Stocks Rise as Oil Prices Plunge: Live Markets Updates

Stocks are higher but oil prices are crashing again.

U.S. stocks rose and global markets rallied on Monday as governments around the world discussed when and how to reopen businesses and get their economies back on track.

The S&P 500 rose about 1 percent. European stocks were trading about 2 percent higher after a broadly higher day in Asia.

European governments, including Italy and France, have been discussing ways to reopen in recent days. New Zealand is loosening restrictions on retailers, restaurants, construction sites and schools after only one new case of the virus was reported Monday.

In the United States, governors in Colorado, Georgia, Michigan and other states are deciding how and when to start easing some social-distancing restrictions. Any opening will be slow and painful, but investors signaled optimism that the recovery could begin soon.

The price of West Texas Intermediate crude, the U.S. benchmark, fell nearly 30 percent to about $12 a barrel. Brent crude, the international benchmark, was down nearly 10 percent, below $20 a barrel. Global cuts in oil production are set to start on Friday, after the Organization of the Petroleum Exporting Countries, along with Russia and other producers, agreed to reduce daily output by 9.7 million barrels a day (close to 10 percent of output) to address a glut as demand for crude crashed.

But traders in energy markets have worried that the cuts won’t be enough. West Texas oil futures have cratered this month as investors worry about a shortage of storage capacity.

The Small Business Administration is bracing for a deluge when it starts processing loan applications on Monday for the second round of money available through the Paycheck Protection Program. The small business aid fund ran through its initial $349 billion allocation in 13 days. Another $310 billion will become available at 10:30 a.m., and lenders expect it to be snapped up fast.

Business owners must apply for the loans through a participating bank or other lender. The S.B.A. and Treasury Department said on Sunday that individual lenders will be able to parcel out no more than 10 percent of the program’s total funds (excluding a set-aside for smaller banks). That caps the big banks’ total lending at $60 billion each.

JPMorgan Chase, the program’s largest lender, has already made $14 billion in loans, and has more than 280,000 hopeful borrowers still seeking help.

One pain point for banks has been the S.B.A.’s loan processing system, known as E-Tran, which typically requires loans to be submitted individually. In the lending program’s first days, E-Tran crashed at times because it was overwhelmed.

To prevent that from happening again, the S.B.A. said it would let large lenders — those with at least 15,000 applications — to make one bulk submission each by bundling all of their loans together. The loans will still be processed individually, on a first-come, first-served basis, and will only be funded if money remains available, the agency said.

A quarter of the companies in the S&P 500 have already reported first-quarter earnings, and it hasn’t been pretty. More companies will open their books this week, revealing the effects of the pandemic on their businesses.

💻 If anything, lockdowns have been good for many tech giants, including Alphabet which reports on Tuesday, Facebook and Microsoft on Wednesday, and Amazon and Apple on Thursday.

🛢 Energy companies, reeling from the crash in oil prices, will unveil an ugly set of results: BP on Tuesday, ConocoPhillips and Shell on Thursday, and Chevron and Exxon Mobil on Friday.

💊 Pharma firms will be closely watched for any news of Covid-19 breakthroughs, including Pfizer, Merck and Novartis on Tuesday, and AstraZeneca and GlaxoSmithKline on Wednesday.

💰 The big European banks, like their American counterparts, are expected to set aside huge amounts as a buffer against bad loans, including HSBC and UBS which report on Tuesday, and Barclays on Wednesday.

🗣 Other companies of note reporting this week include Boeing, Caterpillar, eBay, General Electric, Kraft Heinz, Mastercard, McDonald’s, PepsiCo, Qualcomm, Southwest Airlines, Samsung, Spotify, Starbucks, Tesla, Twitter, Visa and Yum Brands.

Just two months ago, Airbus had so many orders that the company’s factories were struggling to keep up. Now, with the coronavirus pandemic sapping those deals for new aircraft, the European plane maker is warning of severe financial distress and cutting back on work.

“We are bleeding cash at an unprecedented speed, which may threaten the existence of our company,” wrote Guillaume Faury, the chief executive, in a letter to Airbus’s 134,000 employees. “We face a severe and immediate imbalance between our revenues and costs.”

Before the pandemic hit, Airbus was thriving on demand from customers around the world, while rival Boeing was struggling with the grounding of its most important plane, the 737 Max, following two crashes that killed 346 people.

Now Airbus, too, is paring back output. Airlines, its key customers, are deferring orders as they struggle for survival. Many of their aircraft are sitting on runways unable to fly because of government restrictions and lack of demand.

Earlier this month, Airbus said that it would temporarily halt or slow production at facilities including in Mobile, Ala., as well as in Britain, Spain and Germany. At the time the company said it was responding to high inventories at the sites as well as the need to adopt workplace measures to make production safer during the pandemic.

The vast economic rescue package that President Trump signed into law last month included $349 billion in low-interest loans for small businesses. The so-called Paycheck Protection Program was supposed to help prevent small companies — generally those with fewer than 500 employees in the United States — from capsizing as the economy sinks into what looks like a severe recession.

The loan program was meant for companies that could no longer finance themselves through traditional means, like raising money in the markets or borrowing from banks under existing credit lines. The law required that the federal money — which comes at a low 1 percent interest rate and in some cases doesn’t need to be paid back — be spent on things like payroll or rent.

But the program has been riddled with problems. Within days of its start, its money ran out, prompting Congress to approve an additional $310 billion in funding that will open for applications on Monday. Lenders expect the second round to be depleted even faster.

