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Global Markets Fall on Recovery Fears and China Tensions: Live Updates Stocks Waver as China Tensions Climb: Live Updates
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J. Crew, known for producing preppy fashion with mass market appeal, filed for bankruptcy on Monday. The company is the first major retailer to fall victim to the pandemic that has hobbled the world economy. Costco, the club retailer, has started to limit the amount of meat customers can buy at once.
The company, whose popularity was lifted more than a decade ago by Michelle Obama, had amassed enormous debt even before the outbreak. Since then, it has seen sales virtually wiped out at more than 170 J. Crew stores and a further 140 operated under the popular Madewell brand that it also owns. The company, which attracts shoppers who want to buy in bulk, said in an update on its website on Monday that fresh beef, pork and poultry products would be “temporarily limited to 3 items” per member.
J. Crew had struggled to keep up with changing tastes, but appeared to be adapting in recent months, having named Jan Singer, formerly of Nike and Victoria’s Secret, its new chief executive. The company had been planning an initial public offering this spring of Madewell, a popular denim brand among millennials, to pay down debt and revamp the J. Crew brand. The limits come as production in the meat industry slows after widespread illnesses in slaughterhouses across the Midwest and South. Dozens of meat packing plants have been closed around the country since the coronavirus took hold. And in many of those that have stayed open, large numbers workers are not showing up.
While it is the first major retailer to fall to the coronavirus, J. Crew is unlikely to be the last. The pandemic halved sales of clothing and related accessories in March and is believed to have had an even greater effect in April. Neiman Marcus is carrying significant debt, for example. On Monday, Tyson Foods, one of the world’s largest pork, chicken and beef producers, said that it expected further “slowdowns and temporary idling” of meat processing plants because of the coronavirus pandemic.
And Brooks Brothers is already facing questions about its future. Tyson did not quantify how much meat production had declined, but the union representing plant workers estimates that pork production has fallen by as much as 25 percent and beef was down 10 percent.
Wall Street was headed for a downbeat start to the week, and a third straight day of declines, following a drop in Europe and Asia, as investors remain on edge about the severity of the economic downturn. The cruise giant Carnival Corporation said on Monday that it planned to reopen cruising on eight of its ships before the end of the summer.
Investors have been contending with two diverging ideas lately: encouraged by the progress made in combating the coronavirus pandemic, and hopeful that economies will begin to reopen soon, they bid stocks sharply higher in April. Carnival has canceled service on some of its cruise lines through September, but it said it was planning to offer cruises from ports in Galveston, Tex.; Miami; and Port Canaveral, Fla., as early as Aug. 1.
But evidence of the damage caused by the coronavirus pandemic to employment, corporate profits and the broader economy continues to roll in. Carnival, the world’s largest cruise line, has been at the center of the coronavirus pandemic since the beginning, widely blamed for a series of major outbreaks that spread the disease across the world. Last week, Congress began investigating the company’s handling of the virus, asking it to turn over internal communications related to the pandemic.
On Monday, the focus was on the risks, with sentiment hurt by rising tensions between the United States and China. All of Carnival’s North American cruises set to depart between June 27 and July 31 would be canceled, the company said in its statement on Monday.
The Trump administration, under pressure for its own bungles in dealing with the outbreak, has ramped up criticism of China’s response. President Trump on Sunday said the Chinese government made a “horrible mistake” in its coronavirus response and then orchestrated a cover-up that allowed the pathogen to spread around the world. He has threatened new tariffs on Chinese products in response. “We will use this additional time to continue to engage experts, government officials and stakeholders on additional protocols and procedures to protect the health and safety of our guests, crew and the communities we serve,” the company said.
Shares of the big U.S. air carriers — Delta Air Lines, United Airlines, American Airlines and Southwest Airlines — were all sharply lower after Warren Buffett on Saturday said he had dumped his stakes in the companies. Because of the pandemic’s impact on travel, “the airline business — and I may be wrong, and I hope I’m wrong — but I think it, it changed in a very major way.” One week after the Paycheck Protection Program began backing a second round of small-business relief loans, $175 billion of the program’s $310 billion in remaining funding has been committed, according to the Treasury Department and Small Business Administration.
