Stocks surged on Tuesday, offering some respite from the prior session’s gruesome sell-off that saw the Dow Jones Industrial Average post its largest-ever point drop, and its worst sell-off on a percentage basis since Black Monday of 1987.
The coronavirus pandemic continues to keep investors on edge, as one major economy after the other shuts its borders to stem the outbreak. And Tuesday’s move was not enough to undo the damage wrought by a viral outbreak that has a stranglehold on the world’s economy — and driven stocks from record highs to a bear market in just under a month.
Worldwide, the total of coronavirus infections is creeping inexorably toward 200,000 — with over 5,000 alone in the U.S. — amid a death total that is closing in on 8,000.
Volatility stemming from the outbreak has seen the Dow move up or down by 1000 points or more for 7 straight days, and 11 times total in the last month, according to Yahoo Finance data. Based on the stock market’s historically steep declines over the past few weeks, market participants have already priced in a recession, according to Fundstrat head of research Tom Lee.
“Over the past month, equity markets and financial assets broadly, have been attempting to price in the dual shock of a pandemic and the sudden collapse in oil prices (which is viewed by markets as negative given effect on high-yield and drilling-related GDP),” Lee wrote in a note late Monday.
Treasury Secretary Steven Mnuchin said during a White House press briefing that “the president wants to give cash now” to the public, and is discussing doing so in the next two weeks. He also said the administration “believes in keeping the markets open,” but is considering shortening market hours eventually amid the outbreak.
A day earlier, President Donald Trump had offered a grim assessment of the COVID-19 crisis, acknowledging that the U.S. “may be” heading toward a recession, and social distancing measures could drag on well into the summer months.
The U.S. government, however, has also underscored a willingness to provide at least some aid to individuals and corporations most affected by the outbreak to soften the blow to the economy as much as possible. Trump has vowed to “back the airlines 100%,” with air carriers having been hit hard by a steep drop-off in travel demand and in desperate need of government aid to survive.
In Congress, the House of Representatives unanimously passed a revised multi-billion coronavirus emergency bill Monday evening and sent it up to the Senate for a vote. The package would include at least $750 billion to combat disruptions from the coronavirus outbreak, providing funds for hospitals, expanded unemployment insurance, small businesses and food aid.
The situation overseas also continues to evolve, with the entire European Union following moves made by Italy, Spain and France to shut their borders. In North America, Canada closed its borders to most non-residents, offering some exemptions including for U.S. citizens.
As travel grinds to a halt, economists are increasingly bracing for a major hit to global GDP growth in 2020.
“In a realistic scenario where travel and tourism dropped by 50% in four or five months, annual global GDP growth would be reduced by about 0.7 percentage points,” Jennifer McKeown, head of global economics service as Capital Economics, wrote in a note Tuesday. “Indirect effects or disruption to domestic travel could make the hit even harder. What’s more, the strain on insurers and airlines is adding to the risk of a financial crisis.”
4:00 p.m. ET: Stocks claw back from the ‘new Black Monday’
Investors cheered President Donald Trump’s aggressive plan to backstop the U.S. economy with fiscal stimulus worth a reported $1 trillion, and the Federal Reserve’s latest bid to shore up stressed financial markets amid the worldwide spread of the coronavirus.
Gold (GC=F): +$49.30 (+3.32%) to $1,535.80 per ounce
10-year Treasury (^TNX): +26.9 bps to yield 0.9970%
3:00 p.m. ET: Goldman sees oil hitting $20 per barrel
Crude (CL=F), which has been walloped by the coronavirus crisis and the Russian-Saudi price war, may not see selling relief anytime soon. Goldman Sachs said on Tuesday that it was slicing its forecast for Brent to $20, from $30 per barrel previously:
"The oil demand collapse from the spreading coronavirus looks increasingly sharp, with many [developing] economies implementing quarantines. With no change to our view that low-cost producers have embarked on a rational recapture of lost market share, our lower demand forecast now far exceeds high-cost production declines. This is leading us to now base-case our prior downside scenario of a fall in oil prices..."
2:45 p.m. ET: NYC Mayor tells citizens to be prepared to stay home
New York City Mayor Bill de Blasio told citizens that a “shelter-in-place” order could be announced within days, despite Governor Andrew Cuomo dismissing the legality of such an idea earlier in the day. If the mayor wins the argument, it means New Yorkers may not be able to leave their homes for an extended period of time.
