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

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Investors drive global shares lower, in a bad sign for Wall Street.

The morning after the U.S. Federal Reserve unleashed extraordinary action aimed at shoring up market confidence, investors took that as an impetus for more panic: They unloaded stocks with abandon.

European markets opened more than 4 percent lower on Monday, then fell more than 8 percent as the morning continued. France’s main stock index briefly fell 10 percent. Futures trading on Wall Street pointed to a sharp losses at the start of trading.

The rout in Europe followed a brutal day in Asian markets, where fear intensified throughout the day. Australia suffered a 9.7 percent plunge in the S&P/ASX 200 stock index, leaving it down about 30 percent from its high last month.

The Fed’s emergency action underscored its deepening worry that the spread of the pandemic is dramatically depressing revenue for industries around the world, while frightening consumers into hunkering 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.

Bond prices moved sharply higher, sending yields — which move in the opposite direction — down. The yield on the 10-year Treasury note fell 0.19 percentage points, to less than 0.7 percent in Monday trading.

Investors and economists have concluded that the pandemic and its attendant economic damage is effectively resistant to the traditional economic crisis playbook, bringing warnings that this downturn could be especially punishing.

Lower borrowing costs will not bring workers back to factories in Italy or South Korea that are shut down because of the virus. Cheaper interest rates on credit card balances will not entice shoppers to malls now avoided as breeding grounds for a lethal pandemic.

The stocks of airlines, hotel chains and cruise lines have led the way down during the market’s steep drop in recent weeks. Movie theaters and restaurants are increasingly abandoned, threatening the earnings of companies throughout the leisure and hospitality industries worldwide.

Alarm over historic levels of corporate debt — especially in the United States — have amplified fears that the economic shock could trigger a financial crisis.

Benchmark global and American crude oil prices were also lower, signaling concern that global demand for crude would continue to fall.

Economists have been cutting forecasts for growth for weeks. On Sunday, economists at Goldman Sachs said they now expected the American economy, the world’s largest, would record zero growth in the first quarter, and would shrink in the second quarter.

“These shutdowns and rising public anxiety about the virus are likely to lead to a sharp deterioration in economic activity in the rest of March and throughout April,” Goldman’s economists wrote in a research note.

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

Disinfecting in Beijing earlier this month. — Credit...Kevin Frayer/Getty Images

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.

Zhu Chaoping, a global markets strategist in the Shanghai office of JP Morgan, said that the willingness of China’s statisticians to acknowledge steep declines in January and February made it increasingly likely that China would report an actual shrinkage of its economy in the first quarter of 2 or 3 percent and possibly more. “They have let us know the real situation,” he said.

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. Even when shops reopened, often under pressure from their landlords, they had almost no customers until early March as many people continued to stay home to avoid infection.

Industrial production fell 13.5 percent. Many factories did not reopen until late February if at all. Tens of millions of workers had not yet returned from visits to their villages because of quarantines and roadblocks.

Fixed-asset investment slipped 24.5 percent.

United makes deep 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.

“We took early, aggressive action because we have been determined to do everything possible to avoid painful steps that affect your paycheck,” Oscar Munoz, the chief executive, and Scott Kirby, the president, said in the letter. “But, based on the severity of the situation, that no longer appears realistic.”

The executives said discussions had begun with the airline’s union leadership “about how to reduce our payroll expense in a way that minimizes what we know will be painful for all of us.”

The options being considered include furloughs, pay cuts and reducing minimum hours. United’s corporate officers will be taking a 50 percent pay cut, Mr. Munoz and Mr. Kirby said. Both had already said they would forgo their base salaries through June.

This is typically the airline’s busiest month, but based on the vastly reduced demand in recent weeks, United expects revenue to be $1.5 billion less than last March.

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

European airlines slash service and warn of their demise.

A growing number of European airlines are announcing big cuts in service as demand squeezed by the coronavirus pandemic. The situation is dire enough that 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.

IAG, the group that owns British Airways and Iberia, said that President Trump’s restriction of entry from European countries, as well as tighter entry rules and advice against traveling in other areas, had cast a pall over its finances.

The group said on Monday that it would reduce capacity by 75 percent in April and May. It said it would cut costs by offering voluntary leave, suspending employment contracts and reducing working hours. The group’s chief executive, Willie Walsh, will delay his retirement.

Air France KLM has grounded all nine of its A380 aircraft, meaning it will suspend service to cities including Los Angeles, Miami, and New York. The plane is the largest passenger airliner ever built, but its enormous size has made it uneconomical to run in a world of budget airlines.

The Scandinavian airline SAS has stopped most of its flights altogether, saying that “the demand for international air travel is essentially nonexistent.” The airline said it would look to return to flying when conditions allowed, but until then 90 percent of its work force, about 10,000 people, will be forced to stop work.

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 into the weekend. As of Sunday night, the chains that announced two-week store closures in North America included:

Patagonia

Apple

Lululemon

Nike

Urban Outfitters

Abercrombie & Fitch

Glossier

Everlane

Allbirds

Eileen Fisher.

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 action generally came from retailers with healthy balance sheets, which can afford to close their doors while paying staff. It will likely increase pressure on other chains, including those with less financial flexibility, to pursue similar action.

Japan and South Korea announce emergency measures.

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, the Bank of Korea, cut its benchmark lending rate by half of a percentage point, to 0.75 percent.

The Bank of Japan said it would double its target for annual purchases of exchange-traded funds — baskets of equities that track indexes — to 12 trillion yen ($113 billion) and would extend 8 trillion yen ($75 billion) in interest-free loans to corporations hit hard by the virus, among other moves.

The bank declined to lower interest rates, which are already negative for some bonds.

Japanese stocks have cratered over the past weeks as the coronavirus has spread across the globe, increasing the risk of recession for an economy that had already begun to contract, shrinking 7.1 percent in the last quarter amid slowing global growth.

The danger has been increased by investors pouring into the yen, long seen as a safe harbor in times of financial distress, pushing up its value against the dollar and putting further stress on the economy by driving up the costs of Japanese exports and driving down the size of corporate profits earned abroad.

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 coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the central bank said in a statement on Sunday. “The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses.”

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.”

The Fed’s actions are aimed at making it easier for banks to lend money to businesses facing a steep and sudden drop in revenue as the virus forces them to curtail their activity or shut down.

Starbucks will eliminate seating and close some stores.

Starbucks 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.

For the next two weeks, Starbucks employees who are unable to work or whose hours are reduced because of the store closures will be compensated for the shifts they would normally have worked.

At the end of that period, Starbucks will “reassess to make sure that our partners continue to be financially supported,” Ms. Riley said.

Catch up: Here’s what else is happening.

Wynn Resorts to shut down for two weeks. The company 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.”
Fiat Chrysler Automobiles will temporarily close eight factories in Europe as it reacts to disruption caused by the coronavirus, the company said Monday. The factories, six in Italy, one in Serbia and one in Poland, represent most of the company’s manufacturing capacity in Europe.
Hollywood just had an epically bad weekend. Domestic ticket sales totaled about $55.3 million, a 44 percent drop from last weekend, despite three new films — “Bloodshot,” “The Hunt” and “I Still Believe” — arriving in wide release. It was the worst period for movie theaters in two decades, according to comScore, which compiles box office data.

Peter S. Goodman, 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.

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