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Stocks Rise as Oil Prices Plunge: Live Markets Updates | |
(about 11 hours later) | |
Less than an hour after the Small Business Administration started taking requests for $310 billion in emergency aid for small businesses on Monday morning, its computer system for processing the loan applications crashed. | |
“It’s obvious the system is simply flooded right now,” said Craig Street, the chief lending officer at United Midwest Savings Bank in Columbus, Ohio. “It’s been very stop and start, with no real way to know whether it is working other than to keep hitting the submit button.” | |
Lenders had predicted that demand would be overwhelming for the second round of funding through the Paycheck Protection Program, which began early this month. Its initial round of funding — $342 billion — was depleted in 13 days. Hundreds of thousands of borrowers who sought loans were left out. Congress authorized a new funding round last week, and the government began accepting applications at 10:30 a.m. on Monday. | |
Borrowers must apply for the money through banks or other lenders, but the S.B.A., which is managing the program, must approve each loan. Because the funds are first-come, first-served, lenders are anxious about getting their loans approved as quickly as possible. Officials from the S.B.A. did not immediately respond to questions about the technical problems lenders were reporting with E-tran, the agency’s computer system for processing loans. | |
Rob Nichols, president of the American Bankers Association, said banks’ hands were tied: They can’t help small businesses get loans if S.B.A. technology isn’t working. “Our member banks across the country are deeply frustrated at their inability to access @SBAGov’s E-Tran system,” Mr. Nichols said in a tweet on Monday. | |
The Federal Reserve on Monday said it would substantially expand its municipal lending program, an effort to provide relief to strapped states and cities as coronavirus outbreak drains public coffers. | |
The Fed had previously announced that it would buy short-term debt from states, cities with populations of more than one million and counties with populations exceeding two million. On Monday, it expanded that to cities with more than 250,000 residents and counties with more than 500,000. It also announced that it would buy slightly longer-term debt: securities that mature in three years will qualify for the program, up from two years previously. | |
The program, which has yet to start, will operate through the Federal Reserve Bank of New York. It will be backed by $35 billion in Treasury Department funding, and capable of buying up to $500 billion in eligible debt. | |
A total of 261 states, cities and counties will qualify for the program, the Fed said. So will some multistate issuers, which can include entities like the Port Authority of New York and New Jersey. | |
The expansion comes as the Fed scrambles to set up new programs to keep markets functioning properly and credit flowing into the economy, pushing its own boundaries and expanding into areas — like municipal debt — that it left untouched even in the depths of the 2008 crisis. Lawmakers from both parties and activists have called on the central bank and Treasury to offer more support for smaller localities. | |
U.S. stocks rose and global markets rallied on Monday as governments around the world discussed when and how to reopen businesses and get their economies back on track. | |
The S&P 500 rose more than 1 percent. European benchmarks rose 1 to 3 percent after a broadly higher day in Asia. | |
European governments, including Italy and France, have been discussing ways to reopen in recent days. New Zealand is loosening restrictions on retailers, restaurants, construction sites and schools after only one new case of the virus was reported Monday. | |
In the United States, governors in Colorado, Georgia, Michigan and other states are deciding how and when to start easing some social-distancing restrictions. Any opening will be slow and painful, but investors signaled optimism that the recovery could begin soon. | |
The clearest signal of this on Monday was a rally in companies that stand to gain from the lifting of restrictions on travel and public gathering. Department store Kohl’s rose nearly 18 percent, while shares of Nordstrom and Gap were also sharply higher, for example. | |
Hotel operators like Hilton Worldwide and Marriott International also jumped. | |
Oil prices plunged on Monday, with the American benchmark hurtling toward $10 a barrel, as fears about a global glut in crude continued to weigh on energy markets. | |
Since last week, investors have been panicked about oil storage facilities running out of capacity as producers continued to pump oil even as demand collapsed. That concern is most acute in the United States, where storage facilities in Cushing, Okla., are expected to reach capacity in May. | |
