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Stock Markets Lose Earlier Gains: Live Business Updates Stocks Waver as Investors Weigh Concerns: Live Market Updates
(about 9 hours later)
Global markets moved with uncertainty on Monday as different countries began to ease restrictions on business activity designed to curb the spread of the coronavirus outbreak. AutoNation, the country’s biggest chain of new-car dealerships, said on Monday that auto sales had started to improve after a steep drop in the early days of the coronavirus outbreak.
Markets in Europe started strongly but then gave up their gains, following a rise in most Asian markets. Futures markets were predicting Wall Street would open lower. In the first 10 days of April, sales of new and used vehicles plunged by 50 percent. But in the final 10 days of last month, sales were off by just 20 percent, the company’s chief executive, Mike Jackson, said.
Some investors are betting on what is called a V-shaped recovery, or an initial plunge in economic activity followed by a strong surge. But a quick recovery isn’t assured, especially amid worries that a second wave of outbreaks could eventually undermine efforts to get economies back on track. The auto industry will see ups and downs the rest of this year, but consumers are still interested in buying new vehicles, Mr. Jackson said in an interview. “The automotive recovery is underway,” he said.
In France, Spain, Greece, the Netherlands and other countries in Europe, different restrictions on business activities were eased on Monday, part of a gradual approach as authorities try to balance economic recovery with control of the deadly virus. Many buyers coming to AutoNation are buying cars to reduce their use of public transit or shared transportation to avoid the chance of contracting the virus, he said. “There is now a greater desire to be in your own personal space,” Mr. Jackson said.
Prices for U.S. Treasury bonds — which often rise in times of uncertainty — were generally lower. But oil prices also fell, on continued worries about an oversupply. News that auto sales are improving comes as several manufacturers are preparing to resume production of new cars and trucks. Toyota Motor planned to reopen its plants on Monday. General Motors, Ford Motor and Fiat Chrysler have said they will begin production May 18.
In Japan, the Nikkei 225 average closed 1.1 percent higher. Hong Kong’s Hang Seng index was up 1.5 percent. Australian, Taiwan and New Zealand markets also rose. Bucking the trend, the Shanghai Composite index in mainland China was flat, while South Korea’s Kospi fell 0.5 percent. AutoNation on Monday reported that it lost $232 million in the first quarter, compared with a profit of $92 million in the same period a year earlier.
Temperature checks are conducted on ticket holders upon arrival. All guests must wear face masks. Parades are suspended. No theater shows or fireworks. Purple social-distancing mats prevent bunching while waiting in line. Rows of seats are left empty on rides. Many consumers expect to lose their jobs and to see home prices stall — or even decline — over the coming year, according to a Federal Reserve survey. Given that peoples’ homes are often their largest investment, that could spell even more trouble for the economy.
It’s not quite the escapist fantasy Disney typically hopes its theme parks will be, but the reopening of Shanghai Disneyland on Monday carried immense symbolic importance. It sent a message to Disney’s furloughed park employees — 43,000 in Florida alone — about the future: There will be one. For the first time since the Federal Reserve Bank of New York started its survey of consumers in 2013, the median consumer did not expect home prices to increase over the next year. More than 44 percent of April respondents actually expected home prices to decline, and that pessimism was broad-based across demographic groups and regions.
From a business standpoint, Shanghai Disneyland will be operating far below its potential. The Chinese government has limited capacity at the park to 24,000 people daily, less than one-third of its pre-outbreak capacity. Bob Chapek, Disney’s chief executive, said last week that Disney would reduce ticket sales even further — “far below” the government’s limit, in his words — to make sure that employees can enforce new safety rules. Fewer tickets sold means decreased food and merchandise sales. As recently as February, consumers expected a 3 percent home price appreciation. The swift deterioration in their outlook underlines how much the coronavirus lockdown, which has left millions out of work and has made loans harder to come by, could threaten the housing industry.
Investors have been relieved. Disney shares have climbed 8 percent since May 5, when Mr. Chapek announced that Shanghai Disneyland would reopen, perhaps paving the way for similar actions at Disney resorts in the United States, Japan and France. The limited number of tickets that Shanghai Disneyland put on sale for this week sold out within hours, suggesting that people are willing to resume public activities, even without a vaccine. Mortgage credit availability has tumbled to its lowest level since late 2014, a Mortgage Bankers Association index showed last week, as lenders shy away from borrowers with low credit scores and those looking for large mortgages. That could blunt the economic benefit of the Fed’s recent rate cuts, as consumers struggle to benefit directly from lower borrowing costs.
