Stocks Drop as Grim Economic Outlook Grips Markets: Live Updates - The New York Times

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Stocks plunge as Fed signals economic emergency.

Stocks on Wall Street slid on Monday, after an extraordinary move by the Federal Reserve aimed at shoring up confidence instead provoked more concern.

Investors were also confronted with weak economic readings from both China and the United States, the world’s largest economies. Chinese officials reported that retail sales, manufacturing activity and investment in the first two months of the year slumped by even more than economists had expected, and a gauge of manufacturing activity in New York State fell to its lowest level since 2009.

“Unfortunately this is the new reality. This report is a harbinger of what is to come,” wrote economic analysts with the investment bank Jefferies in New York.

The S&P 500 fell 8 percent as trading began in New York and stock trading was immediately halted for 15 minutes as Wall Street’s ‘circuit breakers’ kicked in. Shares were down more than 7 percent around 1 p.m. in New York.

European and Asian markets tumbled, and bond prices moved sharply higher, sending yields — which move in the opposite direction — down.

Energy prices also slid sharply as investors factored in significant slowdowns in economic activity. The price for benchmark American crude dropped more than 6 percent. American gasoline futures prices plummeted more than 17 percent.

Traders resume work on the floor of the New York Stock Exchange after a halt in trading on Monday. — Credit...Bryan R. Smith for The New York Times

The Fed’s emergency interest rate cut on Sunday underscored its deepening worry that the spread of the pandemic is dramatically depressing revenue for industries around the world while consumers hunker down, raising the risk of a worldwide recession. The central bank cut interest rates to near zero and said it would buy hundreds of billions of dollars in government debt, moves that are reminiscent of its actions during the financial crisis in 2008.

Those moves were engineered to ensure that credit flows freely, spurring businesses and households to borrow and spend to keep the economy growing. But markets appeared to absorb the action as the latest indication that the world had arrived at a dangerous place — a clear sign that they should dump risky assets like stocks and seek refuge in government bonds.

But the nature of this crisis — a viral outbreak that can only be contained by massive economic disruptions — is beyond the Fed’s ability to stop, analysts said.

“They can only make sure the fallout and economic impact are softened,” wrote Yousef Abbasi, global market strategist at INTL FCStone, a financial services and brokerage firm, in an email.

A major concern for stock investors now is that efforts to contain the virus in the United States will hit consumer spending, the biggest driver of economic growth. Broadway is dark. College basketball tournaments are canceled and professional sports are on indefinite hold. Conferences, concerts and St. Patrick’s Day parades have been called off or postponed.

“If the public stops spending then the economy will go into a recession, and frankly, the market’s steep losses are saying that day isn’t just coming, it is now,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in an email on Monday.

In Asia, markets also fell sharply on Monday, as fear intensified throughout the day. Australia suffered a 9.7 percent plunge in the S&P/ASX 200 stock index, leaving it about 30 percent below its high last month.

Kudlow says the Trump administration is readying an $800 billion stimulus package.

Larry Kudlow, the director of the National Economic Council, said on Monday that the Trump administration is planning to roll out $800 billion in fiscal stimulus, including the legislation that the Senate is currently considering, and that it is developing additional economic relief measures.

Mr. Kudlow, speaking on the Fox Business Network, said that the Trump administration is moving ahead with a plan to suspend interest payments on student loans. He said that Mr. Trump continues to strongly favor a payroll tax holiday through the end of the year, which he thinks would help small businesses and workers.

“These measures will help mitigate the economic risks and challenges in front of us,” Mr. Kudlow said. “We have these fiscal measures out there and they’re very powerful.”

Speaking to reporters later in the morning Mr. Kudlow said the administration has an “enormous fiscal plan.” He also lamented the stock market drop but said he sees the moment as a buying opportunity.

The ‘Trump Bump’ in stocks has been deflated.

The decline of the stock market, which hit a record high less than a month ago, has wiped out many of the gains that President Trump has crowed about throughout his presidency.

Mr. Trump’s victory in 2016, along with the Republican Party’s control of Congress, triggered a surge in share prices as investors looked forward to the prospect of steep cuts to corporate tax rates and an administration stocked with industry-friendly faces.

In December 2017, Mr. Trump delivered a sweeping tax overhaul. By the following month, the S&P 500 was up more than 30 percent, and the gains kept coming for much of the year. For Mr. Trump, this was a surefire barometer of his success as president.

There was one other nasty dip along the way: In late 2018, investors grew increasingly worried about Mr. Trump’s trade war with China and the prospect that the Federal Reserve would raise interest rates.

Stocks climbed 28.9 percent last year, thanks largely to the Fed’s decision to reverse course.

On Thursday, the S&P 500 had its worst day in more than 30 years, dropping 9.5 percent. The next day, it rallied late, making up most — but not all — the ground it had just lost, after Mr. Trump declared the pandemic a national emergency.

