US stocks ended Friday’s session lower, although the losses were more contained than they have been in previous weeks.
Even so, it was the worst weekly performance for all three major stock indexes since October 2008.
The Dow closed 913 points, or 4.6% lower, dropping 17.3%this week. The index has now erased all of the gains accumulated during the Trump administration.
The S&P 500 finished down 4.3%. It fell 15% on the week.
The Nasdaq Composite slipped 3.8%, for a 12.6% loss this week.
Famed hedge fund Bridgewater predicts the coronavirus will lead to $4 trillion in lost corporate revenue for both public and private businesses in the U.S., according to a report the firm published Friday.
“That is a very dangerous decline, and if not mitigated, it will lead to a long-lasting ripple,” said the Bridgewater team who authored the research report.
In Bridgewater’s model, companies will have a shortfall of $2 trillion “concentrated in energy and travel and leisure, and about equally divided between large and small companies.”
The firm projects a 6% decline in US GDP for 2020, with the biggest hit during the second quarter.
The firm also estimates a decline of $12 trillion for global businesses in 2020.
“Since this hit to revenues is happening throughout the world, the total hole globally will be roughly three times that—about $12 trillion. Governments are responding, of course, but in most cases these responses will just mitigate some of the ripple. Governments’ capacities to deal with this hit vary greatly and will be a major driver of markets going forward.”
“Many companies will try to fill this gap by drawing credit lines, increasing their debt positions,” said the investors.
If government policies don’t help fill the gap, companies are likely to dramatically cut spending, which would result in meaningful cuts in employment.
Ray Dalio, who founded Bridgewater, is famous for predicting the 2008 financial crisis.
Less than two hours are left in the trading day and all three major US stock benchmarks are in the red.
The S&P 500 and the Dow are both set to record their worst week since October 2008 – the height of the financial crisis.
The S&P was last down nearly 2.3%, while the Dow was down 2.3%, or 470 points. Still, today’s drop is less severe than many over the past two weeks.
The Nasdaq Composite was last down 1.5%.
The first half of 2020 will be ugly. Economic forecasts for the first and second quarters are dire, but none have been quite as bad as one published by Goldman Sachs today.
Goldman is now forecasting a whopping 24% annualized contraction in second-quarter GDP, as well as a 6% drop in the first three months of the year.
Declines in consumer spending, manufacturing activity and building investment will weigh on the economy this spring, the bank said.
Even though the economy is expected to aggressively rebound in the second half of the year, the American economy will contract in 2020, shrinking by 3.8%, Goldman predicts.
This is the second dire economic forecast from Goldman this week. The bank also expects unemployment claims to jump to their highest level ever – 2.25 million – next week.
Existing home sales soared to their highest level since before the financial crisis and subsequent Great Recession on Friday.
Nearly 5.8 million home were sold last month, the most since February 2007 and a 6.5% jump.
But as great at that sounds, there are clouds on the horizon.
The US economy – as well as the global economy – is expected to plunge into a short but sharp recession due to the raging coronavirus outbreak. This new recession is starting now, Rupkey said, with the bright light of a strengthening housing sector going out for America.
The Federal Reserve announced another move to help keep the financial system function orderly throughout the coronavirus crisis.
The latest action expands the central bank’s action in money markets, enhancing the liquidity through its Money Market Mutual Fund Liquidity Facility, or MMLF.
The Fed first announced the MMLF on Wednesday.
The facility allows the Boston Fed to make loans available to financial institutions to buy high-quality assets from municipal money market mutual funds. These loans will in turn be secured by the assets bought.
“I would anticipate similar responses in other markets, should additional stresses emerge,” said Steven Friedman, senior macroeconomist at MacKay Shields, in emailed comments Friday.
US stocks were lower around midday, with the S&P 500 in modestly negative territory, and the Dow and Nasdaq Composite in the green. So far, nothing crazy.
The benchmarks are still on track for another ugly weekly performance. Stocks were down as New York Governor Andrew Cuomo and the White House coronavirus task force announced further measures to curtail the outbreak.
The rise of social distancing to prevent the spread of the coronavirus has forced Peloton (PTON) to suspend selling and delivering its treadmill.
The at-home fitness company explained in a post that the treadmill is too big to deliver while maintaining a safe distance from customers.
Peloton is still selling and delivering its more well-known bike, which is smaller, but the company will only deliver it to a customer’s door.
The market meltdown of the past few weeks is hurting various corners of the financial system. One area in which things are expected to go from bad to worse? High yield bonds.
High yield – or junk – bonds carry lower quality labels from ratings agencies like Standard & Poor’s and Moody’s because the companies behind them are less credit worthy. Ordinarily, these bonds also yield more than safer options, giving investors more bang for their buck.
But that hasn’t held true of late: “The high yield index has now erased all of its total returns going back to January 2017,” said Oleg Melentyev and Eric Yu, credit strategists at Bank of America Merrill Lynch, in a note Friday.
The credit cycle has turned and the number of companies defaulting on their junk debt is about to jump, according to the analysts.
The defaults will be driven by companies in the energy industry, with the default rate across sectors at 9%. In normal credit cycles, default rates peak at 10% to 12%, the analysts said.
With tumbling oil prices, energy companies will struggle in the near term – but lack of credit-worthiness will make things harder for them for a long time to come.
