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Stocks Drift as U.S. Retail Data Shows 16 Percent Plunge: Live Updates Stocks Inch Higher as U.S. Retail Data Shows 16 Percent Plunge: Live Updates
(about 2 hours later)
It was a week of downbeat pronouncements and grim economic data that had investors focus on the dire challenges facing the American economy.
Friday was no exception, and stocks were unsteady for most of the day, after new data showed how devastating the impact of the coronavirus pandemic had been to retail sales.
After a sharp fall early in the day, the S&P 500 rebounded, ending the day with a gain of less than 1 percent.
Still, thanks to back-to-back declines on Tuesday and Wednesday, the index had its sharpest weekly drop since late March, a retreat that stands out after a long stretch in which stock investors seemed willing to look past the deeply negative outlook for the economy and the uncertain path of the coronavirus outbreak.
On Tuesday, the nation’s top infectious disease expert, Dr. Anthony S. Fauci, warned lawmakers that an overly rapid reopening of large swathes of the American economy, which had been shuttered in an effort to control the outbreak, could reignite the outbreak. His comments drove a sell-off in the stock market, which closed down 2 percent.
The economic prognosis offered by the Federal Reserve chair, Jerome H. Powell, the next day did little to soothe investors. The head of the central bank warned of potentially serious consequences if the deep economic downturn facing the country was not countered with forceful fiscal policies.
“The one-two punch from Fauci/Powell is that the road ahead is likely to be rocky — perhaps rockier than market was hoping for,” William Delwich, an investment strategist at Baird, a financial firm based in Milwaukee, wrote in an email.
Amid it all, a parade of economic reports continued to show an economic downturn of breathtaking speed and scope.
In April, consumer prices — excluding volatile food and energy prices — posted their fastest month-on-month collapse in records going back to 1957; industrial production fell 11.2 percent in April, the largest drop in the 101-year history of the index; manufacturing output fell 13.7 percent, also a record, and retail sales dropped a record 16.4 percent.
The latest weekly update on applications for unemployment benefits showed nearly three million more Americans applied. Some 36 million jobs have been lost in the last two months.
The result is an incongruous situation in which stocks have soared even as economic data have continued show the United States is entering one of the worst recessions in its history.
Prices of other “safe” investments — such as Treasury bonds and gold — continue to be high, suggesting some investors continue to be unconvinced that the market rally is sustainable.
“Just like it did in January and early February, the stock market is ignoring the warning signals that are being sent out by the moves in the ‘flight to safety’ assets,” said Matt Maley, chief market strategist at Miller Tabak, a trading and asset management firm.
When Michael Sullivan borrowed $22 million from a specialist Wall Street lender in 2018 to buy and renovate two Florida hotels, he had no idea how costly that decision would prove to be.When Michael Sullivan borrowed $22 million from a specialist Wall Street lender in 2018 to buy and renovate two Florida hotels, he had no idea how costly that decision would prove to be.
He found out recently, once visitors stopped coming to his properties because of the pandemic, prompting him to seek help from the federal government’s new small business loan program. But first, he had to tussle with his lender, the credit fund Benefit Street Partners, just to win permission to get the government loan. The legal fight cost him thousands of dollars and a month in lost time.He found out recently, once visitors stopped coming to his properties because of the pandemic, prompting him to seek help from the federal government’s new small business loan program. But first, he had to tussle with his lender, the credit fund Benefit Street Partners, just to win permission to get the government loan. The legal fight cost him thousands of dollars and a month in lost time.
The CARES Act, which created the government’s Paycheck Protection Program that Mr. Sullivan borrowed from, prohibits any loan money from being controlled by other lenders. At the same time, it does not outlaw lenders like Benefit Street from enforcing existing contracts with borrowers seeking government funds.The CARES Act, which created the government’s Paycheck Protection Program that Mr. Sullivan borrowed from, prohibits any loan money from being controlled by other lenders. At the same time, it does not outlaw lenders like Benefit Street from enforcing existing contracts with borrowers seeking government funds.
The $650 billion program has helped millions of small businesses, but its rollout was uneven and slowed by confusing rules. The program’s structure itself created other challenges. For businesses such as Mr. Sullivan’s, the program’s structure has required them to fight costly legal battles simply to get any funds at all.The $650 billion program has helped millions of small businesses, but its rollout was uneven and slowed by confusing rules. The program’s structure itself created other challenges. For businesses such as Mr. Sullivan’s, the program’s structure has required them to fight costly legal battles simply to get any funds at all.
