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Wall Street opens higher after biggest rout since 1987

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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US FINANCIAL MARKET

Wall Street opens higher after biggest rout since 1987

  • The main U.S. stock indexes opened higher on Tuesday, a day after their biggest drop since the 1987 crash, as efforts to contain the rapidly spreading coronavirus upended parts of the economy and dampened business sentiment.
  • A closely watched measure of turbulence in U.S. stocks, the CBOE Volatility Index, edged down from Monday’s high but remained sharply elevated.
  • Investors watching for government action to help soften the economic blow of the virus and related containment measures parsed news that U.S. Treasury Secretary Steven Mnuchin is pitching Senate Republicans on a stimulus package of about $850 billion.
  • Some economists have said U.S. households, businesses and investors should brace for a sharp downturn in the first half of 2020, and hope for a bounce back during the last six months of the year.

Airlines Seek $50 Billion Coronavirus Aid Package

  • Reeling from the coronavirus crisis, U.S. airlines are seeking over $50 billion in financial assistance from the government, more than three times the size of the industry’s bailout after the Sept. 11 attacks.
  • A potential aid package could include government-backed loans, cash grants and other measures including relief from taxes and fees, according to an airline trade group and others familiar with the discussions.
  • U.S. airports are separately seeking $10 billion in assistance to counter forecast full-year losses already approaching $9 billion, according to a person familiar with the request.
  • Industry trade group Airlines for America, or A4A, said all seven of the carriers it represents could run out of money in the second half of the year or sooner.

Planemakers grapple with delivery delays as airline crisis grows

  • Boeing and Airbus face a drop in planned deliveries as airlines struggle to survive the coronavirus crisis, sending shares in planemakers plunging on Monday.
  • The world’s largest planemakers make most of their money when they deliver jets, but airlines are doing everything possible to preserve cash as air travel plummets and even financially sound U.S. carriers could defer deliveries.
  • More problematically for Boeing, the global health crisis threatens the smooth return to service of its money-spinning 737 MAX, as cash-strapped airlines push off plans to absorb the grounded planes or make pre-delivery down payments.
  • The head of Southwest Airlines, Boeing’s largest 737 MAX customer, has said it will keep options open on aircraft deliveries this year as it watches demand.

Boeing in talks for short-term U.S. government assistance

  • Boeing confirmed it is in talks with senior White House officials and congressional leaders about short-term assistance for itself and the entire aviation sector.
  • Boeing, already struggling to win approval from regulators for its 737 MAX to return to service, is in talks with the U.S. government to try to win support for manufacturers, suppliers, airlines and airports, the person said.
  • Boeing declined to say how much in assistance it was seeking, but added the entire U.S. aerospace industry that “supports over 2.5 million jobs and 17,000 suppliers – is facing an urgent challenge resulting from the coronavirus pandemic.”
  • Airlines are slashing flights and it raises questions about whether they will cancel orders for the MAX, which has been grounded for just over a year.

U.S. gasoline refining profits slump to 2008 levels amid coronavirus fears

  • U.S. gasoline refining margins fell a whopping 95% on Monday – even briefly turning negative – with the cost of gasoline plunging faster than crude oil in anticipation that the coronavirus will keep people off the road and in their homes.
  • U.S. gasoline refining margins settled at 28 cents per barrel on Monday, their lowest since December 2008, another signal that economic activity appears to be contracting.
  • The United States consumes about 9 million barrels per day of motor gasoline, but fuel demand is now expected to fall by roughly 2 million to 2.5 million bpd in the next three to four weeks.
  • Headed into the evening rush hour on Monday, congestion in New York City was down by 37% from last year’s average.
  • In Chicago, it was down 24%.

Nordstrom shuts stores, pulls 2020 outlook due to coronavirus

  • Nordstrom said on Monday it would temporarily shut its stores in the United States and Canada and pull its fiscal 2020 forecast, as the upscale retailer joins its peers in an effort to limit the spread of the coronavirus.
  • The department store operator said it would close its stores for two weeks starting March 17, while keeping its apps and websites open, including Nordstrom.com, Nordstromrack.com, HauteLook.com.
  • The company also suspended its share buyback program as part of a plan to further cut its expenses and withdrew its 2020 outlook.

