent, while West Texas Intermediate crude, the U.S. benchmark, was down 10 percent to $41.21 a barrel.
Oil prices have fallen more than 20 percent since early January when China, a major importer of oil, started confronting the emerging coronavirus outbreak.Oil prices have fallen more than 20 percent since early January when China, a major importer of oil, started confronting the emerging coronavirus outbreak.
The Organization of the Petroleum Exporting Countries and other producers, including Russia, were meeting to try to steady the prices by reducing output beyond cuts that were already approved. But the producers struggled to reach an agreement during the meetings, which were in their third day on Friday.The Organization of the Petroleum Exporting Countries and other producers, including Russia, were meeting to try to steady the prices by reducing output beyond cuts that were already approved. But the producers struggled to reach an agreement during the meetings, which were in their third day on Friday.
Banks in New York and London are beginning to hive off small parts of their trading desks so that if there is an outbreak of coronavirus at their headquarters, there will at least be a small contingent of traders located elsewhere who can keep business running smoothly. Banks in New York and London are beginning to hive off small parts of their trading desks so that if there is an outbreak of coronavirus at their headquarters, there will at least be a small contingent of traders located elsewhere who can keep business running.
Bank of America assigned about 100 people to an office outside of Stamford, Conn., on Friday, a person familiar with the matter said.Bank of America assigned about 100 people to an office outside of Stamford, Conn., on Friday, a person familiar with the matter said.
JPMorgan’s backup crews are going from New York to New Jersey, according to a memo seen by The New York Times. In London, the bank is splitting its traders and sales representatives between its offices in Canary Wharf and two other disaster-recovery offices.JPMorgan’s backup crews are going from New York to New Jersey, according to a memo seen by The New York Times. In London, the bank is splitting its traders and sales representatives between its offices in Canary Wharf and two other disaster-recovery offices.
Morgan Stanley is testing plans that would have some employees in sales and trading, as well as in capital markets, work out of a disaster-recovery facility near Heathrow Airport in West London, a person briefed on the matter said on Friday. In New York, Morgan Stanley is also sending some employees to backup locations in Westchester, another person said.Morgan Stanley is testing plans that would have some employees in sales and trading, as well as in capital markets, work out of a disaster-recovery facility near Heathrow Airport in West London, a person briefed on the matter said on Friday. In New York, Morgan Stanley is also sending some employees to backup locations in Westchester, another person said.
Citigroup is experimenting with various options for dividing groups of employees among different locations, but a spokeswoman declined to share details.Citigroup is experimenting with various options for dividing groups of employees among different locations, but a spokeswoman declined to share details.
Lufthansa Group, one of the world’s largest airline companies, said on Friday that it planned to cut flights by up to 50 percent in the coming weeks because of a rapid decline in demand.Lufthansa Group, one of the world’s largest airline companies, said on Friday that it planned to cut flights by up to 50 percent in the coming weeks because of a rapid decline in demand.
It was only on Wednesday that the carrier, whose airlines include Lufthansa German Airlines, Swiss Air and Austrian Airlines, announced a 25 percent reduction in capacity.
Hiring is frozen, the company said, and some employees will be able to take voluntary leave.
The Federal Reserve is keeping cash coming from Asia under a quarantine, and stands ready to extend that effort to money coming in from other countries as deemed necessary.
Dollars that have returned to the United States from Asia, where the coronavirus first surfaced, have been held for a minimum of seven to 10 days since Feb. 21., a Fed spokeswoman said.
If the Centers for Disease Control and Prevention or State Department determines that other countries could also present a risk, the Fed is prepared to extend its new procedures to other incoming cash.
On Friday, Instagram said it was working to cull the spread of misinformation about the coronavirus. The company is sending flagged posts to its fact-checking partners, though the volume of false content far outweighs the number of fact-checkers able to handle the material. Instagram is also blocking hashtags used to spread false information, and has banned all advertising that is being used to exploit the outbreak for financial gain.
Microsoft said late Thursday that two employees in the Seattle area had been found to have the coronavirus, the first known cases at the company, which is one of the region’s largest employers.
Singapore Airlines said on Friday that a cabin crew member, whose last flight was between Paris and Singapore on Feb. 24, had tested positive for coronavirus. He has not been to work since the onset of symptoms, the airline said.Singapore Airlines said on Friday that a cabin crew member, whose last flight was between Paris and Singapore on Feb. 24, had tested positive for coronavirus. He has not been to work since the onset of symptoms, the airline said.
British Airways said Friday that two employees — both baggage handlers who work at Heathrow Airport — had tested positive for the coronavirus. “The colleagues have been isolated are recovering at home,” a spokeswoman said in a brief statement.British Airways said Friday that two employees — both baggage handlers who work at Heathrow Airport — had tested positive for the coronavirus. “The colleagues have been isolated are recovering at home,” a spokeswoman said in a brief statement.
Apple sent a memo to its Silicon Valley employees on Friday saying its offices would remain open, but it was encouraging them to work from home to minimize health risks. Facebook said on Friday that it had closed its London offices until Monday because of coronavirus concerns.Apple sent a memo to its Silicon Valley employees on Friday saying its offices would remain open, but it was encouraging them to work from home to minimize health risks. Facebook said on Friday that it had closed its London offices until Monday because of coronavirus concerns.
Reporting was contributed by Matt Phillips, Emily Flitter, Michael de la Merced, Jeanna Smialek, Alexandra Stevenson, Stanley Reed, Patricia Cohen, Karen Weise, Geneva Abdul, Kirk Johnson, Mike Isaac and Jack Ewing. Reporting was contributed by Matt Phillips, Emily Flitter, Michael de la Merced, Jeanna Smialek, Alexandra Stevenson, Stanley Reed, Patricia Cohen, Karen Weise, Geneva Abdul, Kirk Johnson, Mike Isaac, Alan Rappeport, Jim Tankersley and Jack Ewing.