Retail sales fell 16.4 percent last month, the Commerce Department said Friday. That followed an 8.3 percent drop in March, producing by far the largest two-month decline on record.Retail sales fell 16.4 percent last month, the Commerce Department said Friday. That followed an 8.3 percent drop in March, producing by far the largest two-month decline on record.
April could prove to be the bottom. The March figures were helped in part by panic buying, and stores were generally open for the first half of the month. Most states have begun to lift barriers to commerce and movement, and many economists expect spending to rise in May as people venture out.April could prove to be the bottom. The March figures were helped in part by panic buying, and stores were generally open for the first half of the month. Most states have begun to lift barriers to commerce and movement, and many economists expect spending to rise in May as people venture out.
But any rebound is likely to be gradual. There is no guarantee that customers will return in numbers previously seen — and even if Americans feel comfortable going out to shop, they may not have as much money to spend, since millions have lost their jobs.But any rebound is likely to be gradual. There is no guarantee that customers will return in numbers previously seen — and even if Americans feel comfortable going out to shop, they may not have as much money to spend, since millions have lost their jobs.
“It’s probably fair to say the worst is over in terms of a collapse, unless there are waves of new outbreaks,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But how fast does it come back? The short answer is none of us really know.”“It’s probably fair to say the worst is over in terms of a collapse, unless there are waves of new outbreaks,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But how fast does it come back? The short answer is none of us really know.”
The downturn may have left lasting scars. J. Crew and Neiman Marcus have filed for bankruptcy protection, and other big retailers like J.C. Penney, which employs about 85,000 people, are expected to follow.The downturn may have left lasting scars. J. Crew and Neiman Marcus have filed for bankruptcy protection, and other big retailers like J.C. Penney, which employs about 85,000 people, are expected to follow.
The retail collapse is both a result of the economic crisis and a major contributor to it. The nation’s second-largest private-sector employer, after health care, the retail industry cut 2.1 million jobs in April.The retail collapse is both a result of the economic crisis and a major contributor to it. The nation’s second-largest private-sector employer, after health care, the retail industry cut 2.1 million jobs in April.
The Commerce Department’s report on retail sales for April showed staggering declines in individual sectors of the industry. Increased sales at grocery stores and from online retailers didn’t come close to offsetting the declines elsewhere.The Commerce Department’s report on retail sales for April showed staggering declines in individual sectors of the industry. Increased sales at grocery stores and from online retailers didn’t come close to offsetting the declines elsewhere.
Restaurants and bars have lost half their business over the past two months.Restaurants and bars have lost half their business over the past two months.
At furniture stores, sales are off by two-thirds.At furniture stores, sales are off by two-thirds.
Clothing stores have seen sales fall by 89 percent since February. That plunge shows how reliant many retailers have remained on physical outposts, even as the internet has upended the shopping landscape.Clothing stores have seen sales fall by 89 percent since February. That plunge shows how reliant many retailers have remained on physical outposts, even as the internet has upended the shopping landscape.
It was a week of downbeat pronouncements and grim economic data that had investors focus on the dire challenges facing the American economy.
Friday was no exception, and stocks were unsteady for most of the day, after new data showed how devastating the impact of the coronavirus pandemic had been to retail sales.
After a sharp fall early in the day, the S&P 500 climbed in afternoon trading. Still, thanks to back-to-back declines on Tuesday and Wednesday, the index was on track for its sharpest weekly drop since late March, a retreat that stands out after a long stretch in which stock investors seemed willing to look past the deeply negative outlook for the economy and the uncertain path of the coronavirus outbreak.
On Tuesday, the nation’s top infectious disease expert, Dr. Anthony S. Fauci, warned lawmakers that an overly rapid reopening of large swathes of the American economy, which had been shuttered in an effort to control the outbreak, could reignite the outbreak. His comments drove a sell-off in the stock market, which closed down 2 percent.
The economic prognosis offered by the Federal Reserve chair, Jerome H. Powell, the next day did little to soothe investors. The head of the central bank warned of potentially serious consequences if the deep economic downturn facing the country was not countered with forceful fiscal policies.
