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Global Stocks Waver After Wall Street’s Slump: Live Updates Wall Street Set for More Turmoil as Stocks Waver: Live Updates
(about 2 hours later)
European stocks opened higher but slowly gave back those gains on Thursday, as investors appraised efforts by officials in the United States and Europe to shore up the world economy. U.S. stock futures fell on Thursday, indicating another tough day as investors appraised efforts by officials in the United States and Europe to shore up the world economy.
Elsewhere, oil futures gained, gold slipped in value, and the U.S. Treasury 10-year note, whose yield was below 1 percent two days ago, was about 1.16 percent — all signs that would normally suggest rising confidence among investors. European stocks opened higher but slowly gave back those gains, and Asian markets had another down day, following a brutal day on Wall Street on Wednesday, when benchmark indexes fell 5 percents.
Elsewhere, oil futures gained, gold slipped in value, and the U.S. Treasury 10-year note, whose yield was below 1 percent two days ago, was about 1.16 percent. The recent rise in government bond yields is the opposite of what would typically happen after dramatic interest rate cuts and bond buying by the U.S. Federal Reserve and many investors said was a sign that the securities are increasingly hard to offload.
Still, other indicators suggested that unease lingered. Asian markets had another down day, and futures markets indicated that Wall Street would open lower. Wednesday was yet another dismal day on Wall Street, with markets falling 5 percent. Investors were dealing with a flurry of news. Overnight, the European Central Bank unveiled a huge bond-buying program aimed at preventing economic calamity, and the Fed presented a plan to support money market funds, which are threatened when there is a rush for cash. U.S. officials also neared passage of stimulus efforts to keep the American economy running.
Investors were dealing with a flurry of news. Overnight, the European Central Bank unveiled a huge bond-buying program aimed at preventing economic calamity, and the U.S. Federal Reserve presented a plan to support money market funds, which are threatened when there is a rush for cash. U.S. officials also neared passage of stimulus efforts to keep the American economy running. On Wednesday, financial markets reeled, reflecting another extreme swing in sentiment on Wall Street. Stocks had jumped on Tuesday as the White House called for urgent action to pump $1 trillion into the economy.
The renewed selling showed how fragile any gains have become as long as the virus continues to spread and the number of cases grows at a staggering rate.
Analysts now expect that the American economy could face its worst quarterly contraction ever, with a sudden slowdown that is more akin to what happened in wartime Europe than during previous American slowdowns like the financial crisis more than a decade ago or even the Great Depression.
In Asia on Thursday, Tokyo’s Nikkei 225 index fell 1 percent. In China, the Shanghai Composite Index was also down 1 percent. Layoffs rose sharply last week as the effects of the coronavirus pandemic began to ripple through the economy. The worst is yet to come.
Hong Kong’s Hang Seng Index fell 2.6 percent. Some 281,000 Americans filed first-time claims for unemployment insurance, up by 33 percent from 211,000 the week before, the Labor Department said Thursday. On a percentage basis, the increase was among the largest one-week spikes on record.
South Korea was the biggest loser among major world markets, with the Kospi index falling 8.4 percent. The Labor Department said the increase was “clearly attributable to impacts from the COVID-19 virus” and noted that many states reported a rise in jobless claims from workers in food services, accommodation and travel.
Still, the data released Thursday was for claims filed from March 8-14, before the outbreak began to shut down restaurants, bars and retail stores in much of the country. The next report, which will reflect the first wave of closings, will almost certainly be much worse. Individual states from California to Rhode Island have released their own data showing enormous spikes in jobless claims; on Monday, the website to apply for benefits in New York state crashed amid the crush of inquiries.
Economists in recent days have made increasingly dire predictions about the likely damage to the job market, with many predicting that the unemployment rate will quickly surpass the 10 percent level it hit in the worst of the last recession.
“This is a body blow to the economy unlike anything we’ve experienced in recent memory,” said Patrick Anderson, an economist in East Lansing, Mich. “Even the Great Recession did not include shuttering of businesses by government order at the same time that people were being told to say home and distance themselves.”
The Federal Reserve said late Wednesday night that it would offer emergency loans to money market mutual funds, its latest in a series of steps to keep the financial system functioning and prop up the economy as it spirals toward recession during the coronavirus pandemic.The Federal Reserve said late Wednesday night that it would offer emergency loans to money market mutual funds, its latest in a series of steps to keep the financial system functioning and prop up the economy as it spirals toward recession during the coronavirus pandemic.
