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U.S. Stocks Drop Despite Fed’s Latest Stimulus Move

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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US FINANCIAL MARKET

U.S. Stocks Drop Despite Fed’s Latest Stimulus Move

  • U.S. stocks opened lower on Monday as a brief spurt of optimism from an aggressive credit boost by the Federal Reserve was overshadowed by the still rapidly spreading coronavirus pandemic.
  • Senate Democrats blocked a $1.3 trillion rescue package after a dispute with Republicans over corporate bailout provisions and aid to dislocated workers.
  • Lawmakers and administration officials still hoped to reach an agreement to allow both chambers of Congress to approve it.
  • The Senate convenes noon on Monday.
  • While stocks fluctuated, investors sought shelter in traditional safe-haven assets, such as bonds, gold and currencies like the Swiss franc and Japanese yen, a return to a more traditional trading pattern that gave some investors solace.
  • For several days last week, those assets fell along with stocks, a sign that markets were coming under severe strain.

Countries Roll Out Restrictions to Curb Coronavirus

  • Governments world-wide are increasingly imposing mandatory restrictions on residents to force people to keep their distance from each other, stepping up efforts to slow the global spread of the coronavirus as cases surged past 350,000.
  • Globally, the death toll from Covid-19, the pneumonialike disease caused by the virus, hit 15,328.
  • Cases in the U.S. crossed 35,000, 10-fold from a week earlier, as a growing number of state leaders ordered residents to stay home as much as possible, sought medical supplies and moved to expand hospital capacity to prepare for an influx of patients.
  • New York state has emerged as the center of the crisis in the U.S., with 15,777 confirmed cases reported Sunday—about 4,000 infections more than a day earlier and thousands more than any other U.S. state.
  • In China, the government reported 39 new cases Monday, all of them imported, as well as nine deaths in Wuhan.

Skies clear as more flights grounded by growing coronavirus curbs

  • Widening curbs on travel to contain the spread of the coronavirus led airlines to ramp up flight cancellations on Monday, with new restrictions spanning Australia, New Zealand, the United Arab Emirates, Hong Kong, Singapore and Taiwan.
  • Globally the number of scheduled flights last week was down more than 12% from the year earlier, flight data provider OAG said, with many airlines having announced further cuts to come.

Delta Air expects quarterly revenue to fall by $10 billion, beefs up line of credit

  • Delta Air Lines expects its second-quarter revenue to fall by $10 billion, representing an 80% reduction compared with a year earlier, the company said on Friday, as the coronavirus hurts travel demand.
  • To beef up its cash position during the crisis, Delta has entered into a $2.6 billion secured credit facility and was drawing down $3 billion under its existing credit facilities.
  • Delta has already said it will park more than 600 jets, cut corporate pay by as much as 50% and scale back its flying by more than 70% until demand begins to recover.
  • The global travel industry has been upended as tourists stay indoors to stop spread of the highly contagious virus, with some estimates pegging revenue losses for the business travel sector at about $820 billion.

Best Buy withdraws fiscal 2021 financial guidance

  • Best Buy said on Saturday that the company withdrew all financial guidance for fiscal 2021, for both the first quarter and full year, due to increased uncertainty related to the potential impacts of the coronavirus.
  • The retailer said it drew the full amount of its $1.25 billion revolving credit facility, which was undrawn as of Feb. 1.
  • The company also said it suspended all share repurchases and is shifting to enhanced curbside service only for all of its stores on an interim basis starting from March 22.

GE’s aviation unit to cut U.S. workforce by about 10%: CEO

  • General Electric’s aviation unit plans to cut its total U.S. workforce by about 10%, Chief Executive Officer Larry Culp said on Monday, as airlines delay purchases amid the coronavirus pandemic.
  • In a letter to employees, Culp also said he would forgo his salary for the rest of 2020.

Panasonic to suspend battery production at Tesla joint venture in Nevada due to coronavirus

  • Panasonic said on Saturday it will temporarily suspend production at its battery joint venture with U.S. electric carmaker Tesla in Nevada because of the coronavirus outbreak.
  • The Japanese electronics company, which supplies battery cells for Tesla’s electric vehicles, will scale down operations at so-called Gigafactory 1 early next week before closing it for 14 days, Panasonic said in an emailed statement.
  • A Panasonic spokeswoman declined to comment on how the suspension would affect Tesla, which produces battery packs using Panasonic cells at the Nevada plant.

Amazon raises overtime pay for warehouse workers

  • Amazon.com said on Saturday it is raising overtime pay for associates working in its U.S. warehouses as the world’s largest online retailer tries to meet the rapidly growing demand for online shopping from consumers stuck at home.
  • Hourly workers at Amazon’s U.S. warehouses will receive double pay after 40 hours for overtime, up from the 1.5-times rate, from March 15 through May 9, the rate increase announcement said.
  • This is the second time the e-commerce giant announced an increase in pay for its workers in a week.
  • On Monday, Amazon hiked the minimum hourly rate for associates to $17 from $15 and announced plans to hire 100,000 warehouse and delivery workers in the United States as the virus outbreak boosts online orders.

Walmart ups minimum wage in e-commerce warehouses by $2 as orders surge on virus worries

  • Walmart said on Monday it has temporarily raised entry wages for workers in its e-commerce warehouses by $2, following similar moves by rivals, as it attempts to manage a shopping surge brought about by the coronavirus outbreak.
  • Walmart said the hike will increase entry wages for workers in e-commerce fulfillment centers or warehouses to between $15 and $19 an hour effective immediately through Memorial Day, a holiday in the United States that falls on May 25 this year.
  • Last week, Walmart said it would pay special cash bonuses totaling $550 million to hourly staff and hire 150,000 temporary workers through the end of May in its stores and fulfillment centers.
  • Target said last week it would raise its minimum wage by $2 an hour for store and distribution center workers through May 2.
  • Dollar General said it plans to nearly double its normal hiring rate and add up to 50,000 employees by the end of April.