“The one-two punch from Fauci/Powell is that the road ahead is likely to be rocky — perhaps rockier than market was hoping for,” William Delwich, an investment strategist at Baird, a financial firm based in Milwaukee, wrote in an email.
Amid it all, a parade of economic reports continued to show an economic downturn of breathtaking speed and scope.
In April, consumer prices — excluding volatile food and energy prices — posted their fastest month-on-month collapse in records going back to 1957; industrial production fell 11.2 percent in April, the largest drop in the 101-year history of the index; manufacturing output fell 13.7 percent, also a record, and retail sales dropped a record 16.4 percent.
The latest weekly update on applications for unemployment benefits showed nearly three million more Americans applied. Some 36 million jobs have been lost in the last two months.
The result is an incongruous situation in which stocks have soared even as economic data have continued show the United States is entering one of the worst recessions in its history.
Prices of other “safe” investments — such as Treasury bonds and gold — continue to be high, suggesting some investors continue to be unconvinced that the market rally is sustainable.
“Just like it did in January and early February, the stock market is ignoring the warning signals that are being sent out by the moves in the ‘flight to safety’ assets,” said Matt Maley, chief market strategist at Miller Tabak, a trading and asset management firm.
As the pandemic persists, Wall Street bankers, Uber drivers, academics, artists and many other adults have turned reluctantly into boomerang children, uprooting their independent lives and migrating home. Some had partners, children and pets in tow. More than a few wondered if they carried the virus, but risked moving in anyway.As the pandemic persists, Wall Street bankers, Uber drivers, academics, artists and many other adults have turned reluctantly into boomerang children, uprooting their independent lives and migrating home. Some had partners, children and pets in tow. More than a few wondered if they carried the virus, but risked moving in anyway.
There were people who fled dense cities for the bucolic suburban houses where they grew up and the promise of home-cooked meals and free laundry. Others ended up in downsized spaces designed for empty nesters or in apartments already shared with other family members, such as grandparents or school-age siblings.There were people who fled dense cities for the bucolic suburban houses where they grew up and the promise of home-cooked meals and free laundry. Others ended up in downsized spaces designed for empty nesters or in apartments already shared with other family members, such as grandparents or school-age siblings.
Parents caught by the swell of layoffs, furloughs and canceled contracts found themselves feeding grown children who were in the same position. Mothers who had grown accustomed to freedom were expected to return to cooking and cleaning. Shorts, cat food, headphones and other items had to be purchased because the new residents had not packed enough to last through the extended lockdown; their abandoned apartments had to be cleared out when the leases began to expire.Parents caught by the swell of layoffs, furloughs and canceled contracts found themselves feeding grown children who were in the same position. Mothers who had grown accustomed to freedom were expected to return to cooking and cleaning. Shorts, cat food, headphones and other items had to be purchased because the new residents had not packed enough to last through the extended lockdown; their abandoned apartments had to be cleared out when the leases began to expire.
“Some parents see this as a welcome surprise, but it can also add a lot of fiscal strain,” said Lindsey Piegza, chief economist at the investment bank Stifel. “You can’t assume that parents are necessarily in a better-off position than their adult children.”“Some parents see this as a welcome surprise, but it can also add a lot of fiscal strain,” said Lindsey Piegza, chief economist at the investment bank Stifel. “You can’t assume that parents are necessarily in a better-off position than their adult children.”
But younger workers are “notoriously poor savers,” she said, and many were caught without rainy-day funds during a devastating economic storm. A multigenerational quarantine was often the only viable option, albeit a potentially dangerous one given the risk of the virus spreading in close quarters.But younger workers are “notoriously poor savers,” she said, and many were caught without rainy-day funds during a devastating economic storm. A multigenerational quarantine was often the only viable option, albeit a potentially dangerous one given the risk of the virus spreading in close quarters.
The German economy suffered its worst contraction since the 2008 global financial crisis, shrinking by 2.2 percent in the January-March period from the previous quarter as the shutdown of activity to halt the spread of the coronavirus pummeled growth.The German economy suffered its worst contraction since the 2008 global financial crisis, shrinking by 2.2 percent in the January-March period from the previous quarter as the shutdown of activity to halt the spread of the coronavirus pummeled growth.
