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Stock Markets Gain, and Oil Too, as Investors Look Ahead: Live Updates Stocks Surge as Oil Prices Rally: Live Updates
(about 11 hours later)
Global markets rose broadly on Monday on continuing hopes that the world’s economy will gradually emerge from the coronavirus outbreak. Many of the world’s economies have begun to loosen restrictions on commerce, the Federal Reserve chair on Sunday signaled that the central bank has more firepower to lend to recovery efforts, and a drugmaker reported positive developments in an early trial of a coronavirus vaccine.
European markets were trading 2 to 3 percent higher following more moderate gains in Asia. Futures markets were predicting Wall Street would open percent higher. Taken together, the developments set off a surge in global stock prices and Wall Street had its best day in about six weeks.
Oil was trading higher, with West Texas Intermediate, the U.S. standard crude, rising above $30 a barrel for the first time since March. In another sign of investor optimism, prices of longer-term U.S. Treasury bonds fell. The S&P 500 rose more than 3 percent Monday, while stock benchmarks in Europe were 4 percent to 6 percent higher.
Investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed the world’s No. 3 economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. On Sunday, Jerome H. Powell, the Federal Reserve chair, suggested that a full American rebound from virus-induced lockdowns could take until the end of 2021. Before trading began in the United States, the drugmaker Moderna said its coronavirus vaccine showed promising early results in tests on humans. The early-stage tests were on just eight people, but the hope that a vaccine might be quickly developed was enough to give stock prices a lift.
The Nikkei 225 index in Japan and South Korea’s Kospi both finished 0.5 percent higher, while the Hang Seng in Hong Kong gained 0.6 percent. Mainland China’s Shanghai Composite index gained 0.2 percent. Also bolstering markets was a pledge from Jerome H. Powell, the Fed chair, that there was “really no limit” to what the central bank could do with its emergency lending facilities.
The FTSE 100 index in London and the CAC 40 index in Paris both rose 2.1 percent in early trading. In Germany, the DAX was up 2.3 percent. “The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve,” Mr. Powell said during a television interview broadcast on Sunday.
Japan fell into a recession for the first time since 2015, as its already weakened economy was dragged down by the coronavirus’s impact on businesses at home and abroad. The Fed chair also suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7 percent in April, could peak at 20 percent or even 25 percent.
The world’s third-largest economy after the United States and China shrank by an annualized rate of 3.4 percent in the first three months of the year, the country’s government said on Monday. Still, investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed its economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. Some restrictions have also been lifted in parts of Europe and the United States.
That makes it the largest economy to officially enter a recession, often defined as two consecutive quarters of negative growth, in the coronavirus era. Other major economies around the world are set to follow, joining Japan as well as Germany and France in recession, as efforts to contain the outbreak ripple around the globe. The experiences of China, where the outbreak first emerged in December and January, suggest recovery will be long and difficult. And trading on Monday had all the characteristics of a rally focused on the prospects for a return to normal. Shares of companies that stand to gain the most, like United Airlines, Expedia Group and Marriott International were among the best performers in the S&P 500.
“The economy entered the coronavirus shock in a very weak position,” said Izumi Devalier, chief Japan economist at Bank of America Merrill Lynch, but “the real big ugly stuff is going to happen in the April, June print. It’s going to be three quarters of very negative growth.” Businesses that have benefited as Americans stockpiled food and cleaning supplies, like Campbell Soup and Clorox, were among a small number of decliners.
SoftBank Group on Monday reported the largest annual loss in its history and one of the largest ever by a Japanese company. Oil prices also reflected optimism about the economy, with West Texas Intermediate, the U.S. benchmark, rising above $30 a barrel for the first time since March. Shares of energy companies like Chevron and Exxon were also sharply higher.
The dismal results were driven largely by SoftBank’s investment in WeWork and other technology-related companies that have been hit hard by the coronavirus pandemic. Earlier, SoftBank announced that Jack Ma, the co-founder of the Chinese e-commerce giant Alibaba, had resigned from its board. J.C. Penney, the 118-year-old retailer that filed for bankruptcy on Friday, said on Monday that it planned to close about 242 stores — 30 percent of its locations — as part of its restructuring plan. The move will leave J.C. Penney with 604 stores.
