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US stocks finished the session in the red on Friday, but that didn’t keep major indexes from posting one of their best weeks ever after a monstrous rally between Tuesday and Thursday.
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Business has essentially ground to a halt this month due to the coronavirus pandemic. Few expect Corporate America to resume to anything remotely resembling normal any time soon.
With that in mind, analysts have dramatically slashed their forecasts for second quarter earnings. They were already predicting a drop for earnings in the first quarter.
According to data from FactSet, Wall Street now expects profits for companies in the S&P 500 to fall 10% from the second quarter a year ago – i.e. April through June. That would be the first double-digit drop in earnings since a nearly 16% plunge in year-over-year profits during the third quarter of 2009 – just as the US was bottoming out during the Great Recession.
Plunging oil prices and a sharp pullback in retail spending are the biggest culprits behind the slump in earnings. FactSet said that the energy and consumer discretionary sectors had, by far, the biggest cuts to profit forecasts.
Analysts are also predicting a decrease – albeit by just 1.1% – for the third quarter before a rebound of 4.5% in the last quarter of 2020. Profits are now likely to fall 1.2% for all of 2020 — the first annual drop since 2015. That pales in comparison to 2008’s staggering earnings decline of 25.4%.
And if this is any comfort, Wall Street thinks there will be a sharp rebound next year, with analysts forecasting an increase of 14% or more in corporate profits for both next year’s first quarter and the rest of 2021.
Cruise line operators Carnival (CCL), Royal Caribbean (RCL) and Norwegian (NCLH) have been hit hard by the coronavirus pandemic. But the three companies aren’t getting any help from Washington as of now.
Shares of all three stocks plunged between 12% and 20% Friday after the Senate and House passed a more than $2 trillion coronavirus aid package that did not include any money for them.
The reason? The cruise lines all have headquarters in Miami, but none of them is legally based in the United States – which allows them to pay fewer taxes. Carnival is incorporated in Panama, while Royal Caribbean is headquartered in Liberia. Norwegian is incorporated in Bermuda.
Republican US Senator Josh Hawley of Missouri noted that fact in a tweet earlier this week, urging them to move to America in order to qualify for aid.
President Trump said in a press briefing Thursday that “it’s very hard to make a loan to a company when they’re based in a different country.” But he also noted the cruise companies employ thousands in the United States and that “we’re going to try and work something out.”
For what it’s worth, Carnival CEO Arnold Donald said in an interview on the “Axios on HBO” show that the company is not looking for a government bailout. But Donald acknowledged that “capital markets are constrained right now.” (HBO is a part of WarnerMedia, the AT&T-owned parent company of CNN.)
US stocks are still sharply lower, but it doesn’t look like today’s selloff is going to change just how good a week it has been for equities.
The Dow, which is down 3.9%, or 875 points, at midday is on track for its best weekly performance since 1938.
How’s that for a week for the history books?
The S&P 500 – Wall Street’s broadest measure – is down 3.6% at noon, but it’s looking at its best week since 2009.
The Nasdaq Composite is up 3.5% at midday.
Some Instacart shoppers are planning to strike on Monday in response to the company’s treatment of them during the coronavirus pandemic.
The grocery delivery company announced Monday that it plans to add another 300,000 “full-service shoppers” in North America over the next three months in response to overwhelming demand spurred by coronavirus. These workers shop and make deliveries for customers and are treated as independent contract workers by Instacart.
The strike is being called for by Instacart shoppers and a newly formed non-profit called Gig Workers Collective. It was first reported Friday by Vice.
Demands include providing workers with safety items including hand sanitizer, disinfectant wipes, and sprays, hazard pay, and an expansion of its coronavirus pay to include those with underlying health conditions.
Congress has agreed a $2 trillion economic relief package to get America through the coronavirus crisis. But will that be enough?
The payments to industries and citizens alike should provide some short-term financial support and, hopefully, boost the confidence of consumers and business. But the singularity of this crisis could mean traditional stimulus tools won’t work as they have in the past
“The package will not help the US avoid lost output that we estimate will be around $920 billion this year,” wrote Morgan Stanley economists in a note this morning. “But we estimate it will close that gap by mid-2021 and ensure a faster recovery.”
America may even a second stimulus package by the time social distancing measures ease, to give the economy a bigger boost, they said. That’s because merely putting money in people’s pockets while they remain homebound might not get them spending. Consumer spending is a major contributor to the US economy.
Morgan Stanley expects a 2.3% drop in real fourth quarter GDP this year versus the same period in 2019, “the deepest since 2008”. But the bank is also forecasting above-average 3.3% growth in 2021 as the economy recovers.
Kroger (KR) said Friday that it is hiring 23,500 workers to help keep up with demand during the coronavirus crisis.