When the Shanghai resort reopened on Monday, according to videos of the event, cast members — Disney’s term for employees — lined Mickey Avenue, which leads to the castle and aerial Dumbo ride, and waved madly as they greeted attendees. Belle, Minnie, Woody, Duffy and other costumed characters appeared with welcome banners as a marching band played an upbeat “Mary Poppins” tune. Consumers were glum along other dimensions, too. They increasingly expected to lose their jobs, putting the chances over the coming year at 20.9 percent in April, a new series high.
“It has been an emotional morning,” Joe Schott, president and general manager of the Shanghai Disney Resort, said in a phone interview. “There is light at the end of the tunnel.” The United States is on the brink of the worst economic collapse since the Hoover administration. Corporate profits have crumpled. More than a million Americans have contracted the coronavirus, and hundreds are dying each day.
France began a cautious, partial reopening of its economy Monday after two months of lockdown, allowing hundreds of thousands of businesses to resume activity and increasing public transportation on a reduced basis, with masks required. Employees can return to offices, stores and factories, but the government is encouraging people to continue to work from home the next two weeks whenever possible. But after a few weeks of wild swings, the market is down roughly 9 percent this year and a little more than 13 percent from its peak. Even as 20.5 million people lost their jobs in April, the S&P 500 stock index logged its best month in 33 years. The index was basically unchanged on Monday.
Not everything is coming back to life: Restaurants, bars, cinemas, theaters and parks will remain closed until further notice. And travel into and outside of France’s borders is generally prohibited through June 15 for everyone except for people like those who must travel abroad for their work. Conventional wisdom would explain the market’s comparatively modest losses this way: Because markets tend to be forward-looking, investors have already accounted for what’s expected to be a cataclysmic drop in second-quarter activity and are forecasting a relatively rapid economic recovery afterward.
The government is hoping Europe’s second-biggest economy will soon start to mend from the lockdown. The lack of activity has dealt the worst blow to growth since World War II, hammering all sectors and contributing to the continent’s rapid and deep recession. But for decades, the market has been growing increasingly detached from mainstream of American life. There are a few reasons:
France has sought to limit mass unemployment through a nearly 100 billion euro, about $108 billion, program that is helping businesses stay afloat and paying companies not to lay off more than 12 million workers. The program will slowly begin to unwind in June. But with growth expected to contract by 8.2 percent this year, the government is cautiously reviewing the situation. The giant companies that make up the S&P 500 operate under very different circumstances than the nation’s small businesses, workers and cities and states. They are highly profitable, hold significant sums of cash and have regular access to public bond markets.
Meatpacking plants around the country that have been shuttered by the coronavirus are reopening again, in an effort to avoid meat shortages in fast-food chains and supermarkets. Stock ownership is heavily skewed to the richest segments of the population, who are least likely to feel the pain of an economic downturn.
But even with stronger safety precautions, it’s unclear if America’s appetite for meat can be sated without sickening armies of low-wage workers, and their communities, in new waves of infection. The Federal Reserve’s actions have also bolstered investors’ confidence that the bottom won’t fall out of the market.
Tyson Foods reopened a massive meatpacking facility in Waterloo, Iowa, on Thursday with new safety precautions like plexiglass barriers along the production line, infrared temperature scanners to detect fevers, and face shields and masks for the workers. Tyson’s largest pork operation in the United States, the plant is responsible for almost 4 percent of the nation’s pork supply. Americans have long relied on the stock market as a proxy for the U.S. economy. The current economic fallout, however, could snap any illusions that the logic of the market is derived, in any consistent way, from real-world events.
Like many other meatpacking plants around the United States, it had become a hotbed for coronavirus infections. As of Thursday, the county health department had recorded 1,031 coronavirus cases among Tyson employees — more than a third of the work force. As of Friday, three employees had died, according to Tyson. Randal K. Quarles, the Fed’s vice chair for banking supervision, will tell lawmakers this week that banks are playing a key role in getting credit to consumers and businesses as the coronavirus crisis unfolds in the economy and in financial markets.