Officials said they would establish a so-called Money Market Mutual Fund Liquidity Facility, which would be backed by $10 billion from the Treasury Department. That facility joins a similar lending program for banks, established earlier this week.Officials said they would establish a so-called Money Market Mutual Fund Liquidity Facility, which would be backed by $10 billion from the Treasury Department. That facility joins a similar lending program for banks, established earlier this week.
The Fed is trying to protect the financial system and insulate the broader economy, where short-term pain could turn into long-term suffering if credit crunches prevent companies from obtaining the cash they need to function, forcing them to lay off workers, delay payments to vendors and shutter plants.The Fed is trying to protect the financial system and insulate the broader economy, where short-term pain could turn into long-term suffering if credit crunches prevent companies from obtaining the cash they need to function, forcing them to lay off workers, delay payments to vendors and shutter plants.
Investors, corporations and trading clients are turning to Wall Street amid one of the most tumultuous periods in market history to borrow money, buy or sell assets, and limit losses on their holdings. But Wall Street itself is grappling with a challenge it never previously faced: how to protect employees from a worsening public-health threat while managing clients who need services around the clock.Investors, corporations and trading clients are turning to Wall Street amid one of the most tumultuous periods in market history to borrow money, buy or sell assets, and limit losses on their holdings. But Wall Street itself is grappling with a challenge it never previously faced: how to protect employees from a worsening public-health threat while managing clients who need services around the clock.
As the week started, numerous financial services firms — from the investment bank Goldman Sachs to the private equity firm Blackstone to the hedge fund Point72 — were adopting emergency work policies as employees tested positive for coronavirus. As far away as Cape Town, the commodities analyst Jeffrey Christian, who had traveled there from New York on business, was in an emergency room with chills and a fever.As the week started, numerous financial services firms — from the investment bank Goldman Sachs to the private equity firm Blackstone to the hedge fund Point72 — were adopting emergency work policies as employees tested positive for coronavirus. As far away as Cape Town, the commodities analyst Jeffrey Christian, who had traveled there from New York on business, was in an emergency room with chills and a fever.
“Waiting to be tested for C19,” wrote Mr. Christian, the managing partner of the research firm CPM Group, in an email. “Woke up with nasty fever and chills today.”“Waiting to be tested for C19,” wrote Mr. Christian, the managing partner of the research firm CPM Group, in an email. “Woke up with nasty fever and chills today.”
On Wall Street, where the stock market’s daily plunges have been the most severe in 33 years and Treasury bond yields have hit new price floors, the metamorphosis from calm to apprehension is now well underway.
A reliable predictor of German economic growth suffered its biggest plunge since eastern and western Germany reunited almost three decades ago.A reliable predictor of German economic growth suffered its biggest plunge since eastern and western Germany reunited almost three decades ago.
“Companies’ expectations in particular have darkened as never before,” the Ifo Institute in Munich said in a statement. The institute’s monthly survey of how managers expect their business to develop, published on Thursday, has a good record in predicting the direction of Europe’s largest economy.“Companies’ expectations in particular have darkened as never before,” the Ifo Institute in Munich said in a statement. The institute’s monthly survey of how managers expect their business to develop, published on Thursday, has a good record in predicting the direction of Europe’s largest economy.
“The German economy is speeding into recession,” the institute’s statement added.“The German economy is speeding into recession,” the institute’s statement added.
Financial markets reeled again on Wednesday, as the coronavirus continued its relentless spread, governments ramped up efforts to contain it and investors waited for lawmakers in Washington to take action on proposals to bolster the American economy. As household incomes feel the impact of the economic crisis from the coronavirus outbreak, there has been a groundswell of moves across the country to protect renters from eviction.
Stocks did recoup some losses late in the day, as the Senate began to vote on a bill to provide sick leave, jobless benefits, free coronavirus testing and other aid. President Trump is expected to sign it. But when all was said and done, the S&P 500 fell about 5 percent, stocks in Europe were sharply lower and oil prices cratered. The Miami-Dade police in Florida said they wouldn’t carry out evictions. A New York State judge declared that the courts would consider no eviction cases until further notice. Gov. Gavin Newsom of California issued an executive order allowing cities to impose eviction moratoriums.