In the earnings release, the company announced an annual operating loss of 1.36 trillion yen, or $12.7 billion, in the fiscal year that ended March 31, its first annual loss in 15 years. It reported a profit of $19.6 billion during the same period last year. The retailer also aims to have its e-commerce business account for more than one-quarter of its revenue within the next few years, up from 14 percent last year, according to a filing that included a presentation outlining J.C. Penney’s business plan.
Investors had been bracing for the results. The company had released two earnings warnings, telling markets to expect that its $100 billion Vision Fund — an investment vehicle that was a major finance force in the technology world — would post losses on the order of $16.7 billion. The company said in the filing that it would close 192 stores this year and close and sell 50 stores that it owns next year. The stores it plans to keep operating accounted for 82 percent of J.C. Penney’s most recent annual revenue and represent “the highest sales-generating, most profitable, and most productive stores in the network.”
The company’s losses were slightly higher than its estimates, and the Vision Fund reported a loss of $17.7 billion. It attributed the blow to the coronavirus’s impact on major companies in its portfolio like Uber, the ride-share company, and WeWork, the tech-related office space company. J.C. Penney is planning to lose about half of its overall sales this year for annual revenue of about $5.1 billion. The retailer said it thinks it can expand its e-commerce sales to $2.3 billion in fiscal 2024, which would make up 26 percent of its business.
Apple plans to reopen several stores this week in the United States, Canada and Italy, another sign of the gradual return to business across the world. The retailer said it would reduce expenses by having fewer workers, lowering ad spending and cutting administrative costs, as well as cutting “bonus/equity and benefits.”
In March, Apple closed more than 450 of its stores — nearly every location outside of China — to combat the spread of the coronavirus. The company recently started to reopen shops in South Korea, Australia and Austria. Jerome H. Powell, the chair of the Federal Reserve, will tell members of Congress that the central bank stands ready to do what it can to help the American economy make it through the sharp downturn underway.
Now Apple is planning to add another 25 stores in the United States, 12 in Canada and 10 in Italy to its list of reopenings this week. The American stores are in California, Florida, Oklahoma, Hawaii, Colorado and Washington state, though some stores in those states will remain closed. Likewise, Apple is keeping 17 stores in Canada and seven stores in Italy closed. “The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II,” Mr. Powell said in prepared testimony that he is scheduled to deliver to the Senate Banking Committee on Tuesday.
Apple has set limits on the number of people inside its stores and requires social distancing. Apple Store employees are checking the temperatures of their colleagues and customers at the door and requiring everyone to wear face masks. Customers who don’t have a mask are given one. He added that the Fed was “committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response.”
Executives of J.C. Penney received a bankruptcy judge’s approval on Saturday to spend up to $500 million while they try to save the company. Mr. Powell will testify alongside Treasury Secretary Steven Mnuchin. The pair will explain to senators what they are doing with a $500 billion congressional appropriation in the CARES Act that was primarily meant to back up Fed emergency lending programs, which can keep credit flowing to businesses and local governments in times of crisis.
A day earlier, the 118-year-old department store chain, which was an anchor of America’s once-thriving shopping malls but is now drowning in debt, became the third major retail chain to file for bankruptcy protection this month, following J. Crew and the Neiman Marcus Group. It is the biggest corporate casualty of the coronavirus crisis so far, with more than 800 stores and nearly 85,000 employees. Mr. Powell noted that one program — the Main Street facility, which is intended to lend to midsize businesses and which has been a particular focus of lawmaker concern — has been revised to count in a broader set of counterparties and could be revised further.
The filing was expected after J.C. Penney failed to make an interest payment on its debt in April to “maximize financial flexibility,” and then skipped another payment earlier this month. The stock of the chain, which is based in Plano, Texas, has traded below $1 a share for most of this year. Its sales have steadily shrunk to $10.7 billion for the year ending Feb. 1, when it posted a net loss of $268 million. The changes made already “should help the program meet the needs of a wider range of employers that may need bridge financing to support their operations and the economic recovery,” he said. “We will continue to adjust facilities as we learn more.”