These figures, combined with a revision downward to the economic growth tally for the end of 2019, mean Germany has entered a recession.These figures, combined with a revision downward to the economic growth tally for the end of 2019, mean Germany has entered a recession.
The German government, which reported the data on Friday, said the biggest hit came in March and probably worsened in April, when consumer spending, capital investment and exports — a major driver of growth in Germany — fell off a cliff.The German government, which reported the data on Friday, said the biggest hit came in March and probably worsened in April, when consumer spending, capital investment and exports — a major driver of growth in Germany — fell off a cliff.
“Things will get worse before they get better,” Carsten Brzeski, the chief eurozone economist at ING, said in a note to clients.“Things will get worse before they get better,” Carsten Brzeski, the chief eurozone economist at ING, said in a note to clients.
While the worst of the pandemic is beginning to ease, with Germany and other countries slowly easing their lockdowns, Germany’s contraction was a reminder that even if the virus dissipates, the economic fallout could pressure the European and global economy for months or years. The worst of the pandemic is beginning to ease, with Germany and other countries slowly easing their lockdowns, but Germany’s contraction was a reminder that even if the virus dissipates, the economic fallout could pressure the European and global economy for months or years.
The European Commission has projected that European Union economy would shrink by 7.4 percent this year, the worst recession in its history.The European Commission has projected that European Union economy would shrink by 7.4 percent this year, the worst recession in its history.
China’s factories maintained a brisk pace last month, but Chinese consumers were slow to resume shopping, according to official statistics released on Friday.China’s factories maintained a brisk pace last month, but Chinese consumers were slow to resume shopping, according to official statistics released on Friday.
Many countries have been watching China’s economic performance closely because it is several months ahead of the rest of the world in coping with the virus. The Chinese economy shrank in the first three months of this year for the first time since Mao Zedong died in 1976.Many countries have been watching China’s economic performance closely because it is several months ahead of the rest of the world in coping with the virus. The Chinese economy shrank in the first three months of this year for the first time since Mao Zedong died in 1976.
Factories caught up on orders that they had struggled to fill earlier this year, when the coronavirus pandemic raced across the country. The country’s industrial production was up 3.9 percent from April of last year, better than most economists expected. Production had been down 1.1 percent in March from a year earlier and had plunged in February, when the virus outbreak was at its worst in China.Factories caught up on orders that they had struggled to fill earlier this year, when the coronavirus pandemic raced across the country. The country’s industrial production was up 3.9 percent from April of last year, better than most economists expected. Production had been down 1.1 percent in March from a year earlier and had plunged in February, when the virus outbreak was at its worst in China.
But shopping and fixed asset investment stayed weak. Retail sales were down 7.5 percent in April compared to a year earlier, marginally worse than economists’ expectations.But shopping and fixed asset investment stayed weak. Retail sales were down 7.5 percent in April compared to a year earlier, marginally worse than economists’ expectations.
“We should be aware that given the continuous spread of the epidemic abroad, the stability and recovery of the national economy is still faced with multiple challenges,” said Liu Aihua, the director general of the agency’s department of comprehensive statistics.“We should be aware that given the continuous spread of the epidemic abroad, the stability and recovery of the national economy is still faced with multiple challenges,” said Liu Aihua, the director general of the agency’s department of comprehensive statistics.
Strong exports kept factories busy last month. Many factories were catching up on orders placed while Chinese cities were locked down. But orders for further exports have stalled, according to surveys of purchasing managers.Strong exports kept factories busy last month. Many factories were catching up on orders placed while Chinese cities were locked down. But orders for further exports have stalled, according to surveys of purchasing managers.
Despite the progress, tens of millions of migrant workers are unemployed. Many white-collar workers have suffered pay cuts. Weak consumption has some economists wondering how long China can sustain an economic rebound.Despite the progress, tens of millions of migrant workers are unemployed. Many white-collar workers have suffered pay cuts. Weak consumption has some economists wondering how long China can sustain an economic rebound.
With movie theaters closed because of the pandemic, many Hollywood producers have delayed the release of potential blockbusters. But on April 10, Universal Pictures made the animated sequel to its 2016 hit “Trolls” available as a digital rental on streaming platforms for $19.95. Ultra Petroleum, which produces oil and natural gas in Wyoming, filed for bankruptcy protection on Friday, its second such filing in four years. Burdened with debt, the company was struggling before the pandemic sent oil prices tumbling.
