Bank regulators are urging financial institutions to work with borrowers in communities hurt by the coronavirus pandemic.
In a joint statement released by federal and state regulators Monday evening, the group said that “financial institutions should work constructively with borrowers and other customers in affected communities.”
The regulators said “prudent efforts” to provide financial relief to stressed borrowers will not be subject to “criticism” from authorities.
In other words, regulators are giving the green light for banks to take a more lenient stance towards struggling businesses and households.
Of course, some banks will also be struggling during the coronavirus outbreak. Shares of major US banks including Bank of America and JPMorgan Chase plunged more than 10% apiece Monday.
The agencies, which include the Federal Reserve, FDIC and Consumer Financial Protection Bureau, also offered to provide “appropriate regulatory assistance” to banks. That includes granting requests in scheduling bank exams or inspections “to minimize disruption and burden.”
The Dow fell 7.8% Monday. The last time that happened – October 15, 2008 – the economy was plunging in the midst of a global financial crisis. It was one of deepest recessions since the Great Depression.
San Francisco Federal Reserve Bank President Janet Yellen (years before she became Fed chair) said that day the US economy “appears to be in a recession,” something many economists, but few Fed officials, had said at that point.
A report on retail sales fell to a 3-year low, and a manufacturing report in the New York area sank to an all-time low that day.
Investors panicked. The Dow fell 733 points, or 7.9%. At the time, it was the second-biggest point decline ever, and it remains the worst percentage decline since October 26, 1987.
How’s that for context about how bad Monday was?
It was a turbulent day in the US stock market, which experienced a massive selloff amid coronavirus fears and a sharp drop in oil prices.
The Dow had its worst point drop on record, overtaking the massive loss from February 27, less than two weeks ago. The index closed down 2,014 points, or 7.8%. It was its worst day since October 2008.
Stock futures trading was halted following steep losses in the overnight session, which carried into regular trading: Shortly after the market open the S&P 500 tumbled 7%, triggering a circuit breaker and forcing the New York Stock Exchange to suspend trading for 15 minutes.
Stocks remained in the red all day. The S&P 500 slumped 7.6% and the Nasdaq Composite declined 7.3%. It was the worst day for both indices since December 2008.
All three are now nearly 20% below their most recent highs, which is the definition of a bear market. If stocks fall further tomorrow, they will have slid from record highs to a bear market in a matter of weeks.
Although oil prices are plunging, it seems that investors don’t expect consumers to splurge on new cars if the coronavirus concerns lead to a recession.
Shares of Detroit’s Big Three automakers – General Motors (GM), Ford (F) and Fiat Chrysler (FCAU) were all stuck in reverse Monday, plummeting between 9% and 14%.
But does that mean consumers will hang on longer to older vehicles and spend what it takes to fix them up?
That’s what the market appears suggest. Auto parts retailers O’Reilly (ORLY), AutoZone (AZO) and Advanced Auto Parts (AAP) each rallied Monday. In fact, AutoZone was the big winner on Wall Street, with a gain of more than 5% that made it the best performing stock in the S&P 500. (O’Reilly and AAP each were up 2%.)
So investors looking to cheer themselves up after today’s brutal session might want to consider singing the “O O O O’Reilly!” jingle, followed by a round of “Get in the Zone. AutoZone!”
It was an ugly day in the oil market – the ugliest since 1991.
Oil prices suffered an historic collapse Monday after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.
US oil prices crashed as much as 34% to a four-year low of $27.34 a barrel as traders brace for Saudi Arabia to flood the market with crude in a bid to recapture market share.
Crude settled with a staggering loss of nearly 26% to settle at $31.13 a barrel. Brent crude, the global benchmark, plunged 24% to close at $33.36 a barrel.
Both oil contracts fell to four-year lows.
Read more about the oil drop here.
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Bond giant Pimco is gearing up for a brief recession, according to a blog post from the firm’s global economic adviser Joachim Fels.
A technical recession is defined as two consecutive quarters of negative growth. Japan likely is already in one, Fels said.
The spread of coronavirus has not yet peaked outside of China, but Fels said the bank assumes it will do so over the next several months. This underpins Pimco’s thesis for a U-shaped trajectory for global growth. At the start of that pattern, however, there will be a steep drop in economic activity.
Pimco expects the Federal Reserve to step in and cut interest rates at least another half-percentage point to keep financial conditions accommodative.
“In addition, we expect most governments to put in place further fiscal easing to support demand and help the healing of the economy once the virus subsides,” Fels said.
Monday’s stock market plunge is bringing back painful memories of 2008 – and leading to fears that the coronavirus outbreak will cause a global recession and bear market. But BlackRock (BLK), the Wall Street firm run by Larry Fink that just so happens to be the largest asset manager in the world, is urging investors to take a deep breath and relax.
“We do not think this is 2008,” said analysts with the BlackRock Investment Institute, in a special report Monday.
“The virus shock’s impact will likely be large and sharp, but we believe investors should be level-headed, take a longterm perspective and stay invested. The economy is on more solid footing and, importantly, the financial system is much more robust than it was going into the crisis of 2008,” the BlackRock analysts added.