1:00 p.m. ET: United Auto Workers seeking 2-week shutdown
FILE- This Jan. 16, 2019, file photo shows a GMC Sierra pickup, left, and Denali in Detroit. General Motors' posted an $8.1 billion net profit last year as it got better prices for vehicles sold in the U.S., its most lucrative market. The performance was far better than the previous year, when the company lost $3.9 billion due to a giant tax accounting charge.(AP Photo/Paul Sancya, File)
As major swaths of the economy shut down to combat the COVID-19 surge, the UAW is seeking a moratorium on workers reporting for duty to the Big 3 auto makers (Fiat-Chrysler, General Motors and Ford). It comes as an increasing number of cities and states force the closure of cultural gathering places to prevent community spreading of the coronavirus.
According to Reuters:
UAW President Rory Gamble in a letter to members seen by Reuters said General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV were not willing to do so and instead asked "for 48 hours to put together plans to safeguard workers in their facilities." The UAW said that period expires later today and the union will "evaluating what the companies submit today."
FCAU, GM and F were all lower in Tuesday afternoon trading.
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12:00 p.m. ET: Stocks jump to fresh session highs
Investors are trying to shake off the pandemic blues, taking major Wall Street benchmarks to fresh session highs, as President Donald Trump and Treasury Secretary Steve Mnuchin talk up the federal government’s response to the COVID-19 crisis. Plans include a way to transfer cash to Americans “immediately” as entire swaths of the economy shut down.
“Americans need cash now and the president wants to give cash now,” Mnuchin said. “And I mean now, in the next two weeks.”
Here’s where the major benchmarks traded as of noon ET:
The one-two punch of the 737 MAX fiasco and the coronavirus pandemic has pushed Boeing’s stock (BA) to its lowest in over six years. Both the aerospace giant and the airlines that serve as its customers are seeking federal assistance as the COVID-19 crisis pummels supply chains and worldwide demand.
Boeing’s stock, traded on the New York Stock Exchange and one of the Dow’s (^DJI) 30 components, tumbled by over 15% on the day to under $110 per share.
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10:45 a.m. ET: Federal Reserve relaunches Commercial Paper Funding Facility in move to help businesses get short-term funding
The Federal Reserve said Tuesday it will reestablish its financial crisis-era Commerce Paper Funding Facility, a program helping give U.S. companies increased access to financing amid disruptions due to the coronavirus outbreak.
“The commercial paper market has been under considerable strain in recent days as businesses and households face greater uncertainty in light of the coronavirus outbreak,” the Fed said in a statement.
The program will establish a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper from eligible companies as long as the paper is rated A1/P1 as of March 17. The facility will be available to companies across various industries and was opened with the approval of the U.S. Treasury, which will provide $10 billion of credit protection from its Exchange Stabilization Fund, the Fed said.
“By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, this facility should encourage investors to once again engage in term lending in the commercial paper market,” the central bank said. “An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak.”
The three major indices’ earlier advances were short-lived, with the S&P 500 and Nasdaq quickly cutting gains and the Dow turning slightly negative about 30 minutes into Tuesday’s session. The Dow was off 0.06%, or 11.28 points, as of 10:11 a.m. ET.
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10:00 a.m. ET: Homebuilder sentiment dips more than expected in March
Sentiment for single-family homebuilders in the U.S. declined slightly more than expected March, in a survey that captured just the very early impacts of the COVID-19 outbreak on builders’ confidence.
The National Association of Home Builders housing market index dropped two points to 72 in March from February, representing a still relatively high level. Consensus economists had expected the index to drop just one point to 73, according to Bloomberg data.
Half of the responses for the survey were collected prior to March 4, however, so the most recent impacts from the coronavirus on U.S. stocks and economic data were not entirely taken into account.
“The rising economic impact of the coronavirus will be reflected more in next month's report," NAHB chief economist Robert Dietz said in a statement.
"Overall, 21% of builders in the survey report some disruption in supply due to virus concerns in other countries such as China,” he added. “However, the incidence is higher among builders who responded to the survey after March 6, indicating that this is an emerging issue."