Countless small businesses were shut out, even as a number of large companies received millions of dollars in aid.

Some, including restaurant chains like Ruth’s Chris and Shake Shack, agreed to return their loans after a public outcry. But dozens of large but lower-profile companies with financial or legal problems have also received large payouts under the program, according to an analysis of the more than 200 publicly traded companies that have disclosed receiving a total of more than $750 million in bailout loans.

The government has since published new guidance strongly discouraging public companies from using the program and urged those that did take the money to return it. Some have; others haven’t.

Small companies — those with under 500 workers — employ nearly half of America’s private sector work force.

“It has been beyond frustrating,” said Diane Burgio, a single mother who runs a design business in New York City that employs four people. She was one of more than 280,000 applicants who sought, and did not get, a loan from JPMorgan Chase.

On a recent weekday, while France was still under one of Europe’s tightest lockdowns, mammoth six-foot tractor tires were rolling off the assembly line at a Michelin factory in northeast France. Farther south, other Michelin plants turned out tires for ambulances and fire trucks as fast as small skeleton crews could make them.

Michelin is an early starter among global manufacturers seeking to revive business safely in the midst of the coronavirus pandemic. A gradual reopening is being tested after the outbreak temporarily shuttered plants in China, Europe and the United States, affecting 127,000 employees.

“We can’t stay confined forever,” Florent Menegaux, Michelin’s chief executive, said by telephone recently. “Just after the health crisis, we’re going to have an economic crisis looming which will have huge social consequences. We have to learn how to live with Covid-19.”

But in France, where Michelin is based, the piecemeal rollout has ignited tensions with labor unions.

“Michelin is trying to reassure financial markets by showing that they’re capable of producing,” said Jean-Paul Cognet, a union leader in Clermont-Ferrand, where Michelin has its headquarters. “But at what cost?”

The question is echoing worldwide as companies seek to rebound from lockdowns that have exacted a devastating economic toll. In the United States, Europe and China, governments are calling for more emphasis on getting vital industries back on track, forcing executives to strike a balance between keeping their businesses alive and their employees safe.

Politicians and public health experts have sparred for weeks over when, and under what circumstances, to allow businesses to reopen and Americans to emerge from their homes. But another question could prove just as thorny — how?

Because the restart will be gradual, with certain places and industries opening earlier than others, it will by definition be complicated.

Georgia and other states are beginning the reopening process. But even under the most optimistic estimates, it will be months, and possibly years, before Americans again crowd into bars and squeeze onto subway cars the way they did before the pandemic struck.

And it isn’t clear what, exactly, it means to gradually restart a system with as many interlocking pieces as the U.S. economy. How can one factory reopen when its suppliers remain shuttered? How can parents return to work when schools are still closed? How can older people return when there is still no effective treatment or vaccine? What is the government’s role in helping private businesses that may initially need to operate at a fraction of their normal capacity?

Then there is the public health threat: If states reopen their economies too quickly, or without the right precautions in place, that could lead to a renewed outbreak, with dire consequences for both safety and the economy.

Falling stock prices are bad enough. But investors are facing the loss of an income flow that may have seemed as reliable as the rotation of the Earth: quarterly dividends.

“In a recession, companies curl up into a fetal position and they cut employment, production and inventories,” said Edward Yardeni, the independent market researcher. “They stop buying back their own stock, and then, if they are still bleeding cash, they cut dividends.”

Cuts have already begun, and they are expected to amount to as much as 30 percent of the nearly $500 billion that S&P 500 companies paid in dividends in the last 12 months. This will add to the pain of investors who may not have realized that dividends are paid at the discretion of management and do not flow automatically year after year.

Some economists say that investors do not really need dividends — stock buybacks or skillful redeployment of earnings within a corporation can be just as beneficial — but the loss of dividends on top of so many other losses is bound to be painful.

But companies like Ford, Boeing, Macy’s and Occidental Petroleum have already announced dividend reductions or suspensions, and many more are on the way.

Catch up: Here’s what else is happening.

  • Boeing expects it to take two to three years before air travel returns to pre-pandemic levels, said David L. Calhoun, its chief executive, at a shareholder meeting on Monday. He said the aircraft manufacturer expects it to be several years more before the industry’s longer-term growth trend recovers.

  • General Motors said it was suspending its quarterly dividend and any share buybacks to strengthen its cash position. When it halted North American production a month ago, the automaker said it was laying off 6,500 salaried workers and cutting executive pay. In labor negotiations last year that prompted a six-week strike, the United Automobile Workers noted that G.M. had spent more than $10 billion on stock buybacks since 2015.

  • The German sportswear maker Adidas said Monday that sales plunged 20 percent and profit all but evaporated in the first quarter of the year because lockdowns kept stores closed in key markets like China.

  • Deutsche Bank said late Sunday that net profit plunged in the first quarter and warned that pressures from the coronavirus are eating away at its capital. In a preliminary earnings report, Germany’s largest bank said that profit from January through March fell by more than two-thirds to 66 million euros, or $72 million, compared to the first quarter of 2019.

Reporting was contributed by Jessica Silver-Greenberg, David Enrich, Jesse Drucker, Stacy Cowley, Stanley Reed, Neil Irwin, Niraj Chokshi, Jason Karaian, Kevin McKenna, Liz Alderman, Jack Ewing, Ben Dooley, Jeff Sommer, Ben Casselman, Carlos Tejada, Kevin Granville and Daniel Victor.

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