Wall Street Shakes Off Grim Economic News

Wall Street Shakes Off Grim Economic News

Wall Street Shakes Off Grim Economic News

Wall Street Shakes Off Grim Economic News

Stocks on Wall Street rose Friday, rebounding from their steepest drop in months, in a day of unsteady trading.

The S&P 500 closed more than 1 percent higher, after earlier having climbed more than 3 percent. On Thursday, the index plunged by about 6 percent, its sharpest drop since mid-March.

Financial markets are suffering from a shift in sentiment this week, as investors have seemed to acknowledge the risks to the economy from pandemic-related shutdowns earlier this year and the prospect of a second-wave of coronavirus infections as government’s lift restrictions on activity, The New York Times’s Matt Phillips reports.

Confidence in a quick recovery and return to normal was rattled after the Federal Reserve chair, Jerome H. Powell, warned that the depth of the downturn and pace of the recovery remained “extraordinarily uncertain.”

The central bank repeated that warning on Friday. In a semiannual monetary policy report to Congress, its first since the pandemic took hold, the Fed said the nation’s gross domestic product would probably contract “at a rapid pace” in the second quarter after “tumbling” in the first.

“Chairman Powell threw a bucket of cold water on the thought that the economy is going to go back to where it was in 2019 any time soon,” said Matt Maley, chief market strategist at Miller Tabak, an asset management firm.

Analysts like Mr. Maley have also noted that the market was overdue a pullback, after a staggering rally — a gain of as much as 45 percent for the S&P 500 from March lows — had left stock prices somewhat disconnected from reality.

It was the fastest recovery off a market low for the benchmark index since 1933, and came even as tens of millions of Americans applied for unemployment benefits and the national unemployment rate surged to its highest level since the Great Depression.

Also worrying investors is data from some states that have eased quarantine restrictions, such as Texas and Arizona that shows a resurgence of the virus in those states.

“The idea that Covid is fully behind us, or that a V-shaped recovery is in front of us, were put on hold” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn.

Even if the rise in cases doesn’t lead to another large-scale lockdown, analysts say it does dash hopes for a return to a more normal environment over the summer and makes a full rebound in particularly exposed industries less likely.

A bankruptcy court judge on Friday allowed Hertz to sell up to $1 billion in new stock, granting the car rental agency’s request as investors improbably bought up shares in recent days.

“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity,” lawyers for the company argued in a bankruptcy court hearing on Thursday.

The judge, Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware, agreed, saying in her ruling that the stock sale “is in the best interests” of Hertz and its creditors.

The company’s stock price ended the day Friday at $2.83 per share, up from a low of 40 cents after it filed for bankruptcy last month. The stock briefly climbed above $5.50 on Monday, its highest level since mid-April.

Hertz did not immediately respond on Friday to a request for comment on when and whether it would proceed with such a sale.

The move is exceedingly rare for a bankrupt company, the DealBook newsletter notes, because most bankruptcy restructurings result in stockholders — who are last in line to recover financial assets — being wiped out. There are also precedents for investors coming out ahead. The hedge fund mogul William A. Ackman made a fortune from owning stock in the bankrupt real estate business General Growth Properties nearly a decade ago.

But in a sign of Hertz’s dire financial straits, the company has asked for permission to end leases for more than 144,000 vehicles that it says it can no longer afford.

A large Amazon fashion photo studio in Brooklyn, where models pose in clothing sold on the company’s site, sat shuttered for more than two months as the coronavirus spread in New York.

Then, on May 18, Amazon reopened the studio and later began taking photos with models. It told employees on conference calls that the studio, in the Williamsburg neighborhood, could open under state rules that allowed warehouses and fulfillment operations to operate as essential businesses.

There was just one problem: It appears that Amazon was playing fast and loose with the rules.

A few days after The Times asked the state about the open studio, Amazon closed it. A manager told employees that someone in state government had given the company a heads-up that it may need to comply with an unspecified new policy. The studio remains closed.

Reopening the studio shows how Amazon has pressed ahead during the pandemic, looking to right its operations quickly after the virus initially caught it on its heels. The push to take advantage of its warehousing operations, when physical retailers were closed, was particularly evident in areas where it has long struggled, like high-end fashion.

The federal government’s multibillion-dollar aid program to help small businesses hurt by the pandemic prompted outrage after billions went to public companies while mom-and-pop businesses were sidelined.

Now, another group of recipients is being scrutinized for taking the money: independent wealth management firms, some of which manage billions of dollars on behalf of affluent Americans. Their fees, which are typically 1 percent, can bring in tens of million annually regardless of market fluctuations.

The initial $349 billion allocated in April for the Paycheck Protection Program went quickly, prompting Congress to approve an additional $310 billion. But some business owners found the guidelines for accepting the money confusing or too restrictive.

Now, a divide is growing between advisory firms that took the money and those that declined because of ethical concerns. The issue is more than a tempest in a teapot. Some firms could lose millions in fees if their clients start pulling their wealth out.

“We didn’t think it was very credible that these firms actually needed the money,” said Gary Ribe, the chief investment officer of Accretive Wealth Partners, which manages $130 million and did not apply a loan from the Paycheck Protection Program. “Getting it out of an abundance of caution — that didn’t seem credible, either.”

The Federal Reserve painted a sober picture of the economy in its semiannual monetary policy report to Congress, highlighting risks to the financial system and emphasizing that pandemic-induced job losses were hitting lower-income workers and minorities especially hard.