Netflix to reduce quality of streams in Israel to help ISPs

  • Netflix will comply with a government request to reduce stream quality in Israel to help ease data congestion from people staying home due to the coronavirus, the Communications Ministry said on Monday.
  • The world’s largest streaming media service has also cut traffic on networks in Europe to help internet service providers (ISPs) experiencing a surge in usage.
  • Israeli ISPs have reported an average increase of as much as 30% since the outbreak began, prompting the telecoms regulator to ask Netflix to lower broadcasting bit rates.
  • In Europe, Netflix is removing its highest bandwidth within each resolution category for 30 days.

 

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US ECONOMY & POLITICS

Fed Unveils Major Expansion of Market Intervention

  • The Federal Reserve unveiled a major expansion of lending programs Monday that are designed to keep credit markets functioning after they seized up last week, expanding its facilities to include certain types of corporate and municipal debt.
  • The Fed said the purchases of Treasury and mortgage securities that it approved one week ago are essentially unlimited, and it said it would buy $375 billion in Treasury securities and $250 billion in mortgage securities this week.
  • The central bank also said it would begin purchasing commercial mortgage-backed securities issued by government-supported entities, which primarily consist of debt on apartment buildings.
  • The Fed also said it would launch three new lending facilities, designed to support $300 billion in new financing, and the Treasury Department will cover $30 billion in losses.
  • The Fed also said it would soon roll out a Main Street Business Lending Program that will support lending to eligible small and midsize businesses.

Senate Resumes Talks After Blocking Coronavirus Rescue Package

  • The Senate was working to overcome differences on a rescue package totaling at least $1.6 trillion, one day after failing to muster enough votes to take up GOP-written legislation aimed at easing the economic damage from the coronavirus pandemic.
  • Treasury Secretary Steven Mnuchin and Senate Minority Leader Chuck Schumer spoke in the middle of the night to find a way around the impasse, which turned on Democratic concerns that the legislation would help businesses more than the public.
  • The version of the legislation that failed on Sunday would provide $350 billion for small business loans that may be forgiven if firms use them to keep workers on payroll and $500 billion to allow the Treasury secretary to make loans, loan guarantees or investments to support businesses, states or municipalities.
  • The measure also includes money to expand unemployment benefits, which one Democratic aide estimated would cost more than $200 billion, and direct payments to households that an outside group has estimated could total $300 billion.
  • Another $242 billion includes additional appropriations, including some money for hospitals and protective gear.

U.S. Coronavirus Response May Include Funds to Boost Internet Access

  • Lawmakers are discussing how to address the problem for tens of millions of Americans who don’t have high-speed internet at home in massive spending bills moving on Capitol Hill, according to Congressional aides, Federal Communications Commission officials and industry executives.
  • One idea with broad support: New federal funding for equipment to help Americans communicate with teachers, doctors or colleagues from home, such as Wi-Fi hot-spot devices, laptops and mobile phones, some of these people said.
  • Other ideas have longer time horizons, aiming to stimulate the economy over the coming months, such as fast-tracking funds to build high-speed internet broadband in rural areas.

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EUROPE & WORLD

Airbus adds 15-billion-euro credit line, scraps dividend

  • Airbus boosted its liquidity with a 15 billion euro ($16 billion) expanded credit facility on Monday while suspending its 2020 outlook in response to the coronavirus crisis that has grounded much of the global airlines fleet.
  • The European planemaker also joined U.S. rival Boeing in scrapping its 2019 dividend, worth a total of 1.4 billion euros.
  • It also said it would suspend the voluntary top-up of staff pension schemes.
  • CEO Guillaume Faury said it would become increasingly difficult to deliver jets and some would be stored. Most airlines continue to pay deposits even though many have called for deferrals, he said.
  • Airbus, which sources say had been producing 58 single-aisle jets a month, declined to say at what rate it would resume output.

Shell cuts 2020 spending by $5 billion, suspends share buyback

  • Royal Dutch Shell will lower spending by $5 billion and suspended its vast $25 billion share buyback plan in an effort to weather the recent collapse in oil prices, it said on Monday.
  • The oil major said it would reduce capital expenditure to $20 billion or below from a planned level of about $25 billion while seeking to reduce operating costs by an additional $3 billion to $4 billion over the next 12 months.
  • The cuts are expected to boost Shell’s cash generation by between $8 billion and $9 billion on a pre-tax basis.

SoftBank plans $41 billion of asset sales to expand buyback and cut debt

  • SoftBank Group plans to raise as much as $41 billion to buy back shares and reduce debt in an unprecedented move to restore investor confidence as a financial market rout pummels its shares and its portfolio companies.
  • The buyback tops the $20 billion of purchases sought by activist investor Elliott Management, which has put pressure on SoftBank to improve shareholder returns, and will retire 45% of the group’s shares.
  • High on the list of pressing problems is a fight brewing over a major soured bet on co-working start-up WeWork, with SoftBank considering pulling out of a $3 billion bid to buy additional shares.

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TODAY in HISTORY

  • Benito Mussolini founded his own party in Italy, the Fasci di Combattimento. (1919)
  • S. President Ronald Reagan proposed a space-based missile defense system called the Strategic Defense Initiative or “Star Wars.” (1983)

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