After a court hearing Saturday held by telephone, David R. Jones, a bankruptcy judge in Corpus Christi, Texas, ruled that J.C. Penney executives could continue paying employees who have not been furloughed, as well as key vendors it needs to keep operating. WeWork, the office space giant that was struggling even before the coronavirus shut down much of the economy, is asking landlords for a break on its huge rent bill as it tries to survive the pandemic.
The company hopes to survive by closing stores and shedding several billion dollars in debt, but its fate remains highly uncertain. Jill Soltau, the chief executive, said in a statement that executives planned to “hit the ground running on Monday.” The judge scheduled another hearing for June 2. Some of the company’s small-business customers are also seeking relief on the rent they owe. But they say WeWork has been unwilling to cut them much slack as they grapple with plunging revenues and stay-at-home orders that prevent them from using the company’s sleek spaces.
At a regularly scheduled Monday morning meeting on Jan. 27 with top executives at Facebook, Mark Zuckerberg turned the agenda to the coronavirus. For weeks, he told his staff, he had been hearing from global health care experts that the virus had the makings of a pandemic, and now Facebook needed to prepare for a worst-case scenario — one in which the company’s ability to combat misinformation, scammers and conspiracy theorists would be tested as never before. Klint Briney, who runs a marketing company in Los Angeles, was disappointed that WeWork only offered to defer one month’s rent. Because much of his business comes from live events, his revenue is a fraction of what it was a year ago.
To start, Mr. Zuckerberg said, the company should take some of the tools it had developed to fight 2020 election garbage and retool them for the pathogen. He asked executives in charge of every department to develop plans for responding to a global outbreak by the end of the week. “Something that was a legitimate offer, I certainly would have entertained,” he said. “What they offered was a slap in the face.”
The meeting, described by two people who attended it, helped vault Facebook ahead of other companies — and even some governments — in preparing for Covid-19. And it exemplified a change in how the 36-year-old is running the company he founded. The tension between WeWork, its landlords and its customers highlights the problems gripping the market for office space, a huge part of the economies of big cities. In the coming months, many tenants will be unable or unwilling to pay their rent. And landlords will have to decide whether to grant them relief, wait for them to make good on their arrears or seek to evict them. Banks and investors who lent money to property owners will face similar choices.
Today more than ever, Facebook is Mr. Zuckerberg’s company. In recent years, he has consolidated power among the executive ranks, taken a more active role with lawmakers and seen his board of directors populated with staunch allies. Now, the coronavirus has presented Mr. Zuckerberg with the opportunity to demonstrate that he has grown into his responsibilities as a leader. Black and Latino business owners are struggling to get government assistance under the Paycheck Protection Program, a new survey has found, and many say they are on the brink of closing permanently.
The wild swings in stock prices that occurred in mid-March were shocking to most investors, but now it’s clear that even the Oracle of Omaha appears to have panicked. The survey, conducted by the Global Strategy Group for two equal-rights organizations, Color of Change and UnidosUS, included interviews with 500 business owners and 1,200 workers from April 30 to May 11. Just 12 percent of the owners who applied for government-backed loans in the $650 billion program reported receiving what they had asked for, and nearly half of all owners said they anticipated having to permanently close in the next six months.
Warren E. Buffett bailed out of his holdings in Goldman Sachs in the first quarter of 2020, selling 84 percent of his stake in the Wall Street bank, according to regulatory filings made Friday by his conglomerate, Berkshire Hathaway. Despite the drastic move, Mr. Buffett hung on to shares of two giant banks with stronger consumer operations, JPMorgan Chase and Wells Fargo. By comparison, in a survey of small businesses by the Census Bureau from April 26 to May 2, three-quarters said they had asked for a loan and 38 percent of them said they had received one.
It was an unusual move for Mr. Buffett, who rarely exits his investments with such abruptness. But it’s clear that the coronavirus crisis has hit his company hard. Berkshire Hathaway reported a $49.7 billion loss during the first quarter, in contrast to a $21.7 billion profit during the same period a year earlier. In its first monthly review of how emergency bailout funds are being used, the Congressional Oversight Commission has outlined the questions it plans to address about how the Federal Reserve and Treasury Department are administering the $500 billion program.
