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Stocks Drop as Grim Economic Outlook Grips Markets: Live Updates Stocks Drop as Grim Economic Outlook Grips Markets: Live Updates
(about 1 hour later)
Stocks on Wall Street slid on Monday, after an extraordinary move by the Federal Reserve aimed at shoring up confidence instead provoked more concern.Stocks on Wall Street slid on Monday, after an extraordinary move by the Federal Reserve aimed at shoring up confidence instead provoked more concern.
Investors were also confronted with weak economic readings from both China and the United States, the world’s largest economies. Chinese officials reported that retail sales, manufacturing activity and investment in the first two months of the year slumped by even more than economists had expected, and a gauge of manufacturing activity in New York State fell to its lowest level since 2009.Investors were also confronted with weak economic readings from both China and the United States, the world’s largest economies. Chinese officials reported that retail sales, manufacturing activity and investment in the first two months of the year slumped by even more than economists had expected, and a gauge of manufacturing activity in New York State fell to its lowest level since 2009.
“Unfortunately this is the new reality. This report is a harbinger of what is to come,” wrote economic analysts with the investment bank Jefferies in New York. “Unfortunately, this is the new reality. This report is a harbinger of what is to come,” wrote economic analysts with the investment bank Jefferies in New York.
The S&P 500 fell 8 percent as trading began in New York and stock trading was immediately halted for 15 minutes as Wall Street’s ‘circuit breakers’ kicked in. Shares were down more than 9 percent around 1:45 p.m. in New York. The S&P 500 fell 8 percent as trading began in New York and stock trading was immediately halted for 15 minutes as Wall Street’s “circuit breakers” kicked in. Shares were down more than 9 percent around 1:45 p.m. in New York.
European and Asian markets tumbled, and bond prices moved sharply higher, sending yields — which move in the opposite direction — down. European and Asian markets tumbled, and bond prices moved sharply higher, reducing yields — which move in the opposite direction.
Energy prices also slid sharply as investors factored in significant slowdowns in economic activity. The price for benchmark American crude dropped more than 6 percent. American gasoline futures prices plummeted more than 17 percent. Energy prices also slid sharply as investors factored in significant slowdowns in economic activity.
The Fed’s emergency interest rate cut on Sunday underscored its deepening worry that the spread of the pandemic is dramatically depressing revenue for industries around the world while consumers hunker down, raising the risk of a worldwide recession. The central bank cut interest rates to near zero and said it would buy hundreds of billions of dollars in government debt, moves that are reminiscent of its actions during the financial crisis in 2008. Global oil prices plunged to below $30 a barrel, the lowest level in more than four years. The prices of both Brent and West Texas Intermediate, the global and American benchmarks, have fallen by half since the start of the year, and some analysts predict that oil prices could drop below $20 a barrel in the coming weeks.
The Fed’s emergency interest rate cut on Sunday underscored its deepening worry that the spread of the pandemic is substantially depressing revenue for industries around the world while consumers hunker down, raising the risk of a worldwide recession. The central bank cut interest rates to near zero and said it would buy hundreds of billions of dollars in government debt, moves that are reminiscent of its actions during the financial crisis in 2008.
Those moves were engineered to ensure that credit flows freely, spurring businesses and households to borrow and spend to keep the economy growing. But markets appeared to absorb the action as the latest indication that the world had arrived at a dangerous place — a clear sign that they should dump risky assets like stocks and seek refuge in government bonds.Those moves were engineered to ensure that credit flows freely, spurring businesses and households to borrow and spend to keep the economy growing. But markets appeared to absorb the action as the latest indication that the world had arrived at a dangerous place — a clear sign that they should dump risky assets like stocks and seek refuge in government bonds.
But the nature of this crisis — a viral outbreak that can only be contained by massive economic disruptions — is beyond the Fed’s ability to stop, analysts said. But the nature of this crisis — a viral outbreak that can only be contained by enormous economic disruptions — is beyond the Fed’s ability to stop, analysts said.
“They can only make sure the fallout and economic impact are softened,” wrote Yousef Abbasi, global market strategist at INTL FCStone, a financial services and brokerage firm, in an email.