Plant employees, immigrant-rights advocates and local government officials have criticized the company for failing to provide adequate safety equipment to Waterloo workers and initially refusing the requests of local officials to close the plant. “Banks entered this crisis in a position of strength,” Mr. Quarles said in prepared remarks released on Monday afternoon, adding that “banking organizations are well-positioned to serve as a source of strength, not strain, in the current crisis.”
Steve Stouffer, the head of Tyson’s beef and pork operations, said in an interview that the company had made the best safety decisions it could in a rapidly evolving situation. But he acknowledged that the company might have done more. Mr. Quarles, long an ally of the banking industry, said that financial institutions “now have an essential part to play in addressing that disruption — as a bridge between the start of this crisis and the completion of our economic recovery.”
“Looking at it in the rearview mirror, you can always be better,” he said. Banks both touched off and exacerbated the 2008 crisis, but this time around, they have been made a key part of many of the government’s lending programs. Their stronger position coming into the crisis, the result of new rules and regulations put into place in the wake of the last crisis, has helped enable that.
Political pressure has been building to get the dozens of meat-processing plants across the country that had shut down because of virus outbreaks up and running again. President Trump issued an executive order in late April declaring the meat supply critical, and he has urged plants to increase their production. Still, there have been some concerns that banks should be conserving more capital because the duration of the coronavirus pandemic and the extent of its economic fallout remain unknown. Some former officials have urged the Fed to halt bank dividend payouts so that the companies can conserve capital in case the crisis drags on, potentially leaving them on shakier footing and with less room to lend.
But the reopening may have to proceed in fits and starts. Tyson executives cautioned that it would take time to return to normal. The Waterloo plant reopened on Thursday at about 50 percent capacity. And ramping back up could take weeks as workers return from quarantine. Mr. Quarles did not address those concerns in the text of his speech but could face questions from lawmakers at the hearings, which begin on Tuesday in front of the Senate Banking Committee and Wednesday before the House Financial Services Committee.
For weeks, the car industry was expected to be the motor pulling the Chinese economy out of a deep downturn caused by the coronavirus pandemic. Car dealers spoke of eager customers who feared becoming infected on mass transit and wanted their own set of wheels immediately. Automakers told their factories to ramp up production. The coronavirus pandemic is putting the brakes on a two-decade-long global expansion for natural gas, which has been replacing coal for electricity and heating and even competing with oil as a transportation fuel in some developing countries. Gas prices, already low after a relatively warm winter in the Northern Hemisphere, have plummeted and storage facilities have filled to the brim. Struggling international oil and gas companies have slashed investment budgets, jettisoning projects.
The bad news came on Monday morning in Beijing: car sales did not rise after all. They actually fell. Now, tankers carrying gas in its compressed, cooled liquid form are sitting idle off the coasts of Europe as factories and businesses are only slowly coming back on line, if at all, and many people are forced to wait out the pandemic at home.
The China Passenger Car Association announced that the number of cars sold by dealerships to the general public fell 5.5 percent in April compared to the same month a year ago. “The coronavirus trajectory is a big unknown in both economic and financial impact and policy changes to manage the fallout,” said Leslie Palti-Guzman, president of Gas Vista, a research and consulting firm. “But it poses unprecedented risk to L.N.G. demand and investments.”
That was a lot better than March, when sales fell by nearly half compared to last year. But it was worse than automakers expected. Investment decisions for proposed multibillion-dollar liquefied natural gas export terminals — which can take up to a decade to plan, permit and build — have been delayed or canceled in Australia, Mozambique, Qatar, Mauritania, Senegal and the United States in recent weeks. Industry executives estimate that investments of more than $50 billion will be delayed this year and next.
The China Association of Automobile Manufacturers said on Monday that factories sold 4.4 percent more cars to dealerships last month than the same month a year ago. Dealership inventories of unsold cars stayed bloated as a result. With air travel nearly shut down during a pandemic, Delta Air Lines has swung from huge profits and is bleeding money. On Wednesday, it will drop 10 more airports from its already skeletal network.
But there were signs of hope for the industry. The passenger car association said that dealership sales to the public had been up 12 percent in the last week of April from a year ago, after dismal sales earlier in the month. Delta and the other major airlines in the United States are losing $350 million to $400 million a day as expenses like payroll, rent and aircraft maintenance far exceed the money they are bringing in. And even though they are slashing schedules, they are averaging an anemic 23 passengers on each domestic flight.