The key to stopping the market selloff will be a “preemptive and coordinated policy response,” said the influential BlackRock, which has $7.4 trillion assets under management including $2.2 trillion in popular iShares ETFs.
The Federal Reserve already cut interest rates by a half-point in an emergency move last week and traders are betting on an even bigger cut – perhaps all the way back to 0% – at the Fed’s regularly scheduled meeting on March 18. But BlackRock also said more fiscal stimulus from lawmakers and the White House is needed.
NBCUniversal quietly sold its entire stake in Snapchat’s parent company, Snap, last year, according to an SEC filing dated January 30.
In March 2017, NBCUniversal acquired a $500 million stake in Snap as part of the social network’s initial public offering.
Snap stock fell more than 11% on Monday afternoon amid the broad market selloff. The Hollywood Reporter was the first to report the news.
In the years following its IPO, Snap has struggled to prove it can achieve a mainstream audience on par with rivals like Instagram and Facebook, which have both blatantly copied its most popular features, such as Stories that disappear after 24 hours. The 2017 redesign of its photo-sharing app was also met with backlash, and millions of users fled the platform. While the company has since bounced back and has steadily added users, its most recent quarterly report disappointed investors.
Recession fears are crushing small American stocks.
The Russell 2000 index of small-cap stocks plummeted 9% Monday and is on track to close in a bear market. The index is viewed as a barometer for confidence in the American economy.
A bear market would reflect a 20% decline from the record high set in January.
Other major US markets, including the S&P 500 and Dow, flirted with bear market territory on Monday but have not yet hit that threshold.
Bear markets are more common in small-cap stocks, which are very exposed to swings in the economy. The Russell 2000 has dropped into three previous bear markets since US stocks bottomed in March 2009, yet the broader markets did not follow suit.
The most recent example occurred in December 2018, when recession jitters similarly rocked Wall Street, driving the Russell 2000 into a bear market.
Other economically-sensitive stocks also fell sharply Monday, including large American banks. JPMorgan Chase tumbled 13%, while Bank of America plunged 16%.
Here we go…
The Dow has fallen 8.1%, tumbling more than 2,100 points. If it closes at that level, it would be the worst day for the Dow since October 26, 1987.
The S&P 500 fell by 7.7%, blowing through the first circuit-breaker level that it tripped minutes after trading opened for the day. The S&P 500 is on pace for its worst day since December 1, 2008, when stocks fell by just over 9%.
The Nasdaq was down “only” 6.7%.
The White House has invited Wall Street executives, including bank CEOs, to a meeting this week on coronavirus, according to an official familiar with the plans.
The meeting is likely to come later in the week, after Trump’s expected meeting on Monday with advisers to determine next steps on containing the economic fallout related to the virus.
The official declined to provide a list of expected attendees.
Trump administration officials have already convened meetings with airline, cruise, pharmaceutical and diagnostic testing CEOs to discuss the outbreak.
The Washington Post first reported the expected meeting.
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US government bond yields dropped to a historic low of 0.32% Monday. Treasury yields have been trending lower for a while now, but the drop has accelerated over the past weeks.
The 10-year yield was last at 0.49%.
A flight to safer assets pushed Treasury prices up and yields down over the past weeks, as the fallout from the coronavirus outbreak caused panic in the markets. Fixed-income assets are also a traditional hedge for stock investments.
Monday’s selloff was also a reflection of turmoil in the oil market, where prices dropped sharply.
On top of that, bond yields move down when the market expects lower interest rates in the future.
The Federal Reserve slashed interest rates by a half-point last week. It was its first emergency action since the financial crisis in 2008. Market expectations for another rate cut at the central bank’s regularly-scheduled March 18 meeting are at 100%.
Expectations for a three-quarter point cut are just higher than for a full point cut. One way or another: rates are expected to go down.
If you thought you were having a bad day, think what it must be like to be the CEO of Apache (APA) today. The oil and gas exploration company’s stock is down 50%, making it the worst performer in the S&P 500.
Not far behind is Diamondback Energy (FANG), which dropped 44.8%. Marathon Oil (MPC) fell 44.7%.
The destruction didn’t end there:
Halliburton (HAL): -37%
Devon Energy (DVN): -36.5%
Hess (HES): -35.6%
Pioneer Natural Resources (PXD): -34.4%
Noble Energy (NBL): -33.9%
ConocoPhillips (COP): -25.9%
BP (BP): -19.5%
Total SA (TOTF): -16.6%
Chevron (CVX): -14.4%
ExxonMobi (XOM): -10.6%
What could be worse than being a bank stock or an oil stock on a day when both sectors are getting crushed? Being a bank with heavy ties to the energy sector.
Shares of Dallas-based Comerica (CMA) and Texas Capital Bancshares (TCBI) are down 19% and 23% respectively. San Antonio’s Cullen/Frost Bankers (CFR) and Houston’s Cadence Bancorp (CADE) plunged 22% and 28%.