It’s one reason the collapse in futures of American crude has been so much sharper than the global benchmark. On Monday, West Texas Intermediate crude, the U.S. benchmark, fell about 24 percent to just below $13 a barrel. At the same time, Brent crude, the global benchmark, was down about 7 percent to just below $20 a barrel. | |
One factor behind the difference in price is that the Cushing facilities are landlocked, reachable only by pipeline, whereas Brent supplies can be reached by boat and either stored there or placed at facilities around the globe. Investors betting on an eventual rebound in oil prices are filling oil tankers up — with as much as two million barrels per vessel — and parking them out at sea, The New York Times’s Stanley Reed reported. | |
“I can send a boat to the Brent field; I can’t send a boat to Cushing, “ said Stuart Joyner, an analyst at Redburn, a market research firm. | |
Analysts say the collapse of American crude prices into negative territory on April 20 spooked investors. | |
Boeing plans to resume operations in South Carolina next week, bringing several thousand employees back to work on the 787 Dreamliner about a month after sending them home. | |
Those who can work remotely will continue to do so, and managers will tell the recalled workers when to return to Boeing’s complex in North Charleston, the company said. | |
“The health and safety of our teammates, their families and our community is our shared priority,” Brad Zaback, Boeing’s South Carolina site leader and general manager for the 787, said in a statement. “Our approach to resumption of operations ensures we honor that priority by ensuring personal protective equipment is readily available and that all necessary safety measures are in place to resume essential work.” | |
The returning employees will find facilities modified to prevent the spread of the coronavirus. Restrooms will be pressure washed, and communal spaces will be thoroughly cleaned. There will be hand-sanitizing stations and visual reminders to maintain cleanliness and distance from one another. The company said that it was encouraging workers to bring face coverings and that it would provide masks to those working in proximity of others. | |
Boeing expects it to take two to three years before air travel returns to pre-pandemic levels, said David L. Calhoun, its chief executive, at a shareholder meeting on Monday. He said the aircraft manufacturer expected it to be several years more before the industry’s longer-term growth trend recovers. Boeing has resumed production in Washington State, where about 27,000 employees returned to work last week. | |
Black and Latino Americans entered the coronavirus crisis with lower incomes and less wealth than whites. In the early months of the outbreak and its recession, they suffered disproportionately high rates of infection and job loss. | |
Now, as public officials around the country take initial steps to lift restrictions on economic activity, those black and Latino workers will bear a higher share of the health risks in getting back to work. | |
It is a pick-your-poison fact of a crisis that has exacerbated racial and socioeconomic inequality in the United States: The pandemic has knocked millions of the most economically vulnerable Americans out of work. Rushing to reopen, their employers could offer them a financial lifeline, but at a potentially steep cost to their health. | |
Americans who earn $50,000 a year or less are more than twice as likely to say they or a family member have lost jobs amid the crisis compared with those who earn more than $150,000, according to national polling data by the digital research firm Civis Analytics. Higher earners and whites are far more likely to say they can work from home during the pandemic than lower earners and black and Latino Americans, according to an April poll for The New York Times by the online research firm SurveyMonkey. | |
Researchers from the JPMorgan Chase Institute warned this month in a report that the coronavirus recession would hit black and Hispanic families harder in terms of lost income, forcing them to cut back their spending to a greater degree than whites, because black and Hispanic families have fewer savings to fall back on. | |
“There could be immense and devastating income effects that could be involved with this evolving depression,” said William A. Darity Jr., an economist at the Sanford School of Public Policy at Duke University, who is a leading scholar of economic discrimination in the United States. Inequality, he said, “has been horrendous in recent years, and I can only imagine those disparities would get worse.” | |