“In the last several weeks, there’s a momentum that has picked up, and from everything I’m seeing is gaining some traction,” said Jay Kunkel, the executive vice president for Asia and Pacific operations at Tenneco, a global manufacturer of automotive emissions and suspension equipment. Passenger traffic is down about 94 percent and half of the industry’s 6,215 planes are parked, according to Airlines for America, a trade group.
Stocks rose on Friday, following global markets higher after upbeat comments from U.S. and Chinese officials about recent trade talks between the two countries. Yet, devastating as the downturn has been, the future is even more bleak. With much of the world closed for business, and no widely available vaccine in sight, it may be months, if not years, before airlines operate as many flights as they did before the crisis. Even when people start flying again, the industry could be transformed, much as it was after the Sept. 11 terrorist attacks.
The S&P 500 climbed more than 1 percent. European markets were higher after a broadly positive day in Asia. The crisis could push some airlines, especially smaller ones, into bankruptcy or make them takeover targets. Consumer fears about catching the virus on crowded planes could lead to reconfigured seating. Carriers may initially entice wary travelers with discounts, but if they can’t fill up flights, they may resort to raising ticket prices.
Investors were cheered by the prospects of countries further reopening their economies, despite worries that those efforts could lead to a rise in infections. They were also bolstered by announcements from the United States and China that appeared to back their Phase 1 trade deal, which would bring their two-year trade war to a temporary truce. The White House had openly questioned China’s commitment to the deal in recent days, hurting stocks. The former Mayor Michael Bloomberg of New York lays out how the government can help companies start up again in a Bloomberg Opinion piece. It’s a mix of protecting workers and businesses.
The optimism was widespread. Prices for U.S. Treasury bonds, which generally rise in troubled times, were lower. Oil prices also rose. Companies should be shielded from lawsuits if they meet certain criteria, including providing workers with protective equipment, imposing social-distancing and offering flexible sick leave. Otherwise, Mr. Bloomberg writes, “these suits could impose a significant economic cost, create uncertainty for businesses, impede needed investment and potentially cause production bottlenecks.”
But more grim economic data was released on Friday. The report on April payrolls in the United States is showed a loss of more than 20.5 million jobs — a breathtaking drop — and a sharp jump in the unemployment rate. Corporate earnings reports, too, are reflecting the heavy toll of the pandemic. Siemens, the European industrial giant, said profit fell 64 percent in the first quarter. Companies that don’t follow the reopening guidelines could still be sued, he writes.
The stock market has shown a remarkable indifference to the dire outlook for the economy since it began to rally on March 23. That was the day the Federal Reserve signaled that it stood ready to pump an unlimited amount of dollars into financial markets to keep key borrowing markets from malfunctioning. Congress should expand unemployment insurance for high-risk workers and let companies offer tax-free “hazard pay” for those who must be at work, Mr. Bloomberg writes. Lawmakers should also create a public fund for employees in critical industries.
Tesla’s chief, Elon Musk, and local health officials in California clashed on Saturday over the timing of the reopening of Tesla’s factory in Fremont, with the company’s chief executive pushing for an immediate return and the county’s government seeking a delay of about a week. And Washington should relax health-privacy laws that would otherwise prevent companies from verifying whether employees had been sick or tracing their contacts.
In a series of tweets, Mr. Musk said he would move the company’s headquarters out of California to Texas or Nevada. A 112-year-old German company has found itself playing an unexpected yet crucial role in supplying the country with the face masks its population needs to safely reopen its economy.
The tweets came a day after health officials from Alameda County told Tesla that it was not yet allowed to resume production of electric vehicles in Fremont because of fears that the coronavirus could spread among the company’s workers. Manufacturers have been allowed to restart work in other parts of the state that have had less severe outbreaks of the virus. The company, Melitta, made coffee filters and vacuum cleaner bags before the coronavirus pandemic hit, but it quickly retooled one of its coffee filter production systems to make masks that filter out bacteria as efficiently as simple medical masks. They are shaped like the coffee filters Melitta still makes for sale in grocery stores around the world, but they are made of material that is similar to Melitta’s vacuum cleaner bags, layers of melt-blown and spun-blown microfiber.