In some global markets, the drop was partly a catch up to trading on Friday. Stocks in France and Germany, which had been closed Friday, fell more than 3 percent. But the FTSE 100 in Britain, which did trade on Friday, was only slightly lower. About 2.2 million applicants have been approved for loans so far in this round, with an average size of $79,000, the agencies said. That’s far smaller than the $206,000 average in the program’s first $342 billion lending round, when publicly traded companies and other larger organizations sucked up billions of dollars.
Hong Kong’s economy shrank by 8.9 percent in the first three months of the year compared with a year earlier, according to government estimates, the worst plunge since the authorities began tracking similar data in 1974. Technical problems with the Small Business Administration’s overwhelmed computer system early last week, preventing many banks from having their customers’ applications processed. Lenders said the crush began to ease toward the end of the week, and Treasury Secretary Steven Mnuchin said on Monday that the backlog had been cleared.
On a seasonally adjusted quarter-to-quarter basis, Hong Kong’s economy contracted by 5.3 percent when compared with the fourth quarter. JPMorgan Chase, the program’s largest lender in the first round, said on Friday that it had approved 211,000 additional loans, bringing its lending through the program to $29 billion. Bank of America said on Monday that it approved 256,000 applications in the last week, bringing its total lending to nearly $25 billion. Citigroup said it submitted just over $3 billion in loans to the S.B.A. for approval in the last week.
Private consumption, imports and exports fell by about one-tenth. Social distancing, layoffs and concerns about the future of the economy led to a drop in spending. But many questions remain about the program’s murky rules — particularly those involving loan forgiveness for businesses that use the money to retain or rehire workers. The earliest loan recipients will be able to seek forgiveness at the end of this month. The Treasury and S.B.A. said Sunday that they planned to issue additional rules and guidance.
The coronavirus slowed Hong Kong’s economy before it spread around the world, so the semiautonomous Chinese city’s performance could offer a hint of what might happen elsewhere. But it was already in a recession brought by anti-government protests and the protracted trade war between the United States and China. Publicly traded companies have given back more than $375 billion in federal stimulus loans meant to help small businesses stay afloat, according to a New York Times analysis of securities filings and public announcements. Many of the companies began returning the loans after their disclosures raised an outcry that the stimulus program was steering money to major corporations instead of smaller operations like independent retailers and restaurants.
Hong Kong could also offer a hint of what an emergence might look like. The city has managed to keep the outbreak under control through widespread use of masks, social distancing and aggressive efforts to track and isolate those who have been infected. The city has recorded 1,040 confirmed cases and four deaths, with no local cases reported over the past two weeks. Nine of the 10 largest known loans issued to public companies have or will be returned, the Times analysis shows. The outlier, a loan to BBQ Holdings, which owns several hospitality brands including Famous Dave’s BBQ, was first disclosed on Friday.
Schools, bars and public facilities have been closed, and a series of restrictions have been put in place to reduce the number of people in restaurants. Still, the city has avoided the broad lockdowns put in place in mainland China, Europe and the United States. Ashford Inc., which oversees a network of hotels and resorts including Ritz Carltons and one of the biggest beneficiaries of the program, said on Saturday that it and its subsidiaries would return $68.8 million in loans after mounting criticism from policymakers and members of the public. So far, at least 35 public and private companies have returned their loans.
The government has also introduced several stimulus measures, including tax cuts and handouts of 10,000 Hong Kong dollars each, or about $1,300, to adult residents. With the lending program under scrutiny, federal officials in late April began putting new policies in place to limit which public companies could receive the stimulus aid. Public companies with access to other capital are not likely to be eligible to receive loans, and companies that returned the money by May 7 would not face penalties.
Hong Kong officials estimate that the economy will contract this year by 4 percent to 7 percent. The Treasury Department said on Friday that it expected to issue nearly $3 trillion in debt from April through June, a substantial escalation in federal borrowing that is a direct result of the coronavirus pandemic.
Even as lines at food banks grow and Americans worry about getting enough to eat, farmers have had to destroy produce, smash eggs and dump milk as the demand from restaurants, hotels and schools has drastically declined in the coronavirus pandemic. In a news release Thursday, Treasury officials said the new borrowing was necessary to cover increased spending on aid to individuals and businesses — via programs like enhanced unemployment benefits, loans to small and large businesses and direct payments to lower- and middle-income Americans.