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“They can only make sure the fallout and economic impact are softened,” Yousef Abbasi, global market strategist at INTL FCStone, a financial services and brokerage firm, said in an email.
A major concern for stock investors now is that efforts to contain the virus in the United States will hit consumer spending, the biggest driver of economic growth. Broadway is dark. College basketball tournaments are canceled and professional sports are on indefinite hold. Conferences, concerts and St. Patrick’s Day parades have been called off or postponed.A major concern for stock investors now is that efforts to contain the virus in the United States will hit consumer spending, the biggest driver of economic growth. Broadway is dark. College basketball tournaments are canceled and professional sports are on indefinite hold. Conferences, concerts and St. Patrick’s Day parades have been called off or postponed.
“If the public stops spending then the economy will go into a recession, and frankly, the market’s steep losses are saying that day isn’t just coming, it is now,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in an email on Monday.“If the public stops spending then the economy will go into a recession, and frankly, the market’s steep losses are saying that day isn’t just coming, it is now,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in an email on Monday.
In Asia, markets also fell sharply on Monday, as fear intensified throughout the day. Australia suffered a 9.7 percent plunge in the S&P/ASX 200 stock index, leaving it about 30 percent below its high last month. The lobbying group for America’s biggest airlines on Monday called on the government to provide the industry more than $50 billion in emergency support in the form of grants, loan guarantees and tax relief. The group, Airlines for America, warned that the current situation is not sustainable for the industry and that there is no end in sight to the crisis.
Larry Kudlow, the director of the National Economic Council, said on Monday that the Trump administration is planning to roll out a plan for $800 billion in fiscal stimulus, including the legislation that the Senate is currently considering, and that it is developing additional economic relief measures. “This is a today problem, not a tomorrow problem,” said Nicholas E. Calio, chief executive of Airlines for America. “It requires urgent action.”
Mr. Kudlow, speaking on the Fox Business Network, said that the Trump administration is moving ahead with a plan to suspend interest payments on student loans. He said that Mr. Trump continues to strongly favor a payroll tax holiday through the end of the year, which he thinks would help small businesses and workers. The industry group said that flight cancellations are outpacing new bookings and that the dramatic decline in demand is getting worse by the day. The requested included $25 billion in grants for passenger carriers, $4 billion in grants for cargo, $25 billion in loan guarantees.
“These measures will help mitigate the economic risks and challenges in front of us,” Mr. Kudlow said. “We have these fiscal measures out there and they’re very powerful.” Larry Kudlow, the director of the National Economic Council, said on Monday that “we’re in touch” with the airlines “about their balance sheets and their cash flow.”
“We don’t see the airlines failing, but if they get into a cash crunch we’re going to try to help them,” he said.
Universal Pictures said on Monday that it would no longer give theaters an exclusive period to play new movies, a break from a longstanding Hollywood practice that could have wide-ranging reverberations. The decision, prompted by the coronavirus pandemic, makes Universal the first old-line studio to attempt a Netflix-like tactic in its approach to film distribution.
Starting Friday, three Universal movies that have already been released in theaters will become available in homes — $20 for a 48-hour rental period — through online stores like iTunes and Amazon Prime Video and on cable systems like Comcast. Those films are “The Hunt,” a horror satire that arrived in theaters last weekend; “The Invisible Man,” which has been playing in theaters since Feb. 20; and “Emma,” a new take on the classic Jane Austen novel that arrived in theaters on March 6.
The animated sequel “Trolls World Tour” will roll out in theaters worldwide — those that are open — on April 10 and will be made available simultaneously for rental in homes for $20.
President Trump’s former top economist, Kevin Hassett, said on Monday that the United States economy could shed as many as 1 million jobs in March because of layoffs and hiring freezes related to the coronavirus.
Mr. Hassett, who served as the chairman of Mr. Trump’s Council of Economic Advisers until last summer, said on CNN and in a follow-up interview that even as the economy continues to suffer its normal churn of job losses this month, the economic chill from the virus could bring hiring to a near-standstill, which would result in a large net loss of jobs.