The renewed selling showed how fragile any gains have become as long as the number of cases continues to grow at a staggering rate. “The very least policymakers can do during a national health emergency is ensure that more people are not pushed into homelessness,” said Diane Yentel, chief executive of the National Low Income Housing Coalition, a nonprofit advocacy group in Washington
The turmoil on Wednesday was evident in other markets as well. The British pound fell to its lowest level in 35 years against the American dollar. There has also been action to keep homeowners from being pushed into default on their mortgages. On Wednesday, the federal agency overseeing Fannie Mae and Freddie Mac, the giant government-run finance firms that back the mortgages of 28 million homeowners, ordered a suspension of foreclosures and foreclosure-related evictions for at least two months.
Borrowing costs for Italy and other stricken eurozone countries fell sharply Thursday, at least temporarily validating a decision by the European Central Bank to flood debt markets with cash.
The bank said late Wednesday that it would buy up to 750 billion euros, or $820 billion, in government and corporate bonds and other assets, pumping newly created money into financial markets deeply rattled by the pandemic.
The central bank’s Governing Council said it would “do everything necessary within its mandate” to support the eurozone economy during the crisis.
That expression of resolve caused the risk premium on Italian 10-year government bonds to fall by 30 percent in morning trading, while the risk premium on Greek 10-year debt fell by more than 40 percent.
No European country is escaping the economic consequences of the coronavirus, but the pain won’t be divided equally.No European country is escaping the economic consequences of the coronavirus, but the pain won’t be divided equally.
Southern Europe, which bore the brunt of the last big economic crisis, will suffer the most. Countries like Greece and Italy depend heavily on tourism and are still suffering the lingering effects of the eurozone debt meltdown over the last decade, including austerity programs that left their health care systems ill prepared for a pandemic.Southern Europe, which bore the brunt of the last big economic crisis, will suffer the most. Countries like Greece and Italy depend heavily on tourism and are still suffering the lingering effects of the eurozone debt meltdown over the last decade, including austerity programs that left their health care systems ill prepared for a pandemic.
But even countries regarded as paragons of competitiveness, like Germany and the Netherlands, may turn out to have weaknesses that, until a few weeks ago, were regarded as strengths. But even countries regarded as paragons of competitiveness, like Germany and the Netherlands, may turn out to have weaknesses that, until a few weeks ago, were regarded as strengths. Germany’s automakers, for example, have dominated the luxury car business. But the virus exposed their dependence on sales in China, and now they are closing factories all over the region.
Germany’s automakers, for example, have dominated the luxury car business. But the virus exposed their dependence on sales in China, and now they are closing factories all over the region.
Any country with lots of small firms and self-employed people will suffer as well, because these businesses typically have thinner financial reserves to survive a sudden plunge in sales. Greece and Italy are examples, but so is the Netherlands.
Other countries may have hidden strengths. An economy with lots of companies that can deliver their services digitally, and where employees can work from home, should be relatively resilient. This could be Estonia’s moment; its capital, Tallinn, has a lively digital start-up scene.Other countries may have hidden strengths. An economy with lots of companies that can deliver their services digitally, and where employees can work from home, should be relatively resilient. This could be Estonia’s moment; its capital, Tallinn, has a lively digital start-up scene.
The European Central Bank said it would embark on an enormous wave of bond purchases intended to counter the “serious risks” to the eurozone caused by the coronavirus pandemic.The European Central Bank said it would embark on an enormous wave of bond purchases intended to counter the “serious risks” to the eurozone caused by the coronavirus pandemic.
The bank will buy up to 750 billion euros, or $820 billion, in government and corporate bonds and other assets, pumping cash into financial markets deeply rattled by the pandemic.The bank will buy up to 750 billion euros, or $820 billion, in government and corporate bonds and other assets, pumping cash into financial markets deeply rattled by the pandemic.
The announcement came after an unusual late-night conference call among members of the bank’s Governing Council, which followed signs that bond investors were losing faith in Italy’s ability to repay its enormous government debt. If Italy’s borrowing costs reach unsustainable levels, the future of the eurozone would be at stake.The announcement came after an unusual late-night conference call among members of the bank’s Governing Council, which followed signs that bond investors were losing faith in Italy’s ability to repay its enormous government debt. If Italy’s borrowing costs reach unsustainable levels, the future of the eurozone would be at stake.
The bank said it would buy even more assets if need be.The bank said it would buy even more assets if need be.
“The Governing Council is fully prepared to increase the size of its asset purchase programs and adjust their composition, by as much as necessary and for as long as needed,” the bank said in a statement. “It will explore all options and all contingencies to support the economy through this shock.