JPMorgan (JPM), America’s largest banks by assets, is stepping up for its employees in the coronavirus pandemic, and will pay those on the front lines of the outbreak a one-time bonus of $1,000.
Both full-time and part-time employees who make less than $60,000 a year, and whose jobs cannot be done from home, are eligible for the cash payment.
It will be a maximum of $1,000 and not more than 10% of their salary in certain countries. On-site workers are also receiving five more paid days off.
Marriott’s furloughs, which previously were only for its hotel workers, are now hitting the corporate level.
The world’s largest hotel chain confirmed to CNN Business that it’s moving to shortened work weeks at its corporate headquarters and it putting many of its employees on temporary leaves that could last as long as three months.
The changes will “impact most associates” at the Bethesda, Maryland-based company, a spokesperson said.
Marriott (MAR) shares are up 22% in early trading because of hopes of a stimulus package from the US government.
Two major retailers announced Friday they’ll ramp up hiring in light of the ongoing coronavirus pandemic:
The Federal Reserve is working overtime to save the world economy from a financial crisis.
The latest emergency move: The US central bank on Friday said it will increase the frequency of operations that give foreign economies access to zero-interest dollars.
The so-called “swap” lines with five central banks are aimed at easing an extreme shortage of dollars that has emerged during the recent market mayhem.
The Fed said these emergency operations, first unveiled on Sunday, will now occur daily, instead of weekly. The liquidity backstop includes the Bank of Canada, Bank of England, Bank of Japan, the Swiss National Bank and the European Central Bank.
The move underscores the stress in financial markets.
Demand for dollars has spiked because the greenback is the world’s safe haven currency. And many foreign businesses took out loans in dollars, debts that are becoming increasingly difficult to repay given the economic turmoil and sharply rising value of the dollar.
The Fed on Thursday expanded the emergency dollar lending program to nine countries including Australia, Brazil, South Korea and Mexico.
Stocks are having another volatile morning. After opening in the green, both the Dow and the S&P 500 briefly dropped into negative territory, while the Nasdaq Composite held onto its gains.
The Dow did recover again – it’s now up 0.5%, or 95 points – but the S&P remains modestly lower.
The Nasdaq is again leading the field with a 1.2% gain.
This is very similar to the dynamic that played out yesterday morning. Stocks closed higher yesterday, so maybe this is a good sign?
Kevin Hassett is returning to the White House to advise President Donald Trump through the severe economic fallout from the coronavirus outbreak, the former Trump official told CNN’s Poppy Harlow.
Trump asked Hassett, a CNN commentator, to rejoin the administration just as the economic outlook has darkened significantly in recent days.
Hassett told CNN on Thursday the widespread shutdowns caused by the health crisis could spark a repeat of the Great Depression.
Hassett left the Trump administration in June 2019 after nearly two years as chairman of the White House Council of Economic Advisers.
During his second stint in the White House, Hassett is expected to advise the president on economic matters and have an office in the West Wing.
US stocks kicked the day off in the green on Friday, adding onto the prior session’s gains.
Even so, all three benchmarks are on track for another terrible weekly performance, with the Dow set for its worst week since 2008.
Disney and Pixar’s “Onward” is heading to streaming early.
The animated film, which hit theaters on March 6, will be available to buy digitally starting Friday at 8PM ET. It’ll premiere on Disney+, the company’s new streaming service, on April 3.
“Onward’s” early arrival comes after other studios like Universal Pictures announced that some of its films, which were currently in theaters, would be available to rent or buy early.
Disney itself moved “Frozen 2,” one of its biggest titles from last year, to streaming early, so to capture the attention of families who are stuck at home as the coronavirus spreads through much of the world.
Studios have been grappling with theaters for years over how long a movie should be available in theaters before being offered on other platforms. However, the coronavirus pandemic has changed all of that.
The outbreak has decimated the global movie theater industry by delaying major films such as Disney’s own “Mulan” and “Black Widow” and closing theaters around the world.
Relax, Coke drinkers: Coca-Cola (KO) doesn’t expect any shortages of its drinks in the near future.
In a regulatory filing Friday, the company said it’s “working closely with our bottling partners on contingency planning for continuous supply and, at this stage, we do not foresee any near-term disruptions in concentrate or beverage base production.”
However, the restaurant closures, event cancellations and reduction in travel sparked by the growing coronavirus pandemic will have a “negative impact” on Coke’s bottom line.
The company said its “operating results cannot be reasonably estimated at this time, but the impact could be material.” It withdrew its previously released full-year financial guidance.
Altria (MO) CEO Howard Williard has contracted the novel coronavirus. He is taking a temporary leave of absence from the Marlboro maker, according to a statement.
Altria’s Chief Financial Officer Billy Gifford will take over Willard’s position while he’s in his two-week self quarantine.
Roughly more than 244,500 people have contracted the virus worldwide, according to Johns Hopkins University, which is tracking cases reported by the World Health Organization and additional sources.
InterContinental Hotels Group (IHG), which owns Holiday Inn and several other brands, is cutting $150 million in costs as demand continues to decline across its 5,900 global hotels.
The company is reducing salaries and incentives for its board and executive committee members to achieve the savings. IHG expects its hotel revenue per room to decline 60% with “steeper declines in those markets most impacted by restrictions.”
Like other hotel companies, IHG’s stock has been absolutely battered this year and is down 60%.
