Wall Street Plummets Despite the Fed’s Support: Live Updates - The New York Times

Here’s what you need to know:

Stock plunge triggers automatic trading halt.

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

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 and stock trading was immediately halted for 15 minutes. Trading will halt again if the daily drop reaches 13 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

European and Asian markets tumbled, 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.

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.

Mnuchin says the United States must help small businesses.

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.

Mr. Mnuchin, speaking on CNBC, praised the actions taken by the Federal Reserve over the weekend and expressed confidence that the central bank is taking the correct action to support the economy.

“The Fed is ahead of the issues and I’m grateful. Nobody has to pull money out of the banks,” Mr. Mnuchin said.

The Treasury secretary added that he believes the banking system will be able to handle the current volatility and that the focus must be on keeping businesses from closing. However, he said that the administration does not want to resort to bailouts.

Will the 2008 crisis playbook work in a pandemic?

Central banks are slashing interest rates, buying billions in bonds and relaxing the rules so it’s easier for banks to lend. But as today’s DealBook newsletter explains, the tactics to deal with a subprime credit crunch might not work against a global pandemic.

Investors, economists and executives are now expecting governments to pump money directly into the “real” economy. That would cushion the impact of the severe measures necessary to control the spread of the virus, upon which many forecasts of a so-called V-shaped recovery rely.

“The central bank stampede has been fierce, but markets are still waiting for the fiscal cavalry to arrive,” analysts at TD Securities said. When will they ride to the rescue?

United makes new service cuts and warns of “painful steps” on jobs.

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 airline also plans to slash service by half in April and May, they said, and expects deep cuts to its schedule to continue into the summer season.

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.

The unions representing United’s pilots and flight attendants called on the government to take action.

“With the reduced flying, the company is doing all it can to avoid furloughs,” Captain Todd M. Insler, the head of the Air Line Pilots Association, said in a letter to members on Sunday. “We are meeting with management again this week to discuss increasing voluntary unpaid leave and other creative options to mitigate adverse impacts on our pilots.”

The outbreak’s damage to the airline industry has accelerated in recent days. Delta Air Lines said it would cut its schedule by 40 percent over the next few months, and American Airlines said that, starting Monday, it was reducing its international flights by 75 percent until early May.

A growing number of European airlines also announced big cuts in service. Norwegian Air, once a fast-growing low-cost carrier, said on Monday that it would suspend all service between Europe and the United States as it is lays off 7,300 employees, or about 90 percent of its work force, one of the largest airline industry job cuts since the coronavirus began decimating travel earlier this year. Ryanair said it had reduced seat capacity by 80 percent “and a full grounding of the fleet cannot be ruled out.”

The Centre for Aviation, a research organization, said in a report Monday that without concerted effort, many airlines would not survive to the end of May.

New data shows the costs of China’s stalled economy.

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.

Economic statistics for January and February had been expected to show a decline. But the data released on Monday was even worse than many economists had anticipated.

The Chinese economy was running fairly strongly up until the lockdown of Wuhan on Jan. 23. Then activity nose-dived, more than offsetting that three-and-a-half weeks.

Retail sales tumbled 20.5 percent in the first two months of the year compared with a year ago, after authorities kept stores closed beyond January’s Lunar New Year holiday. Industrial production fell 13.5 percent, while fixed-asset investment slipped 24.5 percent.

Apple, Nike and Patagonia are among the major retailers temporarily shuttering stores.

Major retailers from Apple to Lululemon announced two-week store closures in recent days, in an effort to stem the spread of the virus. The chains also said that they would pay store staff while the stores were closed.

The announcements started on Friday and cascaded through the weekend. Starbucks said it will eliminate seating at all of its company-owned stores in the United States for at least the next two weeks to encourage social distancing, the company announced on Sunday.

It will also temporarily close some stores in “high-social gathering locations,” like malls and college campuses. A Starbucks spokeswoman, Jaime Riley, said the company was still determining how many stores would be closed.

At the stores that remain open, customers will be able to walk up to the counter to order, place delivery or pickup orders online, or use drive-throughs where available.

The King of Prussia Mall in Pennsylvania also said that it expected “nonessential” retail stores to temporarily close their doors because of the coronavirus.

The Fed unveils an emergency program to keep credit flowing.

The Fed’s interest rate cut on Sunday was its second emergency measure this month, reflecting its increasingly dire predictions about the economic impact of the coronavirus.

The Fed cut its benchmark interest rate by a full percentage point, to a range of 0 to 0.25 percent, and said it would increase its holdings of Treasury securities by at least $500 billion and its holdings of government mortgage-backed securities by at least $200 billion “over coming months.”

On Monday, the Fed, along with other regulatory agencies, encouraged banks to use its discount window. The discount window provides loans to banks, and can help to stave off a cash crunch in the financial sector.

Europe’s auto industry is coming to a standstill.

PSA, the maker of Peugeot and Citroën cars and the second-largest carmaker in Europe, said Monday it would suspend production at all of its factories in Europe, a decision with far-reaching implications for the economy.

That includes the suspension of production at Opel factories in Germany, the first shutdowns of major factories in Europe’s automaking powerhouse.

PSA’s decision comes after Fiat Chrysler said earlier in the day it would shut eight European factories, primarily in Italy. Renault, Ford and Volkswagen have suspended production at plants in Spain. In addition, Michelin, the tire maker, said it is closing its factories in France, Spain and Italy.

Volkswagen and other German carmakers continued to operate their factories in Germany Monday.

Catch up: Here’s what else is happening.

Japan’s central bank announced on Monday it would take emergency measures to stabilize the country’s economy, pledging to inject tens of billions of dollars into financial markets and extend interest-free loans to corporations to calm businesses and investors. In a separate move, South Korea’s central bank cut its benchmark lending rate by half of a percentage point, to 0.75 percent.
Wynn Resorts said it would close its Wynn Las Vegas and Encore casino hotels on Tuesday at 6 p.m. for two weeks and is “committed” to paying its full-time employees during the shutdown. MGM Resorts said it would close its Las Vegas properties starting Tuesday and would reopen as soon as it is “safe to do so.”

Peter S. Goodman, Amie Tsang, Ben Dooley, Isabella Kwai, Daniel Victor, Carlos Tejada, Niraj Chokshi, Sapna Maheshwari, 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.

Let's block ads! (Why?)