A month later, “Trolls World Tour” has brought in more than $100 million, a record for streaming. Universal said that when movie theaters reopened, it planned to release its films simultaneously in theaters and online, eliminating the theaters’ traditional window of exclusivity. Consumer spending on video games, hardware and accessories surged to a record $10.86 billion in the first quarter of 2020, an increase of 9 percent compared with the same period last year, according to data from the NPD Group. The rise came as millions of Americans sought distractions while being ordered to shelter in place to stop the spread of the coronavirus. Games such as Animal Crossing: New Horizons, Call of Duty: Modern Warfare and Doom Eternal were top titles, and the Nintendo Switch console was a strong seller.
James B. Stewart asks, is this, finally, the death knell for the theater?
If theaters are no longer the only places to watch hot new movies upon release, what is left to attract crowds? Big screens are nice, and there’s the debatable proposition that movies are more fun when watched with a crowd and the aroma of popcorn, but that’s not much of a business model.
But the concept that a theater could be an experience beyond the movie itself that would lure people out of their homes may offer a path forward.
“Movie theaters have always come back, and when they do, they’ve been better,” said Maggie Valentine, author of “The Show Starts on the Sidewalk,” a history of movie theaters. She noted that the movie palaces of the 1920s were a response to the 1918 flu pandemic, and a drab, run-of-the-mill experience wouldn’t do the trick. “They had to give people a reason to leave their homes.”
A labor case headed to France’s highest court is testing Amazon’s ability to sidestep the demands of workers who are fulfilling the surge in orders the pandemic has produced for Amazon’s business.
It is also emblematic of why Amazon, based in Seattle, has battled to keep unions out of the company, especially in the United States, its biggest market, write Liz Alderman and Adam Satariano.
Unions in the United States have made few inroads after years of campaigns. But in Europe, national labor laws require companies to deal with them, even if employees aren’t members. With more than 150,000 deaths in Europe from the coronavirus, the groups are leveraging the crisis to reassert influence and press Amazon harder on workers’ rights.
“The only way to push Amazon to action is through confrontation,” said Jean-François Bérot, who works at an Amazon warehouse south of Paris. “We’re working in conditions that pose a risk to our safety. Workers’ voices must be heard.”
Amazon defended its response to the virus, saying it had put in place more than 150 changes at its warehouses, including providing masks, temperature checks, hand sanitizer, increased time off and higher pay. It expects to have more than $4 billion of coronavirus-related expenses in the current quarter.
“We respect everyone’s right to express themselves, but object to the irresponsible actions of some labor groups who have spread misinformation and made false claims about Amazon during this crisis,” said Stuart Jackson, an Amazon spokesman.
Vice Media will lay off 100 employees globally and 55 in the United States, the chief executive Nancy Dubuc said in an email Friday, citing both the pandemic and broader negative trends in digital media. “Some tough decisions had to be made primarily around our digital teams,” said Ms. Dubuc, who took over as chief executive two years ago. Vice had already instituted four-day workweeks for three months for staffers earning more than $100,000 in response to the pandemic, with additional pay cuts for higher-earning employees and executives.Vice Media will lay off 100 employees globally and 55 in the United States, the chief executive Nancy Dubuc said in an email Friday, citing both the pandemic and broader negative trends in digital media. “Some tough decisions had to be made primarily around our digital teams,” said Ms. Dubuc, who took over as chief executive two years ago. Vice had already instituted four-day workweeks for three months for staffers earning more than $100,000 in response to the pandemic, with additional pay cuts for higher-earning employees and executives.
Reporting was contributed by Clifford Krauss, Ben Casselman, Sapna Maheshwari, Tiffany Hsu, Emily Flitter, Marc Tracy, Mohammed Hadi, Liz Alderman, James B. Stewart, Kevin McKenna, Matt Phillips, Adam Satariano, Gregory Schmidt, Carlos Tejada and Daniel Victor.
Reporting was contributed by Ben Casselman, Sapna Maheshwari, Tiffany Hsu, Emily Flitter, Marc Tracy, Mohammed Hadi, Liz Alderman, James B. Stewart, Kevin McKenna, Matt Phillips, Adam Satariano, Gregory Schmidt, Carlos Tejada and Daniel Victor.