“Real gross domestic product will contract at a rapid pace in the second quarter after tumbling at an annual rate of 5 percent in the first quarter of 2020,” the Fed said in its report, released Friday. It noted that the most “severe” job losses had been sustained by workers with lower incomes, and said that borrowing conditions remained tight for households and businesses with weaker credit histories.

The Fed also suggested that the pandemic was probably costing workers more than their jobs: Those who were still in the labor market were seeing weak pay growth.

“In the months ahead, labor market prospects for the unemployed and underemployed — both overall and for particularly hard-hit groups of workers — will largely depend on the course of the Covid-19 outbreak itself and on actions taken to halt its spread,” according to the report to Congress.

Jerome H. Powell, the Fed chair, will testify before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

The British economy shrank by 20.3 percent in April compared with the month before, a record contraction that indicated devastation in many parts of the economy.

  • Updated June 12, 2020

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • Will protests set off a second viral wave of coronavirus?

      Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.

    • How do we start exercising again without hurting ourselves after months of lockdown?

      Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


The data reflects the first full month of Britain’s lockdown to reduce the spread of the coronavirus, and is likely to increase pressure to relax those rules more quickly.

Manufacturing fell by 24.3 percent, led by a 90 percent fall in the sector that includes motor vehicles, according to the Office of National Statistics.

In March, British economic output contracted by 5.8 percent.

The drop in the G.D.P. in April was the biggest Britain had ever seen and nearly 10 times worse than the steepest pre-coronavirus fall, said Jonathan Athow, the government’s deputy national statistician.

“Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall,” he said in a news release.

Earlier this week, the Organization for Economic Cooperation and Development projected that the British economy would contract by 12.5 percent in 2020, worsening to 14 percent if there were a second wave of infections.

As France eased its coronavirus lockdowns last month, a small army of street workers fanned out across Paris in the dark of night. They dropped traffic barriers along car lanes and painted yellow bicycle symbols onto the asphalt. By morning, miles of pop-up “corona cycleways” had been laid, teeming with people heading back to work.

As European cities emerge from quarantines, bicycles are playing a central role in getting the work force moving again. Governments are trying to revive their economies from a deep recession, but cannot fully rely on public transportation to get workers to their jobs because of the need for social distancing. In urban areas at least, bicycles are suddenly an unlikely component to restarting economic growth.

In Europe, where many cities have integrated cycling as a mode of transportation, the pandemic is speeding up an ecological transition to limit car traffic and cut pollution, especially as new research draws links between dirty air and coronavirus death rates.

Britain, France, Italy and their neighbors are accelerating hundreds of millions of euros in investments on new biking infrastructure and schemes to get people pedaling.

“This crisis has made clear that we need to change the way we live, work and move,” said Morten Kabell, chief executive of the European Cyclists’ Federation. “In the era of social distancing, people are wary of using public transportation, and cities can’t take more cars. So they are looking to the bike as a natural mode of mobility for the future.”

Three of the largest airlines operating from Britain have filed a legal challenge to the 14-day quarantine imposed by the British government on Monday on many travelers arriving in the country. According to a statement, British Airways, easyJet and Ryanair want a “judicial review” of the measures, which are intended to reduce importation of the coronavirus into Britain, as soon as possible.

The airlines said that the quarantine, which carries heavy fines for those who break the rules, would “have a devastating effect on British tourism and the wider economy and destroy thousands of jobs.” The airlines also said that the government had provided no scientific evidence that such a severe policy was warranted.

As in many countries, Britain’s lockdown has severely curtailed air travel, putting huge financial pressure on airlines, some of which have estimated that air travel won’t return to previous levels for two to three years. The quarantine has been imposed as the government is beginning to ease other parts of the lockdown, including rules on which shops can open.

The government has argued that as the virus comes under control, a quarantine will help stem imported cases.

Airline executives have become increasingly vocal in their criticism of the British government. Ryanair’s chief, Michael O’Leary, rejected the government’s recommendations that passengers check as much baggage as possible to help prevent transmission of the virus.

In an interview with the news outlet The Independent, Mr. O’Leary termed the advice “more rubbish,” and said it was much safer for passengers to keep their bags rather than turn them over to baggage handlers.

  • Lululemon, the premium athleisure brand, said on Thursday that its sales in the first quarter fell 17 percent to $652 million, showing that not even makers of comfortable, stretchy clothing have been spared during the pandemic. The company said that as of June 10, 295 of its 489 stores had reopened, and that e-commerce sales made up more than half of its first quarter revenue, compared with 27 percent in the same period last year. Still, unlike most other retailers, it managed to post a profit of $28.6 million.

  • Boeing has asked a major supplier of parts for its troubled 737 Max jet to stop work on four Max fuselages and not to start work on 16 more, which were planned for delivery this year, according to the supplier, Spirit AeroSystems. Based on that request and further correspondence with Boeing, Spirit said it expected to cut back work it had planned on 125 of the jets and would furlough some employees on the project for three weeks starting Monday.

Reporting was contributed by Karen Weise, Vanessa Friedman, Paul Sulivan, Gregory Schmidt, Stanley Reed, Mohammed Hadi, Michael J. de la Merced, Alan Rappeport, Kevin Granville, Sapna Maheshwari, Liz Alderman, Kate Conger, Paul Mozur, Carlos Tejada, Michael Ives and Niraj Chokshi.


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