Here’s what you need to know:
U.S. stocks continue to fall after the Fed intervenes.
Stocks fell on Thursday, as President Trump’s latest effort to address the coronavirus outbreak — a ban on the entry of most Europeans to the United States — failed to assuage investors’ concerns about the global economy.
Markets in the United States recovered slightly from the worst of those declines after the Federal Reserve Bank of New York said it would offer at least $1.5 trillion worth of short-term loans to banks today and tomorrow, but the S&P 500 quickly resumed its fall. It was down nearly 7 percent Thursday afternoon.
Waves of selling in stocks this week have left the Dow Jones industrial average and several major global benchmarks in bear market territory — a term that signifies stocks have fallen more than 20 percent from their highs. Without a substantial recovery on Thursday, the S&P 500 will end there as well.
The declines follow a spate of late news from the United States on Wednesday. Mr. Trump announced that the United States would stop most Europeans outside Britain from traveling to the country for 30 days in an effort to slow the spread of the virus. The State Department advised Americans to reconsider all international travel. The National Basketball Association suspended its season after a player tested positive.
With global growth on the line, investors have been looking for world leaders to step in to keep the economic gears turning. Mr. Trump on Wednesday said he would extend financial relief for sick workers and would ask Congress for more. Britain has said it would spend more than $30 billion. Central banks are cutting interest rates, or taking steps to keep them suppressed.
For investors, it hasn’t been enough.
“The past few days has found the market waiting for decisive and intelligent action on fiscal policy front,” said Carl Tannenbaum, chief economist at Northern Trust. “Until there are details on the steps that leadership intends to pursue to remedy the economic effects of the viral outbreak, equity markets will be vulnerable.”
The travel ban hit shares in Europe particularly hard, with major stock indexes there down more than 10 percent and one regional benchmark suffering its worst-ever decline.
On Thursday, news of the latest travel ban battered airline stocks. Cruise operators were also sharply lower, and, with oil prices falling more than 5 percent, energy companies were among the day’s worst performers.
The Fed intervenes after ‘highly unusual disruptions.’
The Federal Reserve Bank of New York responded on Thursday to increasingly fraught market conditions by announcing that it would offer at least $1.5 trillion worth of short-term loans to banks today and tomorrow and change the structure of its ongoing asset purchase program.
The moves came as the markets for a variety of bonds — including usually easy-to-trade Treasuries — turned messier starting on Wednesday. Traders and strategists reported that markets were thin, and the gap between the prices buyers offered and those that sellers asked for was widening. At the same time, tremors had developed in funding markets, the plumbing of financial markets in which cash flows between banks, as fears over the coronavirus’ economic caused gyrations across Wall Street.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement.
Specifically, the central bank announced that it would offer $500 billion in a three-month repurchase operation Thursday afternoon. It also said that it would begin to buy government debt “across a range of maturities.” In recent months, it has been buying $60 billion a month only in short-term Treasury bills.
Analysts viewed the moves as warranted given funding constraints on Wall Street.
“This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note.
Mr. Shepherdson also said the move puts an end to the Federal Reserve’s previous insistence that its $60 billion Treasury bill-buying campaign was not the same as its crisis-era bond buying program known as “quantitative easing.” That program, which went through three rounds ending with what’s known as QE3, was intended to prop up the economy during and after the Great Recession.
“QE4 is here,” he wrote.
Stocks in London have their worst day since 1987.
October 19, 1987, became known as Black Monday on Wall Street, when the Dow Jones industrial average fell 22.6 percent. In London, Black Monday was spread over two days — with the FTSE 100 in London falling 10.8 percent on Monday and 12.2 percent on Tuesday.
The decline in the FTSE 100 on Thursday was the index’s worst single-day drop since then — surpassing its biggest decline of the financial crisis in 2008.
Unlike stocks in the United States, trading in London has been volatile for years as investors faced the uncertainty of Britain’s exit from the European Union and the economic chaos that might cause. But the fast spread of the coronavirus in Europe has hit the index, and its counterparts on the European continent, particularly hard. The FTSE 100 is down about 30 percent since the start of the year, compared with the S&P 500’s drop of about 23 percent.
Travel stocks are getting clobbered … again.
News of the latest travel ban imposed by the United States hammered shares of the three big American carriers that fly trans-Atlantic routes: United Airlines, Delta Air Lines and American Airlines all fell more than 10 percent Thursday morning.