Goldman Sachs shares are down more than 30 percent from their peak this year in January at $249.72, but their price has recovered somewhat from the lowest point, reached on March 23, when the stock closed at $134.97. The money, which was allocated as part of the $2 trillion CARES Act, is being used to provide grants and loans to airlines and companies that are vital to national security and to backstop lending programs created by the Fed.
Marc Hamburg, Berkshire Hathaway’s chief financial officer, did not immediately respond to a request for comment. The programs are just getting up and running. The report says that the Treasury has yet to disburse the $46 billion in grant and loan money to airlines or businesses critical to national security.
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. Millions of Americans sought distractions while being ordered to shelter in place. 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. Thus far, it has used only $37.5 billion for the Fed’s Secondary Market Corporate Credit Facility, which purchases outstanding corporate bonds through a special purpose vehicle. The Fed’s other facilities, which are intended to keep credit flowing to businesses and state and local governments, are expected to be operational in the coming weeks, though the timeline remains uncertain.
Reporting was contributed by Mike Isaac, Sheera Frenkel, Cecilia Kang, Ben Dooley, Carlos, Tejada, Jack Nicas, Sapna Maheshwari, Michael Corkery, Matt Phillips, Emily Flitter and Gregory Schmidt. The commission questioned how the Fed and Treasury would measure the success of the programs. Signaling its areas of concern, it questioned whether the Fed facilities would favor large companies over smaller ones and whether the agencies believed that the loan money would help stabilize the economy regardless of how it was used.
The next report is due in late June.
Every financial services company has a coronavirus relief page on its website right now, filled with reassuring language about the assistance on offer. Federal laws and regulations are supposed to make it easier to get help.
But if you’re wary of the corporations riding to your rescue — or even if you’re not — you need to protect yourself, writes Ron Lieber. Memorialize every single thing they tell or promise you.
One unfortunate lesson from recessions past is that companies and consumers often disagree about what help they settled on and under what terms. Absent written proof or recorded phone calls, struggling consumers are at a disadvantage years later when assistance turns out to be fleeting or illusory.
Many consumers are scared for their lives, not just their livelihoods. Billers, landlords and customer service reps are scattered to the winds, away from bosses and compliance officials, distracted by their own disrupted home lives. Mistakes will be made, in great volumes.
So, a taking of receipts is in order.
Uber said on Monday that it laid off 3,000 employees, closed 45 of its global offices and reorganized several of its secondary businesses as the coronavirus caused an 80 percent downturn in its ride-hailing business. Uber has also cut back its food delivery service, Uber Eats, in several countries where it was not successful and sold its bike and scooter arm, Jump. The company has laid off about 25 percent of its work force over the last month.
Target said on Monday that it would extend its temporary $2-per-hour pay increase for full- and part-time front line workers through July 4. The retailer announced the increase on March 20 and said at the time it would maintain the increase until “at least May 2.” Temporary wage increases during the pandemic, which some retailers have referred to as “hero” pay, have become a major point of contention in recent weeks.
Japan fell into a recession for the first time since 2015, as its already weakened economy was dragged down by the coronavirus’s impact on businesses at home and abroad. The world’s third-largest economy, after that of the United States and China, shrank by an annualized rate of 3.4 percent in the first three months of the year, the country’s government said on Monday.
The chief executive of Hertz, the century-old car rental company now at risk of bankruptcy, has resigned, the company said Monday. The company’s fate may be decided this week: It has until Friday to come up with a plan to pay back its lenders and continue to meet its ongoing financial obligations.
Reporting was contributed by Jeanna Smialek, Niraj Chokshi, Mike Isaac, Sheera Frenkel, Clifford Krauss, Cecilia Kang, Ben Dooley, Carlos Tejada, Neal E. Boudette, Ron Lieber, Kate Conger, Jack Nicas, Sapna Maheshwari, Jason Karaian, Michael Corkery, Matt Phillips, Emily Flitter, Mohammed Hadi, Katie Robertson and Gregory Schmidt.