Markets slump as investor alarm persists.
Financial markets reeled again on Wednesday, as the coronavirus continued its relentless spread, governments ramped up efforts to contain it and investors continued to wait for lawmakers in Washington to take action on proposals to bolster the American economy.
The S&P 500 fell more than 7 percent, a drop that triggers a 15-minute pause in trading. The index fell a bit further after trading resumed. Oil prices cratered
Wednesday’s selling reflected another swing in sentiment on Wall Street. Stocks jumped on Tuesday as the White House called for urgent action to pump $1 trillion into the economy. But the calls so far haven’t been met with tangible action in the Senate. Treasury Secretary Steven Mnuchin met with Republican lawmakers on Tuesday and warned them that the unemployment rate in the United States could approach 20 percent without the intervention of robust economic stimulus measures.
The Trump administration’s $1 trillion proposal includes two rounds of direct payments to Americans, one in April and one in May, at a total cost of $500 billion, according to a summary obtained by The New York Times on Wednesday.
The renewed selling showed how fragile any gains have become as long as the virus continues to spread and the number of cases continues to grow at a staggering rate. Analysts continue to downgrade their expectations for the global economy and corporate profits as measures to contain the virus become more extreme.
Wednesday’s turmoil was evident in other markets as well. The British pound fell to its lowest level in 35 years against the American dollar, and oil prices tumbled.
Rystad Energy, a consulting firm, said that supply of oil worldwide would exceed demand by about 3 million barrels a day in April as air travel and other transportation grind to a halt.
“With each day there seems to be yet another trap door lying beneath oil prices, and we expect to see prices continue to roil,” said Louise Dickson, a Rystad analyst.
The American oil benchmark West Texas Intermediate dropped to less than $24 a barrel on Wednesday, the lowest price since 2003.
The global Brent benchmark fell below $27 a barrel, a level not seen since January 2016. Oil prices are roughly 60 percent below where they were at the beginning of the year.
The American economy is poised for the worst quarterly contraction ever, with a sudden slowdown in economic activity that’s more akin to what happened in wartime Europe than during previous American slowdowns like the financial crisis more than a decade ago or even the Great Depression.
Greg Daco, chief U.S. economist at Oxford Economics, thinks the economy could shrink by 12 percent next quarter, with unemployment hitting 10 percent in April.
The ‘Trump Bump’ in stocks is gone.
As it rose to record heights, the stock market had perhaps no bigger cheerleader than President Trump, who has saw the rally as an endorsement of his economic policies and crowed about the gains throughout his presidency.
But stocks have been falling for a month, and the severity of that drop has all but wiped out all of the gains that followed Mr. Trump’s inauguration. In intraday trading on Wednesday, the Dow Jones industrial average fell below its pre-inauguration closing level 19,732. The S&P 500, a better measure of the broader market, is still slightly above its pre-inauguration level.
Mr. Trump’s victory in 2016, along with the Republican Party’s control of Congress, set off a surge in share prices as investors looked forward to the prospect of steep cuts to corporate tax rates and an administration stocked with industry-friendly faces.
In December 2017, Mr. Trump delivered a sweeping tax overhaul. By the following month, the S&P 500 was up more than 30 percent, and the gains kept coming for much of the year. For Mr. Trump, this was a surefire barometer of his success as president.
There was one other nasty dip along the way: In late 2018, investors grew increasingly worried about Mr. Trump’s trade war with China and the prospect that the Federal Reserve would raise interest rates. But with the economy still growing, the job market strong, and the Fed reversing course on its plan to raise interest rates, the market overcame that dip and climbed nearly 30 percent.
Ford, G.M. and Fiat Chrysler automakers will close their factories in the United States.
Ford Motor and General Motors said on Wednesday that they would close their plants in the United States, a decision that comes as automakers are under intense pressure to protect workers from the spreading coronavirus. Fiat Chrysler is planning to do the same, according to a person familiar with the matter.
Ford said in a statement that it would shut down factories in the United States, Canada and Mexico after the end of Thursday evening shifts.
G.M. quickly followed suit, saying it would close its plants in North America until March 30.
“We have been taking extraordinary precautions around the world to keep our plant environments safe and recent developments in North America make it clear this is the right thing to do now,” the automaker’s chief executive, Mary Barra, said in a statement.
The United Automobile Workers union has called on the three Detroit carmakers to shut down manufacturing plants across the United States for two weeks to prevent the spread of the coronavirus. The three automakers employ 151,000 U.A.W. members.
Europe’s auto manufacturing was brought virtually at a standstill after Daimler, Ford Motor and Nissan joined Volkswagen and most other major carmakers in shutting down.
The government moves to protect homeowners and tenants from being evicted.
The federal government stepped in Wednesday to assure millions of homeowners that they are not at risk of losing their homes because of job losses caused by the coronavirus pandemic.
The Federal Housing Finance Agency is directing Fannie Mae and Freddie Mac, the giant government-run mortgage finance firms, to suspend all foreclosures and foreclosure-related evictions for at least two months.