“If you have normal job disruption, and hiring just stops,” Mr. Hassett said, “you’ll have the worst jobs number ever.”
Since the end of World War II, the United States has never lost a million jobs in a single month. The closest it came was 838,000 in 1949.
Mr. Hassett’s forecast came as IHS Markit, a closely followed economic forecasting firm, said Monday that it expected the American economy to fall into recession in the second quarter, shrinking by 5.4 percent.
The firm forecast that the unemployment rate would rise to 6 percent by mid-2021, and that while an economic recovery would begin in the first quarter of next year, it would be “impeded by lack of monetary policy space and an inadequate fiscal response.”
In some places, public officials and private business owners moved with stunning speed. In others, paralyzing hesitancy, defiant bravado or blithe disregard dominated. But by Monday, everywhere there were signs that most of the American economy was scraping to an unparalleled halt.
Across the country, bars and bookstores, gyms and nail salons, kindergarten classrooms and universities shut their doors. Major retailers from Apple to Lululemon to Patagonia have closed stores for two weeks, as have casino hotels in Las Vegas.
Some companies are shutting stores to help prevent the spread of the virus. Others are cutting back because their customers are staying away.
Many companies have vowed to continue to pay workers who are not coming in, and Congress is working on legislation to help businesses cover costs. But it’s only a matter of time before layoffs start registering on the wider economy.
Challenger Gray & Christmas, an outplacement firm that tracks layoffs, said it had seen only a relative handful of coronavirus-related layoffs so far.
“We anticipate more to come,” said Andrew Challenger, the firm’s vice president. Many probably won’t be announced and will be hard to track, at least in real-time, he said. “But they will definitely start happening fairly quickly.”
Some businesses are improvising. Starbucks is eliminating seating at all of its company-owned stores in the United States for at least the next two weeks to encourage social distancing.
And others are planning to keep their doors open, including a few retailers. Home Depot, which employs about 400,000 people at roughly 2,200 stores in the United States, was also open for business on Monday. Lowe’s, another big home improvement chain, said all of its more than 1,700 stores were open for business.
UPS, which employs some 413,000 people in the United States, was still processing packages and sending trucks for deliveries. Merck, the pharmaceutical company, was continuing to produce and distribute drugs from facilities spread out across nine states.
Boeing plans to direct all of its 160,000 employees worldwide who are able to work from home to stop showing up to the company’s factories and offices starting Tuesday, but the directive will not cover the majority of Boeing employees, who are directly involved in manufacturing.
The company has not yet halted production, and for now, engineers and mechanics who need to be at work to build airplanes will continue to report to the factory floor. Employees working on some Defense Department projects will also continue showing up.
The decline of the stock market, which hit a record high less than a month ago, has wiped out many of the gains that President Trump has crowed about throughout his presidency.The decline of the stock market, which hit a record high less than a month ago, has wiped out many of the gains that President Trump has crowed about throughout his presidency.
Mr. Trump’s victory in 2016, along with the Republican Party’s control of Congress, triggered a surge in share prices as investors looked forward to the prospect of steep cuts to corporate tax rates and an administration stocked with industry-friendly faces. Mr. Trump’s victory in 2016, along with the Republican Party’s control of Congress, set off a surge in share prices as investors looked forward to the prospect of steep cuts to corporate tax rates and an administration stocked with industry-friendly faces.
In December 2017, Mr. Trump delivered a sweeping tax overhaul. By the following month, the S&P 500 was up more than 30 percent, and the gains kept coming for much of the year. For Mr. Trump, this was a surefire barometer of his success as president.In December 2017, Mr. Trump delivered a sweeping tax overhaul. By the following month, the S&P 500 was up more than 30 percent, and the gains kept coming for much of the year. For Mr. Trump, this was a surefire barometer of his success as president.
There was one other nasty dip along the way: In late 2018, investors grew increasingly worried about Mr. Trump’s trade war with China and the prospect that the Federal Reserve would raise interest rates.There was one other nasty dip along the way: In late 2018, investors grew increasingly worried about Mr. Trump’s trade war with China and the prospect that the Federal Reserve would raise interest rates.