Amazon to Hire 100,000 Warehouse and Delivery Workers Amid Coronavirus Shutdowns

  • Amazon.com plans to hire an additional 100,000 employees in the U.S. as millions of people turn to online deliveries at an unprecedented pace and Americans continue to reorient their lives to limit the spread of the new coronavirus.
  • Amazon plans to deploy the new workers to fuel its sprawling e-commerce machine and is raising pay for all employees in fulfillment centers, transportation, stores and deliveries in the U.S. and Canada by $2 an hour through April.
  • The 100,000 new Amazon jobs, in locations across the U.S., will come at a time when broader retail is contracting and retailers rethink operating physical stores during a pandemic.
  • Apple, Nike and Lululemon Athletica, among others, have announced temporary store closures.

Tesla Says It Delivered First Model Y SUV

  • Tesla has begun delivering its newest car, the Model Y compact sport-utility vehicle, the Silicon Valley car maker said Monday on Twitter, undeterred by the outbreak of the novel coronavirus that has raised concerns about global economic growth.
  • Tesla initially planned for deliveries of the SUV to start in the fall, but Chief Executive Elon Musk pulled that date forward and said they would commence by the end of this month.
  • The accelerated timeline was announced before the U.S. was hit with the Covid-19 virus that was first discovered in China and subsequently shut down much of that country.

 

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US ECONOMY & POLITICS

Retail Sales Dropped 0.5% in February

  • Retail sales, a measure of purchases at stores, at restaurants and online, declined a seasonally adjusted 0.5% in February from a month earlier, the Commerce Department said Tuesday.
  • That was much weaker than the 0.1% increase economists had expected.
  • Data for January was revised higher to show retail sales accelerating 0.6% instead of rising 0.3% as previously reported.
  • Compared to February last year, retail sales increased 4.3%.

U.S. Job Openings (JOLTS Report) Rebounded in January Before Virus Impact

  • The number of available positions rose to 6.96 million from an upwardly revised 6.55 million in December.
  • That compares with a median forecast for a modest drop to 6.4 million.
  •  Job openings increased by 65,000 in finance and insurance and by 8,000 for mining and logging.

U.S. Braces for Sharp Economic Downturn as Coronavirus Bears Down

  • U.S. households, businesses and investors should brace for a sharp economic downturn in the first half of 2020 because of the new coronavirus pandemic—and hope for a bounce back during the second half of the year.
  • Mark Zandi, chief economist at Moody’s Economy.com, sees the economy contracting at a 1.6% annual rate in the first quarter and a 2.5% pace in the second quarter before picking up in the second half of the year and exceeding 3% growth in 2021.
  • J.P. Morgan is going with similar projections, with the economy contracting at a 2% rate in the first quarter and a 3% rate in the second, and then bouncing back in the second half of the year.
  • Goldman Sachs sees the economy contracting at a 5% annual rate in the second quarter after no growth in the first, and then strong growth in excess of 3% in the second half of the year.

Trump Administration Seeking $850 Billion Stimulus Package

  • U.S. Treasury Secretary Steven Mnuchin is pitching Senate Republicans on a roughly $850 billion economic stimulus package, according to two people familiar with the matter, as the Trump administration works to craft more legislation to cushion the economic blow of the coronavirus pandemic.
  • The Trump administration’s stimulus plan will include roughly $50 billion for the airline industry, according to the people, as well as billions of dollars in general stimulus that could include a payroll tax cut.
  • The proposal is still in its early stages and is awaiting final signoff from President Trump, an administration official said.
  • Senate Minority Leader Chuck Schumer (D., N.Y.) is also set to propose his own broad stimulus package that will be worth at least $750 billion.

Federal Reserve to Launch Commercial Paper Funding Facility Amid Coronavirus Uncertainty

  • The Federal Reserve said Tuesday it would establish a lending facility to support short-term commercial debt markets to prevent intensifying funding strains from accelerating economic damage from the coronavirus.
  • The Fed said it had established the new Commercial Paper Funding Facility, a version of which was last used during the 2008 financial crisis, after securing the approval of the Treasury secretary.
  • To protect the Fed against taking credit losses on such loans, the Treasury will provide $10 billion from an obscure pool of money it retains called the Exchange Stabilization Fund, which has around $94 billion in it.

House Democrats Scale Back Paid-Leave Program in Coronavirus-Aid Bill

  • The Democratic-led House scaled back a paid-leave program that the chamber had tried to enact days earlier, following pressure from businesses worried about financial burdens from the sweeping bill in response to the coronavirus crisis.
  • The new measure would still provide two weeks of sick leave to a wide swath of workers affected by the pandemic, including those who are in quarantine, caring for family members with Covid-19, and those who have children whose schools or day-care centers have closed.
  • But for the next 10 weeks, paid leave would be limited only to workers caring for a child whose school or day care had been shut.
  • In the original version, all the workers who received paid sick time would be eligible for another 10 weeks of paid leave at two-thirds pay, in what would have represented a major expansion of the Family and Medical Leave Act.

