Virus seizes markets, ends ‘business as usual’
North America hangs out collective “Closed” sign as Canada closes border.
Finance: The biggest banks in the U.S. moved in unison to conserve cash through the first half of the year. The Financial Services Forum, which represents Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street, and Wells Fargo, said members would suspend stock buybacks for first quarter and the second quarter due to the virus outbreak. In a prepared statement, the group said the decision “is consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy through lending and other important services.” The financial sector is among the hardest hit Monday. Shares of Citigroup, Bank of America and JPMorgan plunged as billions in bank valuation evaporated. Citigroup, down 18%, led the way.
The Fed on Sunday made an emergency cut to its key interest rate, slashing it by a full percentage point to a range between zero and 0.25%. The central bank said it would stay there until it feels confident the economy can survive a near-shutdown of activity in the United States. The announcement was met U.S. markets that plunged so violently, it triggered mechanisms put into place to prevent panic selling.
Markets: Global stock markets are plunging as airlines cut service and public facing companies shut their doors. Stocks are down about 9% after trading resumed on Wall Street following a temporary halt Monday morning. Markets are gyrating in the U.S. after steep losses in Asia and Europe.
Energy Drain: The price for a barrel of U.S. crude plunged below $30 per barrel Monday and S&P cut Exxon Mobil’s credit rating. Airlines are slashing capacity, factories are shutting down and people are cancelling vacations. That all translates into cratering energy demand. Brent crude lost $3.80, or 11%, to $30.05 per barrel in London on Monday. Benchmark U.S. crude tumbled $2.73, or 8.5%, to $29.00 per barrel.
Manufacturing: Factory activity in New York state plunged in March. The Federal Reserve Bank of New York said Monday that its Empire State Manufacturing Survey plummeted by 34 points to minus-21.5 this month _ the lowest level since the recession year 2009, statistical evidence that the coronavirus outbreak is devastating commerce.
PSA Group, whose cars include Peugeot and Citroen, is closing its factories in Europe until March 27 because of the virus. The French automaker said Monday that along with severe illnesses close to its production sites, it decided to close the factories because of supply chain disruptions and “the sudden decline in the automobile markets.”
A Macro View: Kevin Hassett, former chairman of the Council of Economic Advisers under President Donald Trump, said the global economy is sliding into a recession and forecast negative U.S. economic growth in the second quarter. Hassett said the April jobs report could reveal as many as a million jobs lost to the coronavirus. “I think that the odds of a global recession are close to 100% right now,” Hassett told CNN on Monday.
Supply-Demand Shockwave: A surge of new orders is putting Amazon.com operations under significant pressure. The company told members who are used to two-day shipping to expect that delivery window to grow as millions of people line pantry and storage room shelves with food and supplies. Amazon is struggling to keep items like toilet paper and cleaning solutions in stock. It now says to expect delivery times to at least double. The same supply and demand shockwaves are hitting tech and toy companies, manufacturers and retailers alike.
Airline Deterioration: U.S. airlines are asking the federal government for grants, loans and tax relief that could easily top $50 billion to help them recover from a sharp downturn in travel. Airlines for America, the trade group representing the carriers, posted its request for financial help Monday as airlines announced a fresh wave of service and job cuts. United Airlines CEO Oscar Munoz in a letter to employees said the carrier would slash 50% of its flying capacity in April and May and warned that the cuts could extend into the peak summer travel season. Even with thousands fewer flights every week, the airline expects its planes to be only 20% to 30% full at best. European budget carrier Norwegian Air said Monday that it would cut 90% of its workers _ 7,300 people. The parent of British Airways and Spain’s Iberia announced plans to cut capacity at least 75% in April or May compared with the same months last year. U.K.-based EasyJet warned of “further significant cancellations,” and Irish discount carrier Ryanair said it expects to ground most of its fleet over the next seven to 10 days.
American Airlines on Monday suspended about 75% of its long-haul international flights and began grounding about 135 planes. It will cut passenger-carrying capacity in the U.S. by 20% in April and 30% in May. Airlines are talking to unions about taking cuts in pay or hours, and some are cutting executive and management salaries.
Sorry, We’re Closed: Shopping binges are out, social distancing is in. Nike, Under Armour, Warby Parker, Patagonia, REI, Urban Outfitters and American Girl have closed stores nationwide. Columbia Sportswear joined the list Monday, shuttering its North American stores until at least March 27. The company is offering “catastrophic paid leave” to employees most affected by COVID-19. The Gap cut store hours in the U.S. and Canada and following government guidance for further action.
Table For None: On Monday, the governors of New York, Connecticut and New Jersey essentially placed a curfew on bars and restaurants. The three Northeastern states ordered bars, restaurants and movie theatres closed to the public by 8 p.m. Essential businesses like supermarkets and gas stations will be able to stay open after 8 p.m. Take-out and delivery orders from restaurants are not banned.
A number of states, California, Ohio, Massachusetts, Washington and Illinois among them, ordered restaurants, cafes and bars to close. National chains are trying to stay ahead. Starbucks is announcing it will fill only to-go orders for at least the next two weeks in the U.S. and Canada. The Seattle brewer completely closed company-owned stores in what were crowded areas such as malls and university campuses. Stores in communities with high clusters of COVID-19 cases will close or reduce hours.
There are also confrontations between local governments and some restaurants that have ignored orders to close or reduce capacity. The economic damage to restaurants has already been immense. BTIG analyst Peter Saleh said restaurant sales plunged between 50% and 90% in San Francisco and Seattle. Fast food sales fell 20% to 30% in New York City over the last week. Casual dine-in chains like Applebee’s or Olive Garden could be hardest hit, Saleh believes. Shares of the company that owns Olive Garden fell 11% Monday.
Hollywood: Box office ticket sales plunged to their lowest levels in at least 20 years in North America, leading to one of Hollywood’s worst weekends on record. More people went to the movies the weekend after Sept. 11, 2001, than over the weekend. Not since 2000 have weekend box office revenues fallen so far, according to data firm Comscore. Between the previous weekend to the one that just passed, overall ticket sales plunged 45%, according to Comscore. The premiere of several big franchise films, including the newest James Bond film, have been postponed.
AMC Theaters, the largest movie chain in North America, will limit attendance at all screenings to 50 people to adhere to the CDC’s latest social distancing guidelines. Cinemas in New York City and Los Angeles on Sunday were ordered closed by the city’s respective mayors. Many art house theatres nationwide have also shuttered. While the largest chains in North America _ AMC, Regal Cinemas, Cinemark have tried to keep their doors open, they began to limit theatre capacity to 50% and increased cleaning regimens.
Disneyland: The entertainment juggernaut shut down more operations as the Centers for Disease Control and Prevention releases new guidance on crowds. After closing hours Monday, all Disney stores in North America will remain closed. Disney has already announced the closures of theme parks in California and Florida. On Monday, it added hotels at Walt Disney World in Orlando to the list, including Disney’s Vero Beach Resort on Florida’s Atlantic Coast. Those locations will close Friday evening to give people time to change plans.
Oracle of Omaha: The daughter of billionaire investor Warren Buffett has been exposed to the new coronavirus and has isolated herself at her Omaha home for two weeks. Susie Buffett told the Omaha World-Herald on Sunday that she feels fine and doesn’t think she’s contracted COVID-19, the disease caused by the coronavirus. She has not been around her 89-year-old father since her exposure last week.