Stocks opened lower after a choppy overnight session, as world policymakers race to contain the fallout from the coronavirus pandemic.
Unprecedented levels of volatility and an economy in free-fall prompted the Federal Reserve to announce a broad new, open-ended effort to calm markets, which will include buying unlimited amounts of government and investment grade corporate debt.
“Fed policy is shifting into a higher gear to try to help support the economy which looks like it is in freefall at the moment,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in an email. “The central bank is shifting from being not just the lender of last resort, but now it is the buyer of last resort. Don’t ask how much they will buy, this is truly QE [quantitative easing] infinity.”
The Fed’s move “will go a long way to reassuring investors the Fed has their backs and will stop the growing credit crisis in its tracks,” Rupkey added. “Yield spreads should narrow and the stock market should rest easier now that the Federal Reserve is giving it all it’s got.”
The Fed’s previous efforts to calm markets have faltered, with indexes skidding to their lowest levels in years. Contracts on the S&P 500 slumped 5% just minutes after overnight trading opened at 6 p.m. ET Sunday, hitting the daily lower limit established by CME Group to prevent further extreme losses. Meanwhile, the stimulus bill being debated in the Senate failed on a key procedural vote, hampered by political divisions even as the economic outbreak grows more alarming.
On Friday, markets closed out an especially gruesome week as panicked investors sent benchmarks reeling to their lowest levels since 2017. Amid the worst trading conditions since the 2008 financial crisis, markets obliterated all of the gains made since President Donald Trump was inaugurated, with traders weighing the escalating coronavirus outbreak against vast stimulus measures designed to mitigate the crisis.
The virus’ rapid spread has led to social distancing policies that have all but brought America’s public life to a grinding halt — and pushed stocks from record highs into a bear market in record time.
Amid mass closures of private businesses, soaring layoffs and school shutdowns, economists all but expect the global economy — and the world’s largest — to plunge into a deep recession in the coming quarters, even as the Federal Reserve and Washington throw trillions of dollars at the problem.
“When everything is said and done, officials are responding relatively quickly to the emerging economic and financial fallout,” wrote Marc Chandler at Bannockburn Global Forex on Sunday.
“The benefit of the 2008-2009 experience and response is helping in many respects. Many non-conventional tools had been developed and are being dusted off,” Chandler said. “Yet the magnitude of the problem is greater than in past crises, and some measures of volatility have already outstripped the high seen a decade ago.”
10:45 a.m. ET: Whither airlines? ‘An unprecedented hit’
However badly you think major air carriers are doing, Bank of America has a message: It’s worse.
The bank’s analysts see “a severe deterioration in fundamentals” (no kidding) that prompts a cut in estimates and a forecast of a stunning 36% pace this year:
If our -36% revenue estimate for 2020 holds, it would be meaningfully worse than the four quarters after 9/11 (-19%) and during the financial crisis (-17%). However, booking trends are very concerning as [Delta] said 2Q20 revenues could be down -80% after saying less than two weeks ago it could be free cash flow positive through the crisis. This is a ferocious decline no company could be fully prepared for, and we materially cut all our airline estimates to losses for the full year for all carriers (see inside for changes).
According to BofA, the lone bright spot at this point is domestic airline Southwest (LUV), which isn’t as reliant on international travel as its cohorts. The bank actually upgraded LUV (up over 1% on the day) to Buy from Neutral, while cutting United (UAL) to Neutral from Buy.
10:30 a.m. ET: Uber seeking stimulus help for workers
In a newly released letter, CEO Dara Khosrowshahi called for “immediate protection and support” for its contractors, and called for a new framework for independent workers, even as it battles California over a new gig worker law. “Together we can create a new standard for flexible work that benefits all who choose it and is available to as many people as possible,” he added.
10:15 a.m. ET: COVID-19 has ‘pushed the world into a deep recession’
Goldman, which last week estimated that U.S. growth would collapse by 24% in Q2 as lockdowns and ‘stay in place’ orders keep workers at home, and quite possibly unemployed.
The bank has an even worse forecast for the China, where the coronavirus crisis originated:
The extent to which the global economy is experiencing not just a recession but a “sudden stop” becomes clearer when we focus on sequential numbers for the major economies. Based on the hard data for January/February activity in China, we now estimate that Q1 real GDP there contracted 42% in terms of the quarter-on-quarter annualized rate.