Already reeling from a steep decline in bookings because of the coronavirus outbreak, the airlines could lose millions of dollars in revenue from the U.S. ban on most passenger travel from continental Europe, announced by Mr. Trump on Wednesday night. Trans-Atlantic flights account for a big chunk of the carriers’ international business.
Carnival Corporation also plunged after its Princess Cruises unit said it would suspend all cruises for the next two months. Royal Caribbean Cruises and Norwegian Cruise Line were also down more than 20 percent.
One of the first major coronavirus outbreaks took place on a Princess ship off the coast of Japan, the Diamond Princess. Eight people died and more than 700 were infected. And more than 20 people linked to a second Princess cruise ship in California, the Grand Princess, have also tested positive for the virus.
Widespread worry about economic impact, but with a partisan hue.
Most Americans surveyed are worried about the economic impact of the coronavirus outbreak, with concern greatest among Democrats and independent voters, according to a nationwide poll conducted by the online research firm SurveyMonkey for The New York Times.
The partisan gap in attitudes in the survey, which was begun last week and completed on Sunday, may reflect Republicans’ greater receptivity to President Trump’s assurances that the economy remains strong and that the virus is under control in the United States.
Three-quarters of independents and more than 8 in 10 Democrats said they worried that the virus outbreak would hurt the economy. Two-thirds of Republicans expressed similar concern.
Political differences were even more pronounced on questions about the potential health effects of the coronavirus and personal precautions against it.
Fewer than two in five Republican respondents in the poll said they were worried that they or someone in their family would be exposed to the virus. Nearly seven in 10 said they had made no changes, such as reducing travel, working from home or wearing medical face masks in public, in response to the virus.
In both cases, Democrats and independents expressed significantly higher degrees of alarm.
Forecast for U.S. growth was bad last week. Now it’s worse.
The Institute of International Finance cut its forecast for U.S. economic sharply last week, and on Thursday it said things will be even worse because of the surge in oil prices and increasing risk of “credit stress.” As a result, the think tank has raised its projection for the possibility of a recession.
As the coronavirus spreads, policymakers are limited in what they can do to protect the economy, wrote Robin Brooks, the institute’s chief economist, and his colleague Jonathan Fortun. Money is tumbling out of emerging market countries, a sign of investor fear, at a pace not seen even during the 2008 financial crisis, based on IIF data.
“(A) global ‘sudden stop’ is in the making, one that could present substantial downside risk to our forecasts,” they wrote, noting that a similar seizing up in foreign financing came at huge economic cost to both Turkey and Argentina in 2018.
European Central Bank to step up bond buying.
The European Central Bank said Thursday it would step up its purchases of government and corporate bonds to hold down market interest rates, while expanding lending to commercial banks at very favorable terms as it tries to prevent the coronavirus from crippling the already vulnerable eurozone economy.
But the bank disappointed expectations that it would cut a key interest rate.
The E.C.B. said it would buy an additional 120 billion euros, or $135 billion, of government and corporate bonds it buys every month as part of an effort to increase demand, drive down market interest rates and make the cost of borrowing cheaper. Currently, the central bank is buying bonds at a rate of 20 billion euros a month.
Here’s what else is happening.
The actor Tom Hanks said he and his wife, Rita Wilson, had tested positive for the coronavirus. The 63-year-old Academy Award-winning actor is in Australia, where he was set to film a movie about the life of Elvis Presley.
President Trump’s travel ban will hit jet fuel consumption hard. Bjornar Tonhaugen, head of oil market research at Rystad Energy, estimated that jet fuel use will drop by 600,000 barrels a day, or about 9 percent of the total market.
The rate on a 30-year fixed-rate mortgage has dropped to about 3.74 percent, and the Mortgage Bankers Association said Wednesday that refinancing applications jumped 79 percent last week.
Two California companies, CrowdStrike and FireEye, and the Israeli company Check Point confirmed this week that the Chinese groups were sending out coronavirus-themed documents loaded with malware. For now, the breaches have focused on targets in Vietnam, Mongolia and the Philippines.
Reporting was contributed by Jack Ewing, Peter S. Goodman, Liz Alderman, Alexandra Stevenson, Isabella Kwai, Keith Bradsher, Nicole Perlroth, Matthew Goldstein, Geneva Abdul and Carlos Tejada.
https://www.nytimes.com/2020/03/12/business/stock-market-today.html
2020-03-12 17:58:08Z
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