Now, the Department of Agriculture plans to spend $300 million on surplus produce, milk and meat and ship it to food banks. States have also joined the effort: New York is giving food banks $25 million to buy products made from extra milk produced on farms in the state. The borrowing will also cover the shortfall in tax revenue that has been exacerbated by the department’s decision to delay some tax filing deadlines, including the deadline for individual income taxpayers, from April 15 to July 15.
Even college students have stepped in, renting trucks to rescue unsold onions and eggs from farms. They have created a website that connects farmers and food banks around the country. The fact that those taxes will eventually be paid suggests that not all of the new borrowing will permanently add to the national debt. The Congressional Budget Office projected last month that the budget deficit would hit $3.7 trillion for the 2020 fiscal year.
But the combined efforts are only a “drop in the bucket,” said Jackie Klippenstein, a senior vice president of the Dairy Farmers of America, the largest dairy co-op in the United States. The co-op has diverted almost a quarter of a million gallons of milk to food banks. The shares of the four biggest U.S. airlines — Delta Air Lines, United Airlines, American Airlines and Southwest Airlines — fell sharply on Monday after Warren Buffett said that he had dumped his stakes in the companies. By late morning, they were among the worst-performing shares on the S&P 500.
And more food is coming — California strawberry growers are fretting about how to sell their goods, with peak harvest season approaching in May. “We like those airlines, but the world has changed for the airlines,” Mr. Buffett said on Saturday during the annual shareholder meeting of his conglomerate, Berkshire Hathaway. “I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way.”
“Time is not on our side,” said Mary Coppola, a vice president at the United Fresh Produce Association, a trade group of fruit and vegetable growers and processors. “In my own personal opinion, we are not coming up with the supply-chain logistical solutions as quickly as produce is growing.” Mr. Buffett invested in those companies in 2016 after rejecting the industry for years. In an interview with CNBC at the time, he said that airlines had been “a disaster for capital,” but said that he believed that the industry had gotten “a bad first century” out of the way. Indeed, airlines had enjoyed a rare yearslong streak of profitability before the pandemic.
FIGHTING FOOD WASTE Read our full story on plans to distribute onions, strawberries and eggs from farms to food banks. The existential crisis the industry now finds itself in has started to spread to their suppliers. On Monday, General Electric’s aviation unit, which makes engines and other aircraft components, said it is planning to cut up to 25 percent of its work force, a reduction of about 13,000 hourly and salaried employees. Last week, Boeing said it expected it would take years for passenger demand to recover and is planning to cut 16,000 jobs. Boeing shares were down about 3.5 percent on Monday and G.E. was down about 4.5 percent.
Amazon and Target are the focus of renewed labor protests over the health risks of working during a pandemic. Mr. Buffett was generally optimistic over the weekend, saying that markets will improve in the long term. But his actions spoke just as loudly as his words. Normally, he views a down market as an opportunity to buy stocks, but Berkshire has made few major investments lately.
In addition to earlier demands to keep workers safe, the protests featured a newer goal: to discourage employers from rolling back safety measures in a rush to return to business as usual, especially as states lift stay-at-home orders. “We have not done anything, because we don’t see anything that attractive to do,” he said.
The companies are not unionized, and the scattered protests on Friday were organized ad hoc. Stocks on Wall Street inched higher on Monday, following a drop in Europe and Asia, as investors remained on edge about the severity of the economic downturn.
Some Amazon workers said they were alarmed that the company was ending a policy of unlimited unpaid time off, which many workers had taken advantage of to avoid coronavirus exposure in warehouses. The S&P 500 was less than half a percent higher, after recovering from early losses in part because of a rebound in shares of large technology companies.
Jordan Flowers said he had declined to return to work Friday at an Amazon warehouse on Staten Island. “They’re going to have to fire me,” said Mr. Flowers, who joined more than a dozen people, not all of them employees, in a protest nearby. “I choose my life over this.” Markets have been pushed and pulled by two competing ideas lately. Encouraged by the progress made in combating the coronavirus pandemic and hopeful that economies will begin to reopen soon, investors bid stocks sharply higher in April. But that optimism has been undermined as evidence of the damage caused by the coronavirus pandemic to employment, corporate profits and the broader economy continues to roll in.