“Frankly, this is the final straw,” Mr. Musk said on Twitter. “Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing activity at all, it will depend on how Tesla is treated in the future.” So far, the company has produced 10 million masks, but they are not yet for sale to the public and Melitta has yet to set a price for their wide distribution. One of its executives, Rene Korte, said Melitta can sell the masks at prices comparable to what masks made in Asia sold for before the crisis hit.
Scott Haggerty, the county supervisor for the district in Alameda County where Tesla’s Fremont plant is located, said on Saturday that he had been confident that county health officials and Tesla executives were close to an agreement on reopening the plant on May 18. But, Mr. Haggerty said, that appeared to be unacceptable to Mr. Musk, who wanted to open the plant on May 8. The company is now working on designing earloops that can be made of similar material and can fold out of the mask, which would allow it to eliminate the rubber bands currently used to affix the masks to wearers’ faces.
“We were working on a lot of policies and procedures to help operate that plant and quite frankly, I think Tesla did a pretty good job, and that’s why I had it to the point where on May 18, Tesla would have opened,” Mr. Haggerty said. “I know Elon knew that. But he wanted it this week.” Saudi Arabia’s government said Monday that it would triple the rate of its value added tax on sales to 15 percent and take other measures to shore up state finances as the combination of lower oil prices and the costs of fighting the coronavirus pandemic strain the kingdom’s budget.
Reporting was contributed by Liz Alderman, Niraj Chokshi, Brooks Barnes, Conor Dougherty, Gregory Schmidt, Mohammed Hadi, Ana Swanson, David Yaffe-Bellany, Michael Corkery, Keith Bradsher, Carlos Tejada, Daniel Victor and Kevin Granville. The minister of finance, Mohammad Aljadaan, also said that spending on Crown Prince Mohammed bin Salman’s Vision 2030 projects, which aim to diversify the Saudi economy and create new jobs for Saudis, would be cut, according to the official Saudi Press Agency.
The new measures would boost state coffers by around 100 billion Saudi riyals, or about $26 billion.
On Monday, the Saudi government also said that it had ordered Saudi Aramco, the national oil company, to cut a further 1 million barrels a day in oil production, to about 7.5 million barrels a day in June, the lowest level in nearly two decades. The aim, according to the energy ministry, is to encourage other producers to comply with previously agreed output trims and make additional cuts of their own.
Kuwait and the United Arab Emirates, both Saudi allies, said they would add another 180,000 barrels a day in trims.
Steak ‘n Shake permanently closed 57 restaurants in the first quarter because of the coronavirus pandemic, the company’s parent, Biglari Holdings, said in its quarterly earnings report. Biglari, whose properties include Western Sizzlin restaurants, Maxim magazine and First Guard Insurance, reported that revenue fell to $136 million in the first quarter, from $182 million the same quarter a year earlier. The company had 605 company-operated and franchise Steak ‘n Shake and Western Sizzlin restaurants as of March 31.
Twitter will add new labels to tweets that contain misinformation about the coronavirus, the social media company said on Monday in a blog post. Tweets that contain “potentially harmful, misleading information” related to the virus will now include a link to additional information from trusted sources like public health officials. Posts that Twitter considers particularly harmful or misleading will be hidden behind a warning label, which cautions viewers that the tweet contains information that “conflicts with guidance from public health experts.”
The hotel giant Marriott International reported a 92 percent drop in profits in the first quarter as the coronavirus pandemic closed many of its hotels. Marriott said its net income for the first quarter fell to $31 million, down from $375 million a year ago.
Avianca, Colombia’s flagship airline and one of the world’s oldest carriers, filed for bankruptcy protection in federal court in New York late on Sunday. The company said that the drop in air travel had eroded its revenue by more than 80 percent and that it is in talks to secure financial lifelines from the government of Colombia and those of its other markets.
Reporting was contributed by Kate Conger, Neal E. Boudette, Jeanna Smialek, Michael de la Merced, Liz Alderman, Julie Creswell, Stanley Reed, Niraj Chokshi, Brooks Barnes, Clifford Krauss, Christopher F. Schuetze, Emily Flitter, Conor Dougherty, Gregory Schmidt, Jason Karaian, Mohammed Hadi, Ana Swanson, David Yaffe-Bellany, Michael Corkery, Keith Bradsher, Carlos Tejada, Daniel Victor and Kevin Granville.