The action announced by the regulator came just after President Trump announced that the Department of Housing and Urban Development would suspend evictions in public-housing authorities and suspend foreclosures on mortgages guaranteed by H.U.D.
Trump invokes war powers to boost medical manufacturing.
President Trump invoked the Defense Production Act on Wednesday, giving the administration expanded powers to direct factories to produce face masks, gowns, gloves and other medical supplies needed to fight the virus.
The act, which stems from the Korean War, allows the government to commandeer American factories and direct them to produce items needed to protect national security. While the law is typically thought of applying to weapons, tanks, uniforms and other military goods, the administration will use it to force American factories to ramp up production of medical supplies like ventilators, respirators and other protective gear for health care workers.
A federal government plan to combat the coronavirus warned that shortages of medical supplies like protective gear and pharmaceuticals could occur. Hospitals around the country have been warning of critical shortages of supplies.
In a briefing Wednesday, Mr. Trump said he was set to sign the act Wednesday afternoon, “just in case we need it.”
Here’s what’s in the White House’s spending plan.
The White House is asking Congress to allocate $500 billion for two separate waves of direct payments to American taxpayers in the coming weeks and an additional $300 billion to help small businesses continue to meet payroll, according to a Treasury Department proposal circulating on Capitol Hill and among lobbyists.
The outline, a copy of which was obtained by The New York Times, calls for a total of $1 trillion in spending for those programs, which would also include $50 billion for secured loans for the airline industry, and another $150 billion for secured loans or loan guarantees for other parts of the economy hard hit by the unfolding financial crisis.
It would allow for the use of the Exchange Stabilization Fund, an emergency reserve account that is usually used for intervening in currency markets, to cover those costs, and also temporarily allow it to guarantee money market mutual funds.
Lawmakers were moving swiftly on Wednesday to try to incorporate the proposal and others from senators into legislation that could be put to a vote in the coming days. But the details remained far from complete.
Business groups make their pitch to Trump.
One of the biggest business lobbying groups, which spoke by phone with President Trump on Wednesday, has asked the administration and Congressional leaders to relax tax policies and cut regulations in response to the coronavirus pandemic.
On Wednesday, the president was expected to call into the quarterly meeting of Business Roundtable, which is chaired by Walmart’s chief executive and whose board includes companies like IBM, Apple and AT&T. The group also sent a letter to the president and top lawmakers in Congress calling for a payroll tax holiday for employers and tax credits for companies that retain employees as the economy contracts, as well as relief from tariffs, according to copies of the letters reviewed by The New York Times.
The companies are asking for breaks from regulations governing global supply chains, including “regulatory flexibility and, if necessary, direct resources to sustain port infrastructure and multimodal transportation and delivery networks.”
Trump says the government will help airlines.
President Trump reassured airline executives on Wednesday that the country would “support them and their amazing employees” as his administration proposed a new loan program for the industry to Congress.
The president spoke in a conference call with chief executives of the biggest American airlines and UPS and FedEx. The call came as an administration proposal for $1 trillion in economic stimulus measures was circulating on Capitol Hill. The proposal included $50 billion in secured loans for the airline industry, which has asked for $58 billion in grants and loans.
Forecasts for U.S. job losses are increasingly grim.
As the effects of the coronavirus pandemic hit the U.S. job market, the damage to the labor market looks likely to be much deeper and longer lasting than seemed possible even a week ago.
Most small businesses do not have the financial buffer to pay workers for long if revenue dries up. And while larger public companies may have access to cash, they also have shareholders who want executives to watch the bottom line.
“It’s simple math,” said Deborah Weinswig, founder of Coresight Research, an advisory and research firm that specializes in retail and technology. “You can’t have all expenses and no revenue.”
The Economic Policy Institute, a progressive research group, estimated on Tuesday that the outbreak could eliminate three million jobs by summer.
Catch up: Here’s what else is happening.
In an opinion article published by the Financial Times, Ben S. Bernanke and Janet Yellen, who led the Fed through the 2008 financial crisis, suggested that the central bank should consider trying to buy corporate bonds as well. The idea is something that the current Fed chair Jerome H. Powell has said he’s not currently pursuing.
ConocoPhillips said on Wednesday that it would cut its 2020 capital spending by $700 million, or about 10 percent. Late Tuesday, Halliburton, which provides drilling and related services to oil producers, said it would furlough 3,500 workers for 60 days.
Reporting and research were contributed by Jack Ewing, Ana Swanson, David McCabe, Cecilia Kang, Alan Rappeport, Ben Casselman, Clifford Krauss, Sapna Maheshwari, Nicholas Fandos, Jim Tankersley, Amie Tsang, Kate Conger, Adam Satariano, Matthew Goldstein, Mike Isaac, Jason Gutierrez, Carlos Tejada, Kevin Granville, Daniel Victor and Nelson Schwartz.