An Amazon spokeswoman said that there was “no measurable impact on operations” from the protest and that the company was extending a $2-an-hour pay increase and double overtime pay in the United States and Canada through May 16. She did not dispute that the policy on unpaid time off had changed but said Amazon was providing a range of other leave-of-absence policies. For the last few days, the focus has been on the risks. On Monday, sentiment was hurt by rising tensions between the United States and China.
At Target, some workers expressed concern that the company was again allowing customers to return goods to stores, a practice that had been suspended to reduce potential virus exposure. The Trump administration, under pressure for its own bungles in dealing with the outbreak, has ramped up criticism of China’s response. President Trump said on Sunday that the Chinese government made a “horrible mistake” in its coronavirus response and then orchestrated a cover-up that allowed the pathogen to spread around the world. He has threatened new tariffs on Chinese products in response.
“That’s a point of frustration,” said Adam Ryan, a Target worker in Christiansburg, Va., who helped organize a protest there. “When they stopped accepting returns from guests, we thought that was a good call.” In some global markets, the drop was partly a catch-up to trading on Friday. Stocks in France and Germany, which had been closed Friday, fell more than 3 percent. But the FTSE 100 in Britain, which did trade on Friday, was only slightly lower.
A Target spokeswoman confirmed that returns were again being accepted in stores, citing cleaning, safety and social distancing measures now in place. She said that the company knew of fewer than 10 of its 340,000 front-line workers who had taken part in the protest, and that it had extended a $2-an-hour wage increase until May 30. A vice president of Amazon’s cloud computing arm said on Monday that he had quit “in dismay” over the recent firings of workers who had raised questions about workplace safety during the coronavirus pandemic.
The federal government has distributed stimulus loans worth more than $1 billion to public companies as part of a program meant to protect payrolls at small businesses, according to an analysis of public filings and company announcements by The New York Times. Tim Bray, an engineer who had been a vice president of Amazon Web Services, wrote in a blog post that his last day at the company was Friday. He criticized a number of recent firings by Amazon, including that of an employee in a Staten Island warehouse, Christian Smalls, who had led a protest in March calling for the company to provide workers with more protections.
In total, more than 300 publicly traded firms have disclosed receiving loans from the roughly $660 billion Paycheck Protection Program, which is administered by the Small Business Administration. Mr. Smalls’s firing has drawn the scrutiny of New York State’s attorney general.
The loans have set off an outcry, and led the agency to issue new guidance pushing the public companies to return the money, especially as many smaller operations were left empty-handed in the early stages of the program. In recent weeks, at least 32 public and private companies have disclosed that they had returned loans, including the burger chain Shake Shack and car dealerships like AutoNation. Mr. Bray also criticized the firing last month of two Amazon employees, Maren Costa and Emily Cunningham, who circulated a petition in March on internal email lists that called on Amazon to expand sick leave, hazard pay and child care for warehouse workers.
As China’s economy struggles to get back on track, the problems of Anbang, a debt-saddled insurer, is highlighting the obstacles of the country’s reliance on borrowing. Mr. Bray, who had worked for the company for more than five years, called the fired workers whistle-blowers, and said that firing them was “evidence of a vein of toxicity running through the company culture.”
Anbang once spent billions of dollars scooping up overseas hotels and trophy real estate like the Waldorf Astoria in New York. Two years ago, it was seized by China’s insurance regulator and has been trying to shed its portfolio of foreign assets ever since. Amazon did not immediately respond to a request for comment.
Now one of those efforts, a $5.8 billion deal to sell 15 U.S. hotels to a South Korean asset manager, Mirae Asset Global Investments, has fallen through. Mirae said on Monday that it terminated the deal last month after Anbang breached its contractual obligations. J. Crew, known for producing preppy fashion with mass market appeal, filed for bankruptcy on Monday, making it the first major retailer to fall victim to the pandemic that has hobbled the world economy.
It is the latest deal to be scuppered as the pandemic devastates financial markets and takes a toll on sectors like tourism. Governments around the world have restricted travel, leading to widespread booking cancellations. The company, whose popularity was lifted more than a decade ago by one of its most prominent fans, Michelle Obama, had amassed enormous debt even before the outbreak. Since then, it has seen sales virtually wiped out at more than 170 J. Crew stores and a further 140 operated under the popular Madewell brand that it also owns.