And three other small regional banks – Tulsa’s BOK (BOKF), Lafayette, La.-based IBERIABANK (IBKC) and Hancock Whitney (HWC) of Gulfport, Miss. – all plummeted more than 20% as well. All seven of these banks have between 4% and 18% of their loans tied up in the energy sector.
The rapidly falling price of oil is likely to put more pressure on energy companies in the United States, which will hurt the banks with the most credit exposure to the oil industry, according to CFRA Research analyst Pauline Bell.
Bell has a “sell” rating on Comerica, which has 4% of its loan book tied to oil companies, and Cullen/Frost, where 11% of its net loans are to energy firms.
There’s no bright spot on the horizon for stocks today. The S&P 500 – the broadest measure of the stock market – is on track for its worst day in more than three years.
In the early afternoon, the S&P is down 6%. While energy stocks are faring the worst, only ten of the index’s components are in the green.
The Dow is down 6.4%, or 1,665 points, set for its biggest drop since December 2008. The Nasdaq Composite is 5.3% lower.
Even though most market participants are preaching calm and urging retail investors not to panic, Wall Street’s computer screens sure are looking red today.
Worries about the economic impact of the coronavirus pandemic have been weighing on markets for weeks. But a steep drop in oil prices overnight made things worse.
Why Wall Street underestimated coronavirus concerns:
Bank stocks are tumbling Monday as expectations of further interest rate cuts weigh on their core lending business.
JPMorgan (JPM) – America’s biggest bank by assets – dropped more than 11%. Shares of Bank of America Merrill Lynch (BAC) dropped more than 13% and Citi (C) shares are down more than 12%. All three banks have both investment banking and large-scale retail operations, which make them subject to interest rate changes on all fronts.
Morgan Stanley (MS) and Goldman Sachs (GS) both dropped nearly 9%.
The Federal Reserve slashed interest rates by a half percentage point last week in an effort to stave off the economic fallout from the global coronavirus outbreak.
But the market expects this won’t be the last rate cut this month.
The CME’s FedWatch Tool shows a 64% chance of another three-quarter point cut at next week’s Fed meeting. The odds have been fluctuating throughout the day, but the message is clear: The market expects lower rates.
Stocks plummeted across the board as investors worry about the economic repercussions from the global coronavirus outbreak and tumbling oil prices.
Wall Street veteran and former Goldman Sachs (GS) CEO Lloyd Blankfein weighed in about Monday’s dramatic selloff, telling people not to panic and predicting a swift recovery when the coronavirus outbreak ends.
Market participants are trying to make sense of Monday’s steep stock selloff that was so drastic it triggered a brief halt to trading on the New York Stock Exchange.
Investors are grappling with worries about the economic fallout from the coronavirus pandemic and an oil price war that has tanked prices.
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There aren’t many smiles on Wall Street today – except for investors who own Walmart (WMT) shares. The stock was up 2% in late-morning trading Monday, making it easily the best performing Dow stock.
Drug store giant Walgreens (WBA) and Verizon (VZ), which is viewed by many safe haven investors as a bond proxy because of its big dividend yield were the only other two Dow 30 stocks even close to trading higher. Walmart was also just one of 14 S&P 500 stocks in green.
Traders seem to be betting that nervous consumers will be flocking to their nearest Walmart to stock up on supplies in case they have to hunker down at home due to growing coronavirus fears.
Discount retailers Dollar Tree (DLTR) and Dollar General (DG) and Walmart competitor Target (TGT) were also trading higher. So was wipes maker Clorox (CLX), Kleenex tissues and Scotts toilet paper manufacturer Kimberly-Clark (KMB) as well as Hormel (HRL), the producer of SPAM canned meat.
Wall Street’s bet on a bunker mentality shopping mode didn’t help most other retailers and makers of household goods though. Amazon (AMZN) was lower. The S&P Retail ETF (XRT) was down 3.5% while the Consumer Staples ETF (XLP) fell 2%.
A 2,000-point plunge. A 15-minute trading halt. And a near-bear market in stocks. No doubt it’s a scary time on Wall Street.
Yet the New York Stock Exchange is stressing that none of this means that anything is broken in the financial system. Investors are simply reacting to the worsening coronavirus outbreak, along with an historic collapse in oil prices.
US markets bounced off their lows following the 15-minute trading halt, which was the first time NYSE’s circuit breakers were triggered in their current form. The trading halts are designed to prevent panic selling. The Dow was recently down 1,500 points, or 6%.
“Markets come back over the long term,” Cunningham said. “I don’t mean to minimize when markets move down. We want to protect investors and make sure markets are acting appropriately.”
The recent plunge on Wall Street contrasts with previous episodes where something did appear to be amiss in markets, such as the May 2010 flash crash.
“It doesn’t mean there is anything wrong with the market,” Cunningham said of Monday’s drop.
Watch the interview here:
With the Dow down close to 6%, Walmart is the only stock trading in positive territory. The rest of the “best performers” are all in the red.