Australia’s central bank said on Thursday that it would cut its key interest rate to 0.25 percent to ward off a coronavirus-spurred recession. It will also begin buying government bonds, the first time in the country’s history it would use quantitative easing, or unconventional methods to boost money supply.Australia’s central bank said on Thursday that it would cut its key interest rate to 0.25 percent to ward off a coronavirus-spurred recession. It will also begin buying government bonds, the first time in the country’s history it would use quantitative easing, or unconventional methods to boost money supply.
Sweeping travel restrictions and social distancing had led to “major disruptions to economic activity across the world,” said Philip Lowe, governor of the Reserve Bank of Australia, in a statement announcing the new policy on Thursday. “Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.”Sweeping travel restrictions and social distancing had led to “major disruptions to economic activity across the world,” said Philip Lowe, governor of the Reserve Bank of Australia, in a statement announcing the new policy on Thursday. “Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.”
The bank will also make $50 billion available to authorized banks to encourage lending to small and medium-sized businesses.
Australia has not in the past used quantitative easing, even during the 2008 financial crisis.Australia has not in the past used quantitative easing, even during the 2008 financial crisis.
This is the second time in two weeks that Australia’s central bank cut its main interest rate. Two weeks ago it cut its benchmark rate by one-quarter of a percentage point to 0.5 percent.
The news came as the country experienced a steep uptick in coronavirus cases, with 565 confirmed as of Thursday. The Australian dollar also weakened on Thursday, briefly plunging to 55 cents against the American dollar. At the beginning of this year, it hovered around 70 cents to a U.S. dollar.
Major American corporations spent roughly $1.4 trillion dollars buying back their own shares over the last three years, according to Goldman Sachs.Major American corporations spent roughly $1.4 trillion dollars buying back their own shares over the last three years, according to Goldman Sachs.
Now, after a stock market crash that has pushed prices back to where they were in early 2017, almost all that money is gone, at least for the moment.Now, after a stock market crash that has pushed prices back to where they were in early 2017, almost all that money is gone, at least for the moment.
The penchant of American corporations for buying back their own shares — it is largely an American phenomenon — became a political football in recent years. The Trump administration sold its vast overhaul of the American tax system, which was signed into law in December 2017, as a measure that would supercharge capital investment from companies, increasing productivity and wages for workers.The penchant of American corporations for buying back their own shares — it is largely an American phenomenon — became a political football in recent years. The Trump administration sold its vast overhaul of the American tax system, which was signed into law in December 2017, as a measure that would supercharge capital investment from companies, increasing productivity and wages for workers.
Economists can debate how well it worked. Wages have risen. Business investment has tumbled. No one can prove the tax change is the reason. The tax overhaul left major American companies flush with cash, and set off a record amount of share buybacks by S&P 500 companies. Buybacks hit a record in 2018, with net buybacks accounting for roughly $600 billion in outlays from companies, according to Goldman Sachs. The full numbers for 2019 are still coming in but are estimated to be around $480 billion.
But the tax overhaul left major American companies flush with cash, and set off a record amount of share buybacks by S&P 500 companies. Buybacks hit a record in 2018, with net buybacks accounting for roughly $600 billion in outlays from companies, according to Goldman Sachs. The full numbers for 2019 are still coming in but are estimated to be around $480 billion.
Defenders of buybacks say it is an efficient way for companies to return money to shareholders that they would not otherwise know how to invest efficiently.Defenders of buybacks say it is an efficient way for companies to return money to shareholders that they would not otherwise know how to invest efficiently.
Critics say the practice is merely a way to inflate share prices and burnish key metrics, such as earnings per share, which look better because buybacks reduce the number of shares a company has. They point out that companies can always pay shareholders with dividends, which are checks issued directly to stock owners, rather than by buying back shares.Critics say the practice is merely a way to inflate share prices and burnish key metrics, such as earnings per share, which look better because buybacks reduce the number of shares a company has. They point out that companies can always pay shareholders with dividends, which are checks issued directly to stock owners, rather than by buying back shares.
Reporting and research were contributed by Isabella Kwai, Jack Ewing, Carlos Tejada, Heather Murphy, Matt Phillips, Jeanna Smialek, Jim Tankersley. Reporting and research were contributed by Ben Casselman, Conor Dougherty, Emily Flitter, Isabella Kwai, Jack Ewing, Carlos Tejada, Heather Murphy, Matt Phillips, Jeanna Smialek and Jim Tankersley.