The company will partner with hotels, retailers and food service distributors that have been hit hard by the crisis to hire their workers. Kroger has expedited hiring process. Onboarding new hires in an average of 72 hours.
Kroger is the latest grocer to announce openings.
Walmart (WMT), Amazon (AMZN), Instacart and others are also hiring employees to meet the crush of demand.
Consumer sentiment has fallen off a cliff.
The final reading of the University of Michigan’s consumer sentiment survey index for March fell to 89.1 points. That is the lowest level for the survey since October 2016, when it was 87.2.
The preliminary March rating was 95.9, February’s consumer sentiment reading was 101 points.
“To avoid an extended recession, economic policies must quickly adapt to a new era that will reorder the spending and saving priorities of consumers as well as the relative roles of the public and private sectors in the U.S. economy,” said Richard Curtin, who conducts the monthly surveys of consumer attitudes, expectations and behavior.
The index’s March plunge was the fourth largest single-month decline in nearly half a century, according to Curtin.
Prior steep declines of consumer sentiment occurred in October 2008 in response to the financial crisis, the 1980 recession and Gulf War and Hurricane Katrina in 2005.
We already know that nationally, unemployment benefits reached a staggering level last week: 3.3 million new claims filed. But the effects of the outbreak are already beginning to show in the delayed state-by-state data.
In Nevada, for example, initial claims nearly tripled – rising by 175% in the week ended March 14. More than 40% of Nevada’s jobs are in the leisure, hospitality and retail sectors, all of which have been hit hard by social distancing measures employed to combat the virus spreading.
“This is the largest numerical week-to-week increase in Nevada’s history, and the second-largest percentage increase,” according to David Cooper and Julia Wolfe of the Economic Policy Center.
And next week’s state-by-state numbers should be even worse, as they will reflect the 3.3 million counted in the federal data – the highest number of Americans in history filing for unemployment.
Advanced estimates from the Department of Labor “indicate that when the official data are released next week, they’re going to show historical levels of unemployment insurance claims for nearly every state,” Cooper and Wolfe said.
The District of Columbia was also hit hard in the state-by-state data – along with Washington state, which was an early epicenter of the virus.
The market is deep in the red this morning. Less than half an hour into the trading day, the Dow briefly fell more than 1,000 points, or 4.6%.
Stocks are paring their gains from the massive rally over the past three days. The Dow alone has climbed more than 21% since Monday’s close. That was enough to keep the index on track for its best week since 1938.
US stocks kicked the day off lower on Friday, paring some of their gains from the monstrous rally over the past three days.
Nevertheless, it’s still shaping up to be a week for the history books. The Dow is still on track for its best week since 1938! For the broader S&P 500, it is shaping up to be the best week since 2009.
That puts this morning’s red open in perspective.
As the United States’ largest airline, American Airlines is poised to get $12 billion of the $50 billion airline industry bailout that passed the Senate this week. But it might not qualify to get that money, according to CEO Doug Parker.
Parker did not detail what conditions it might not be able to meet.
If the airline does qualify for money it would comply with the requirement of no involuntary furloughs of employees, he said. It had 134,000 employees at the start of the year. But many employees would be on “minimal hours” as it cuts its schedule 60% in April and 80% in May.
The United States is racking up tremendous debt in its effort to rescue the economy during what looks to be a very deep recession. That could put its credit rating at risk, says Fitch Ratings.
The credit-rating agency said the risk of a downgrade – soon – has risen because of the enormous shock to the economy and the loads of debt America is taking on to save itself. Although the United States’ credit rating remains strong – Fitch did not downgrade the rating from perfect “AAA” in 2011 like Standards & Poors did – the country’s ability to pay back all its debt is now on somewhat shakier ground.
Dow futures pointed at a 600-point loss at the open, marking a big reversal from the last three days – one of the best three-day stretches for the stock market in history.
The House is expected to vote on the $2 trillion stimulus bill Friday. The market will also get to take a look at an inflation report at 8:30 am ET and a final reading of consumer sentiment for March at 10 am ET.
European shares fell in early trading as enthusiasm waned over the trillions of dollars in stimulus measures announced by governments and central banks to fight economic fallout from the coronavirus pandemic.
Germany’s DAX (DAX) dropped 1.4%. France’s CAC 40 (CAC40) shed 2%, while the FTSE 100 (UKX) lost 3.7% in London.
Most markets in Asia Pacific rose modestly. Japan’s Nikkei 225 (N225) gained 3.9%, making it easily the region’s best performer. China’s Shanghai Composite (SHCOMP) rose 0.3%, while Hong Kong’s Hang Seng (HSI) climbed 0.6% and South Korea’s Kospi (KOSPI) increased 1.9%.