In an emailed statement, Mirae accused Anbang of trying to close the transaction on April 17 despite breaching some obligations, resulting in the termination of the contract. Among the breaches was a failure by Anbang to disclose liabilities on some hotel properties, Mirae said. Anbang is suing Mirae in the United States, saying the termination was improper. J. Crew had struggled to keep up with changing tastes, but appeared to be adapting in recent months, having named Jan Singer, formerly of Nike and Victoria’s Secret, its new chief executive. The company had been planning an initial public offering this spring of Madewell, a denim brand popular among millennials, to pay down debt and revamp the J. Crew brand.
Mirae “categorically denies Anbang’s claims,” the company said in the statement. Anbang did not immediately respond to a request for comment. J. Crew is the first major retailer to fall to the coronavirus, but it is unlikely to be the last. The pandemic halved sales of clothing and related accessories in March and is believed to have had an even greater effect in April. Neiman Marcus is carrying significant debt, for example. And Brooks Brothers is already facing questions about its future.
Approximately 36,000 employees of news media companies have been affected by layoffs, pay cuts or furloughs since the coronavirus crisis began in earnest in the United States in March, according to New York Times estimates. Intel said it would pay $900 million to acquire Moovit, the maker of an app that provides directions based on real-time traffic data, a rare deal in the current environment. The acquisition will complement Intel Mobileye, the company’s growing autonomous driving unit, which produces hardware and software for driving-assistance features used in vehicles across the industry.
Recent weeks have brought layoffs at The New York Post and Protocol, while other outlets, such as Condé Nast, continue to ponder them. But on the other hand, the hundreds of billions of dollars in federal stimulus money have begun to arrive in bank accounts. The Vermont weekly newspaper Seven Days even brought five laid-off employees back after receiving its Paycheck Protection Program loan. But such loans still may not go to newspapers owned by large chains. Taubman, the shopping mall owner, said that it would reopen three major shopping centers on May 6 as retailers aim to return to business: International Plaza in Tampa, Fla.; the Mall at University Town Center in Sarasota, Fla.; and City Creek Center in Salt Lake City, Utah. The company made its plans known after Simon Property Group, the biggest mall operator in the United States, said that it planned to reopen 49 malls this weekend across 10 states. Macy’s, which also owns Bloomingdale’s and Bluemercury, said on Thursday that it planned to open 68 stores on Monday.
This week, the general public will begin to get a fuller look at how the crisis has affected newspapers in particular as Gannett, Lee Enterprises and The New York Times Company all make their quarterly earnings reports. Approximately 36,000 employees of news media companies have been affected by layoffs, pay cuts or furloughs since the coronavirus crisis began in earnest in the United States in March, according to New York Times estimates. This week Gannett, Lee Enterprises and The New York Times Company will release their quarterly earnings reports.
Taubman, the shopping mall owner, said that it would reopen three major shopping centers on May 6 as retailers aim to return to business: International Plaza in Tampa, Fla.; The Mall at University Town Center in Sarasota, Fla.; and City Creek Center in Salt Lake City, Utah. The company made its plans known after Simon Property Group, the biggest mall operator in the United States, said that it planned to reopen 49 malls this weekend across 10 states. Macy’s, which also owns Bloomingdale’s and Bluemercury, said on Thursday that it planned to open 68 stores on Monday. Reporting was contributed by Stacy Cowly, Alexandra Stevenson, Kate Conger, Michael Corkery, David Yaffe-Bellany, Vanessa Friedman, Andrew Ross Sorkin, Mihir Zaveri, Jeanna Smialek, Niraj Chokshi, Brooks Barnes, Mohammed Hadi, Austin Ramzy, Michael J. de la Merced, Carlos Tejada, Noam Scheiber, David McCabe, Marc Tracy and Sapna Maheshwari.
Reporting was contributed by Alexandra Stevenson, Kate Conger, Michael Corkery, David Yaffe-Bellany, Vanessa Friedman, Austin Ramzy, Michael J. de la Merced, Carlos Tejada, Noam Scheiber, David McCabe, Marc Tracy and Sapna Maheshwari.