A growing number of companies are returning loans they received from the initial $349 billion Small Business Administration stimulus funds after public outcry over funds that were going to large corporations, including those that had other financing options. | |
More than $2 billion from the first round has been declined or returned to the program, the head of the S.B.A. said on Twitter on Monday. A spokesman said the canceled loans would go back into the program’s next round, which opened Monday. | |
Federal officials clarified last week that the loans should not go to large public companies with access to other sources of capital. A New York Times analysis found that roughly a dozen publicly traded companies had previously talked about their access to capital only to apply for loans through the program. | |
The companies that have returned the money so far range from major chains to lower-profile firms: | |
Nathan’s Famous said on Monday that it would return the $1.2 million loan it received from the Small Business Administration. And in an example of the rippling effects of coronavirus-related disruptions, it disclosed that Smithfield Foods, the meat processor that has temporarily shut down four facilities, is its primary manufacturer of hot dogs. Nathan’s said three of its company-owned locations are open, and it is seeing higher grocery store sales of hot dogs, but most of its franchised locations are in places that are closed or experiencing significantly less traffic — malls and movie theaters, airports and rest stops. | |
The Los Angeles Lakers confirmed they had received and repaid a $4.6 million loan. The National Basketball Association team is among the most valuable franchises in all of sports and is said to be worth billions. | |
Shake Shack, the owner of Ruth’s Chris Steak Houses, the chain Kura Sushi and the restaurant company J. Alexander’s Holdings said they would return roughly $51 million in combined loans. Independent restaurateurs have said that the major chains obtained funding while they were shut out of the program. | |
IDT Domestic Telecom, a communications and money transfer company, said it would return a $10 million loan. | |
Ultralife Corporation, which makes batteries and communications equipment, said it would return a roughly $3.5 million loan. BK Technologies, which produces two-way radios, said it was repaying a roughly $2.2 million loan to its bank. | |
Ballantyne Strong, a North Carolina holding company, said it would repay its $3.1 million loan. | |
Hallmark Financial Services, a Texas-based insurer, said it was repaying an $8.3 million loan. The company says it “markets, underwrites and services” more than $700 million every year. | |
Auto dealership operators were among the companies quick to start returning their money. Penske Automotive Group received and returned $66 million, it said. AutoNation, the nation’s largest chain of car dealers, said it gave back $77 million. Group 1 Automotive returned $1 million. | |
The German automaker Mercedes-Benz has resumed U.S. production at two Southern factories — a sport-utility vehicle plant in Alabama and a delivery van plant in South Carolina — as those states begin lifting or loosening orders that have kept residents at home for weeks and most businesses closed. | |
One plant, in Vance, Ala., employs 3,700 people, and the other, in North Charleston, S.C., employs more than 1,100. | |
More than a dozen other factories across the South operated by foreign automakers are also set to return to production. Volkswagen plans to reopen its plant in Chattanooga, Tenn., on May 3. A day later, Toyota plants in Kentucky, Alabama, Mississippi, Texas and Indiana and Hyundai-Kia plants in Georgia and Alabama are expected to go back to work. Honda and Volvo expected to resume production May 11. None of the plants are unionized. | |
General Motors, Ford Motor and Fiat Chrysler are in talks with the United Automobile Workers union about when and how to reopen their plants to ensure workers are safe from the spread of the coronavirus. Most of those automakers’ plants are in Michigan, which has been hit harder by the virus than most other states. | |
General Motors said it was suspending its quarterly dividend and any share buybacks to strengthen its cash position. When it halted North American production a month ago, the automaker said it was laying off 6,500 salaried workers and cutting executive pay. In labor negotiations last year that prompted a six-week strike, the United Automobile Workers union noted that G.M. had spent more than $10 billion on stock buybacks since 2015. | |
Reporting was contributed by Jim Tankersley, Neal E. Boudette, Jessica Silver-Greenberg, David Enrich, Jesse Drucker, Stacy Cowley, Stanley Reed, Neil Irwin, David McCabe, Niraj Chokshi, Jason Karaian, Kevin McKenna, Liz Alderman, Jack Ewing, Ben Dooley, Jeff Sommer, Ben Casselman, Carlos Tejada, Kevin Granville and Daniel Victor. |