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9:36 a.m. ET: Stocks open higher as Wall Street in an at least momentary pause from selling
U.S. stocks opened higher Tuesday morning, with each of the three major indices up more than 1.5%. The Dow added 300 points, but was still far from recovering its near 3,000-point loss from Monday’s session alone.
Here were the main moves in markets, as of 9:30 a.m. ET:
Crude (CL=F): $28.59 per barrel, down $0.11 or -0.38%
Gold (GC=F): $1,486.40 per ounce, off -$0.10 or -0.01%
10-year Treasury (^TNX): yielding 0.794%, up 6.6 basis points
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9:25 a.m. ET: Wall Street is already declaring a global recession
Stock’s ugly bear market, combined with the resulting shut-downs of major economies, has made Wall Street analysts waste no time in declaring a global recession. Within the last day or so, S&P, Morgan Stanley, Barclays and Goldman Sachs have all predicted the world will see at least 2 quarters of negative GDP print as the COVID-19 crisis morphs from bad to worse in the Western world.
"The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilization has begun," S&P Global's Chief Economist Paul Gruenwald said in a statement Tuesday. "Europe and the U.S. are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year."
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9:00 a.m. ET: Saudis to open oil spigots
A picture taken on March 12, 2020 shows the logo of energy giant Saudi Aramco at the entrance of its main building in Riyadh. - Stock markets in energy-rich Gulf states tumbled with Saudi shares down 3.0 percent following worldwide losses amid fears over the coronavirus pandemic and an oil price war. Saudi Aramco dipped 3.0 percent and ended the week down 12.1 percent as the energy giant prepares to announce its first annual earnings. (Photo by FAYEZ NURELDINE / AFP) (Photo by FAYEZ NURELDINE/AFP via Getty Images)
Making good on its unspoken promise to use low oil prices to its advantage, Saudi Arabia announced a plan to ramp up daily exports to a record 10 million barrels. This comes barely a week since its agreement with Russia ended in shambles, and sent crude prices through the floor.
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8:30 a.m. ET: U.S. retail sales unexpectedly drop 0.5% in February, missing expectations
U.S. retail sales unexpectedly declined in February as the coronavirus outbreak began to escalate domestically, underscoring a deeper than expected early economic hit from the pandemic.
Headline retail sales dropped 0.5% month on month in February, nearly fully reversing January’s upwardly revised 0.6% gain, the Census Bureau said Tuesday. Consensus economists had expected retail sales to rise 0.2%.
The drop was led by a 2.8% decline in gas sales amid a broad slump in energy prices in February. Electronics and appliance stores also posted large losses, with sales down 1.4% over last month.
Excluding more volatile auto and gas sales, retail sales dropped 0.2%, versus a rise of 0.3% expected. In January, retail sales excluding autos and gas had risen 0.7%.
L Brands, the parent company of Bath & Body Works and Victoria’s Secret, will temporarily close all of its U.S. and Canada retail locations Tuesday through March 29.
“With the wellbeing of its customers, associates and communities as its top priority, and to help limit the spread of the Coronavirus, L Brands will temporarily close all Bath & Body Works, Victoria’s Secret and PINK stores in the United States and Canada, effective March 17 through March 29, 2020,” the company said in a statement Tuesday.
All employees will continue to receive pay and benefits during the closure period, the company said.
7:57 a.m. ET: Stock futures up slightly in early trading
Futures for each of the three major indices were up slightly Tuesday morning, stabilizing after Monday’s steep declines.
Here were the main moves in markets, as of 7:58 a.m. ET Tuesday:
S&P 500 futures (ES=F): 2,428.00, up 11.75 points or +0.49%
Dow futures (YM=F): 20,375, up 114 points or +0.56%
Nasdaq futures (NQ=F): 7,115.25, up 57.75 points or +0.82%
Crude oil (CL=F): $29.12 per barrel, up $0.42 or 1.46%
Ten-year Treasury note: yielding 0.778%, up 5 basis points
NEW YORK, March 16, 2020 -- Traders work on the floor at the New York Stock Exchange in New York, the United States, March 16, 2020. (Photo by Michael Nagle/Xinhua via Getty) (Xinhua/Michael Nagle via Getty Images)