Saying the pandemic has propelled the globe into “a deep recession” the banking giant sees a 1% contraction of gross domestic product (GDP) this year — even worse than the year after the financial crisis.
10:07 a.m. ET: GE Aviation announces plan to slash 10% of U.S. workforce amid coronavirus outbreak
General Electric’s Aviation business unit is planning to cut about 10% of its total U.S. workforce in a move to help cut costs as the coronavirus outbreak weighs heavily on U.S. air travel and aircraft manufacturing businesses. GE Aviation employed about 52,000 people globally at the end of 2019, including those both in and outside of the U.S.
In another cost-cutting move, GE Aviation also said its president and CEO David Joyce will forgo half of his salary.
The company expects its combination of efforts, along with its previously announced hiring freeze and other personnel measures, to preserve as much as $1 billion in 2020.
“With regard to our financial position, our company is sound,” GE said in a statement. “However, what we don’t know about the magnitude and duration of this pandemic still outweighs what we do know.
Shares of GE were little changed Monday morning.
9:34 a.m. ET: Stocks open lower even after Fed’s massive stimulus package announcement
Here were the main moves in markets, as of 9:34 a.m. ET:
- S&P 500 (^GSPC): 2,269.12, -35.8 (-1.55%)
- Dow (^DJI): 18,890.78, -282.2 (-1.48%)
- Nasdaq (^IXIC): 6,831.61, -47.9 (-0.58%)
- Crude (CL=F): $22.83 per barrel, +$0.20 (+0.88%)
- Gold (GC=F): $1,522.00 per ounce, +37.40 (+2.52%)
- 10-year Treasury (^TNX): -11 bps to yield 0.838%
9:16 a.m. ET: CVS to hire 50K amid coronavirus demand surge
Drug store chain CVS announced plans to go on a hiring spree. The company plans to hire a mix of 50,000 full-time, part time and temporary workers, as the COVID-19 outbreak pushes up demand for pharmaceutical services and health goods.
8:00 a.m. ET: Fed announces new round of broad open-ended bond buying
In a surprise announcement, the central bank unveiled a number of new and unprecedented measures to expand the Fed’s efforts to calm corporate debt markets.
With turmoil continuing in corporate financing markets, the Fed expanded the scope of its asset purchases under its quantitative easing program and announced four new measures to grease the commercial paper, corporate bond, and even ETF markets.
Stock futures curbed earlier losses, which at one point had been down by over 5%.
7:23 a.m. ET Monday: Stock futures fall as investors await further government stimulus package
Contracts on each of the S&P 500, Dow and Nasdaq held lower in early trading Monday morning as investors monitored developments in the Covid-19 outbreak in the U.S. and the federal government’s response.
After the Senate’s trillion dollar coronavirus relief package failed to pass a key procedural vote Sunday night, market participants have been anxiously awaiting signs that a rescue deal would soon come through. Senate Republicans and Republicans have struggled to hammer out their differing viewpoints on how the massive sum should be allocated to individuals, businesses and other relief efforts.
The House of Representatives is poised to push ahead with writing its own rescue proposal as talks in the Senate break down, Speaker of the House Nancy Pelosi signaled Sunday.
Here were the main moves in markets, as of 7:23 a.m. ET:
- S&P 500 futures (ES=F): 2,228.5, -2.62% or -60 points
- Dow futures (YM=F): 18,543.00, -2.61% or -497 points
- Nasdaq futures (NQ=F): 6,825.5, -2.06% or -143.5 points
- Crude oil prices (CL=F): $22.23 per barrel, -$0.40 or -1.77%
- 10-year Treasury note: yielding 0.815%, down 12.3 basis points
6:04 p.m. ET Sunday: Stock futures tumble, hit lower trading limit minutes after overnight trading begins
Futures for each of the three major indices sank Sunday evening, after Wall Street closed out its worst week since the 2008 financial crisis.
Here were the main moves in markets, as of 6:04 p.m. ET:
- S&P 500 futures (ES=F): 2,174.00, -5.00% or -114.5 points
- Dow futures (YM=F): 18,086.00, -5.01% or -954 points
- Nasdaq futures (NQ=F): 6,628.75, -4.88% or -340.25 points
Monday’s opening bell will be closely watched for investor reaction to the coronavirus stimulus package being hashed out in Washington, as well as the New York Stock Exchange’s plan to temporarily shutter its iconic trading floor and transact in a completely electronic way. Some say the move could ramp up volatility in an already unsettled market.