Economic Downturn Catches State Unemployment Programs Unprepared

  • State unemployment insurance systems across the U.S. aren’t ready for the likely surge in worker claims from the U.S. economic downturn triggered by the new coronavirus pandemic.
  • Despite a historically long economic expansion, 22 states and jurisdictions’ unemployment trust funds are unprepared to pay out enough in unemployment benefits in the event of a recession, according to Labor Department data.
  • For a trust fund to be recession-ready, it must have enough to pay benefits through a yearlong recession.

Democratic Primaries Go Forward as Voters Face Coronavirus

  • The first primary elections since the coronavirus pandemic engulfed the nation were kicking off Tuesday in states including Florida and Illinois, as candidates, voters and election officials tried to navigate a new and challenging environment.
  • Polls indicated former Vice President Joe Biden was poised to dominate the day’s voting, potentially adding significantly to his delegate advantage over Vermont Sen. Bernie Sanders in a Democratic presidential nomination race that appeared to be winding down.
  • Voting in Florida, Arizona and Illinois appeared to be on track, with some polling places moved away from vulnerable locations such as nursing homes.

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EUROPE & WORLD

Singapore, Taiwan and Hong Kong Face Second Wave of Coronavirus Cases

  • Singapore, Taiwan and Hong Kong are witnessing fresh waves of coronavirus infections, as the growing number of cases around the world test their successful early defenses against the disease.
  • Singapore reported 17 new cases late Monday, its highest daily count since the epidemic started.
  • Taiwan recorded a single-day high of 10 cases of infection, bringing its total to 77.
  • Hong Kong added five new cases—a day after it recorded nine—the most since Feb 9.
  • Globally, cases of infection rose to more than 182,000 on Tuesday and the number of deaths hit 7,155, according to Johns Hopkins University.

As Europe Hunkers Down, Governments Pledge Billions to Help Companies

  • France, under a nationwide quarantine as the number of confirmed cases rose to over 6,500, pledged €45 billion ($50.16 billion) in immediate aid for businesses and employees hit by the pandemic.
  • Germany, Britain, the Netherlands and other European countries have announced assistance measures for businesses, such as expanded partial-unemployment packages in which the state pays the salaries of employees who aren’t working amid the pandemic.

Volkswagen, Airbus Halt European Production Amid Wave of Factory Closures

  • Companies temporarily shut swaths of manufacturing capacity across Europe as they tried to protect factories and workers from the spread of the new coronavirus and comply with an array of government measures to slow the disease’s spread.
  • Volkswagen, the world’s biggest car maker by sales, said Tuesday it was preparing to shut down most of its European plants.
  • It had previously said it was only shuttering sites in Italy, the country hardest hit by the virus outside of China, and Spain.
  • Airbus, the world’s biggest plane maker, said it was temporarily halting production at its plants in France and Spain.
  • It said the shutdowns would last four days to enable it to enact new sanitation and hygiene measures and retool workspaces to allow more distance between workers.

China’s JD.com to buy back $2 billion shares

  • China’s JD.com said on Tuesday it would buy back up to $2 billion of its shares, after the e-commerce company estimated a growth in sales in the current quarter that has been ravaged by the coronavirus outbreak.
  • JD said it expects to fund the buyback, to take place over the next 24 months, with existing cash.
  • JD had earlier announced buybacks of $1 billion each in 2015 and 2018, respectively.

VW to start using high-nickel batteries for electric car

  • Volkswagen will raise the amount of nickel used in its electric car battery cells to 80% in the next year from 65% at present, Frank Blome, head of battery cells at the carmaker said on Tuesday.
  • Volkswagen’s current electric car battery cell contains 65% nickel, 15% cobalt and 20% manganese.
  • Next generation batteries will have 80% nickel, 10% cobalt and 10% manganese, Blome told analysts on a call.
  • Volkswagen is embarking on a mass production push to build 3 million electric cars by 2025, requiring 300 gigawatt hours worth of battery cells, mainly in Asia and Europe, he said.

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TODAY in HISTORY

  • British forces evacuated Boston during the Revolutionary War. (1776)
  • Mount Agung on Bali erupted, killing 1,184 people. (1963)

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