Stocks climbed 28.9 percent last year, thanks largely to the Fed’s decision to reverse course.Stocks climbed 28.9 percent last year, thanks largely to the Fed’s decision to reverse course.
On Thursday, the S&P 500 had its worst day in more than 30 years, dropping 9.5 percent. The next day, it rallied late, making up most — but not all — the ground it had just lost, after Mr. Trump declared the pandemic a national emergency.On Thursday, the S&P 500 had its worst day in more than 30 years, dropping 9.5 percent. The next day, it rallied late, making up most — but not all — the ground it had just lost, after Mr. Trump declared the pandemic a national emergency.
Though stocks have now given up about half their gains since the president was elected, the S&P 500 would have to fall another 18 percent for the entire Trump Bump to be erased. Though stocks have now given up about half their gains since the president was elected, the S&P 500 would have to fall another 18 percent for the entire Trump bump to be erased.
Boeing plans to direct all of its 160,000 employees worldwide who are able to to stop showing up to the company’s factories and offices starting Tuesday.
On Monday, managers at the aerospace company were told to evaluate which of their employees could effectively work from home, according to a person familiar with the matter. The company has not yet halted production, and for now, engineers and mechanics who are directly involved in building airplanes will continue to report to the factory floor. Employees working on some defense department projects will also continue showing up.
The company’s manufacturing hub is based in the Seattle area, in the epicenter of the coronavirus crisis. There have been 10 confirmed coronavirus cases among Boeing employees, including six at its plant in Everett and two in Renton.
Meanwhile, United Airlines is in talks with union leaders about reducing payroll costs, its chief executive and president jointly wrote in a letter to employees on Sunday, detailing the coronavirus outbreak’s worsening toll on the company’s bottom line.
The payroll moves being considered include furloughs, pay cuts and reducing minimum hours. United’s corporate officers will be taking a 50 percent pay cut, Oscar Munoz, the chief executive, and Scott Kirby, the president, said in the letter. Both have already said they would forgo their base salaries through June.
Global oil prices plunged to below $30 a barrel on Monday, the lowest level in more than four years. By late morning, after some oil grades dropped by more than 10 percent, prices edged slightly higher.
Usually, the global benchmark, Brent crude, is $5 to $10 a barrel higher than the American standard, West Texas intermediate, but the Brent price has fallen faster and farther in recent days to narrow the gap between the two substantially. Energy experts say that is because of the sharp drop-off in economic activity in Europe. The prices of both Brent and West Texas have fallen by half since the start of the year.
Some analysts predict that oil prices could drop below $20 a barrel in the coming weeks.
The falling price of crude is being reflected at the gasoline pump. The U.S. average price for regular gasoline plunged 13 cents a gallon over the last week, according to the AAA motor club, to $2.25 a gallon. Eleven states now average below $2 a gallon.
Major retailers from Apple to Lululemon to Patagonia have shut their stores for two weeks, as have casino hotels in Las Vegas. Local businesses are seeing a drop in businesses and living day to day.
The escalating coronavirus crisis is roiling businesses big and small. Some companies are shutting stores to help prevent the spread of the virus. Others are cutting back because their customers are staying away.
Many companies have vowed to continue to pay workers who are not coming in, and Congress is working on legislation to help businesses cover costs. But it’s only a matter of time before layoffs start registering on the wider economy.
Challenger Gray & Christmas, an outplacement firm that tracks layoffs, said it had seen only a relative handful of coronavirus-related layoffs so far.
“We anticipate more to come,” said Andrew Challenger, the firm’s vice president. Many probably won’t be announced and will be hard to track, at least in real-time, he said. “But they will definitely start happening fairly quickly.”
Hanging on, some businesses are improvising. Starbucks is eliminating seating at all of its company-owned stores in the United States for at least the next two weeks to encourage social distancing. The high-end designer brand Misha Nonoo, which closed its Manhattan store, is continuing its e-commerce operation and making its stylists available over text and video chat for advice. Nonoo is also offering a $50 gift certificate for “clients who are health care workers actively battling the virus.”