Though stocks have now given up about half their gains since the president was elected, the S&P 500 would have to fall another 18 percent for the entire Trump Bump to be erased.

Boeing to direct most employees to work from home.

Boeing plans to direct all of its 160,000 employees worldwide who are able to to stop showing up to the company’s factories and offices starting Tuesday.

On Monday, managers at the aerospace company were told to evaluate which of their employees could effectively work from home, one of the people said. The company has not yet halted production, and for now, engineers and mechanics who are directly involved in building airplanes will continue to report to the factory floor. Employees working on some defense department projects will also continue showing up.

The company’s manufacturing hub is based in the Seattle area, in the epicenter of the coronavirus crisis. There have been 10 confirmed coronavirus cases among Boeing employees, including six at its plant in Everett and two in Renton.

Meanwhile, United Airlines is in talks with union leaders about reducing payroll costs, its chief executive and president jointly wrote in a letter to employees on Sunday, detailing the coronavirus outbreak’s worsening toll on the company’s bottom line.

The payroll moves being considered include furloughs, pay cuts and reducing minimum hours. United’s corporate officers will be taking a 50 percent pay cut, Oscar Munoz, the chief executive, and Scott Kirby, the president, said in the letter. Both have already said they would forgo their base salaries through June.

Oil prices are plummeting.

Global oil prices plunged to below $30 a barrel on Monday, the lowest level in more than four years. By late morning, after some oil grades dropped by more than 10 percent, prices edged slightly higher.

Usually, the global benchmark, Brent crude, is $5 to $10 a barrel higher than the American standard, West Texas intermediate, but the Brent price has fallen faster and farther in recent days to narrow the gap between the two substantially. Energy experts say that is because of the sharp drop-off in economic activity in Europe. The prices of both Brent and West Texas have fallen by half since the start of the year.

Some analysts predict that oil prices could drop below $20 a barrel in the coming weeks.

The falling price of crude is being reflected at the gasoline pump. The U.S. average price for regular gasoline plunged 13 cents a gallon over the last week, according to the AAA motor club, to $2.25 a gallon. Eleven states now average below $2 a gallon.

Commercial paper backstop may be needed next.

The Federal Reserve pulled out a monetary policy bazooka Sunday night, cutting rates to near zero and announcing an aggressive bond-buying campaign in a bid to stabilize the economy and calm troubled markets.

But analysts said officials need to do more to backstop a critical source of funding for banks and businesses.

The market for commercial paper, short-term promissory notes that businesses use to raise cash, has come under pressure as banks and companies look to shore up their coffers to make it through the dry spell that is setting in as coronavirus leads to quarantines, shutters shopping centers and closes down restaurants.

“The commercial paper market is essentially frozen,” Mark Cabana, a rates strategist at Bank of America Merrill Lynch Global Research, said in an interview Sunday. “Because of coronavirus, because of the economy, everyone is just trying to raise cash, there is no one to take the other side.”

The Fed could act like an escape valve, buying up corporate paper to keep cash flowing — which it did during the 2008 financial crisis. The Fed would need to declare that the economy faces “unusual and exigent” circumstances, a determination that allows it to use its special lending abilities, and any program would require a signoff from the Treasury Department.

Also on Monday, the Federal Reserve Bank of New York announced that it would conduct an additional repurchase operation — essentially an effort to get central bank cash into banks’ hands — today at 1:30 p.m. The $500 billion injection of short-term loans is just the Fed’s latest effort to make sure that liquidity keeps flowing through the financial system during a time of severe stress brought about by the coronavirus.

Catch up: Here’s what else is happening.

Europe’s auto industry is coming to a standstill. PSA, the maker of Peugeot and Citroën cars, said it would suspend production at all of its factories in Europe. Renault is closing its French factories, idling 18,000 workers, and Fiat Chrysler is also shutting factories.
Treasury Secretary Steven Mnuchin said on Monday that the Trump administration’s most immediate priority is making sure that small businesses have sufficient funds to stay afloat as the coronavirus outbreak shuts down large swaths of the economy. However, he said that the administration does not want to resort to bailouts.
China posted record drops in retail sales, manufacturing activity and investment in the first two months of the year, official data released on Monday morning in Beijing confirmed, after coronavirus containment efforts brought the world’s No. 2 economy to a halt. The data was even worse than many economists had anticipated.

Peter S. Goodman, Amie Tsang, Jeanna Smialek, Niraj Chokshi, Ben Dooley, Isabella Kwai, Daniel Victor, Carlos Tejada, Niraj Chokshi, Clifford Krauss, Sapna Maheshwari, Natalie Kitroeff, Keith Bradsher, Jeanna Smialek, Ben Casselman, Jack Ewing, Stanley Reed, Jack Nicas, Liz Alderman, Brooks Barnes, Nicole Sperling, David Yaffe-Bellany and Matt Phillips contributed reporting.

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