The Federal Reserve pulled out a monetary policy bazooka Sunday night, cutting rates to near zero and announcing an aggressive bond-buying campaign in a bid to stabilize the economy and calm troubled markets.
But analysts said officials need to do more to backstop a critical source of funding for banks and businesses.
The market for commercial paper, short-term promissory notes that businesses use to raise cash, has come under pressure as banks and companies look to shore up their coffers to make it through the dry spell that is setting in as coronavirus leads to quarantines, shutters shopping centers and closes down restaurants.
“The commercial paper market is essentially frozen,” Mark Cabana, a rates strategist at Bank of America Merrill Lynch Global Research, said in an interview Sunday. “Because of coronavirus, because of the economy, everyone is just trying to raise cash, there is no one to take the other side.”
The Fed could act like an escape valve, buying up corporate paper to keep cash flowing — which it did during the 2008 financial crisis. The Fed would need to declare that the economy faces “unusual and exigent” circumstances, a determination that allows it to use its special lending abilities, and any program would require a signoff from the Treasury Department.
Europe’s auto industry is coming to a standstill. PSA, the maker of Peugeot and Citroën cars, said it would suspend production at all of its factories in Europe. Renault is closing its French factories, idling 18,000 workers, and Fiat Chrysler is also shutting factories.Europe’s auto industry is coming to a standstill. PSA, the maker of Peugeot and Citroën cars, said it would suspend production at all of its factories in Europe. Renault is closing its French factories, idling 18,000 workers, and Fiat Chrysler is also shutting factories.
Treasury Secretary Steven Mnuchin said on Monday that the Trump administration’s most immediate priority is making sure that small businesses have sufficient funds to stay afloat as the coronavirus outbreak shuts down large swaths of the economy. However, he said that the administration does not want to resort to bailouts Treasury Secretary Steven Mnuchin said on Monday that the Trump administration’s most immediate priority was making sure that small businesses had sufficient funds to stay afloat as the coronavirus outbreak shuts down large swaths of the economy. However, he said that the administration did not want to resort to bailouts.
Shares of the largest banks in the United States were hit particularly hard on Monday, with JPMorgan Chase, Bank of America and Morgan Stanley all down around 13 percent. On Sunday, the eight largest U.S. banks announced that they would suspend buybacks of their stock — a move that would help them keep cash on hand in case conditions in the financial markets grew unstable.Shares of the largest banks in the United States were hit particularly hard on Monday, with JPMorgan Chase, Bank of America and Morgan Stanley all down around 13 percent. On Sunday, the eight largest U.S. banks announced that they would suspend buybacks of their stock — a move that would help them keep cash on hand in case conditions in the financial markets grew unstable.
Peter S. Goodman, Amie Tsang, Jeanna Smialek, Niraj Chokshi, Ben Dooley, Isabella Kwai, Daniel Victor, Carlos Tejada, Niraj Chokshi, Clifford Krauss, Sapna Maheshwari, Natalie Kitroeff, Keith Bradsher, Ben Casselman, Vanessa Friedman, Jack Ewing, Stanley Reed, Jack Nicas, Liz Alderman, Brooks Barnes, Nicole Sperling, David Yaffe-Bellany and Matt Phillips contributed reporting. The falling price of crude is being reflected at the gasoline pump. The U.S. average price for regular gasoline fell 13 cents a gallon over the last week, according to the AAA motor club, to $2.25 a gallon. Eleven states now average below $2 a gallon.
Peter S. Goodman, Amie Tsang, Jeanna Smialek, Niraj Chokshi, Ben Dooley, Isabella Kwai, Daniel Victor, Carlos Tejada, Niraj Chokshi, Clifford Krauss, Jim Tankersley, Peter Baker, Sapna Maheshwari, Natalie Kitroeff, Keith Bradsher, Ben Casselman, Vanessa Friedman, Jack Ewing, Stanley Reed, Jack Nicas, Liz Alderman, Brooks Barnes, Nicole Sperling, David Yaffe-Bellany and Matt Phillips contributed reporting.