Stocks rose Tuesday morning, offering some respite from selling after Monday’s declines sent the Dow off by its largest percentage drop since Black Monday of 1987.
[Read more: Coronavirus jitters send Dow swooning to worst-ever point loss, closes at near 3-year low]
In the U.S., President Donald Trump offered a grimmer assessment of the coronavirus outbreak during a press conference Monday afternoon, acknowledging that the U.S. “may be” heading toward a recession, after which he predicted growth would rebound strongly. He also said that the coronavirus outbreak and response measures from the U.S. could last until August.
Based on the stock market’s historically steep declines over the past few weeks, market participants have already priced in a recession, according to Fundstrat Head of Research Tom Lee.
“Over the past month, equity markets and financial assets broadly, have been attempting to price in the dual shock of a pandemic and the sudden collapse in oil prices (which is viewed by markets as negative given effect on high-yield and drilling-related GDP),” Lee wrote in a note late Monday. “Already, equity markets are down 30% from their highs and as we noted last week, this is pricing in >100% probability of a recession (based on price decline).”
“Since 1900, there have been 22 equity drawdowns of 20% or more and the current 30% slide would rank #14 overall,” he added. “Notably, the typical bear market during a recession period is 30%, so the S&P 500 has already discounted a recession.”
The U.S. government, however, has also underscored a willingness to provide at least some aid to individuals and corporations most affected by the outbreak to soften the blow to the economy as much as possible. In his remarks Monday, Trump vowed to “back the airlines 100%,” with air carriers having been hit hard by a steep drop-off in travel demand. Earlier in Monday, the industry on had requested more than $58 billion in government aid to survive amid the current circumstances.
In Congress, the House of Representatives unanimously passed a revised multi-billion coronavirus emergency bill Monday evening and sent it up to the Senate for a vote. The package would include at least $750 billion to combat disruptions from the coronavirus outbreak, providing funds for hospitals, expanded unemployment insurance, small businesses and food aid.
The situation overseas also continues to evolve, with French President Emmanuel Macron saying Monday that the country would guarantee up to 300 billion euros worth of bank loans to companies and allow them to delay paying taxes and social security contributions amid the outbreak. Macron also ordered citizens to stay at home and only leave for essential duties, mirroring efforts in other countries and municipalities hardest hit by the coronavirus outbreak.
Elsewhere in Europe, Germany on Monday closed its borders to neighboring nations except for commercial travel, and the European Commission proposed a temporary ban on non-essential travel to the European Union as a whole. In North America, Canada closed its borders to most non-residents, offering some exemptions including for U.S. citizens.
As travel grinds to a halt, economists are increasingly bracing for a major hit to global GDP growth in 2020.
“In a realistic scenario where travel and tourism dropped by 50% in four or five months, annual global GDP growth would be reduced by about 0.7 percentage points,” Jennifer McKeown, head of global economics service as Capital Economics, wrote in a note Tuesday. “Indirect effects or disruption to domestic travel could make the hit even harder. What’s more, the strain on insurers and airlines is adding to the risk of a financial crisis.”
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9:36 a.m. ET: Stocks open higher as Wall Street in an at least momentary pause from selling
U.S. stocks opened higher Tuesday morning, with each of the three major indices up more than 1.5%. The Dow added 300 points, but was still far from recovering its near 3,000-point loss from Monday’s session alone.
Here were the main moves in markets, as of 9:30 a.m. ET:
S&P 500 (^GSPC): 2,431.01, up 44.88 or +1.88%
Dow (^DJI): 20,494.77, up 306.25 or +1.52%
Nasdaq (^IXIC): 6,983.86, up 101.38 or +1.47%
Crude (CL=F): $28.59 per barrel, down $0.11 or -0.38%
Gold (GC=F): $1,486.40 per ounce, off -$0.10 or -0.01%
10-year Treasury (^TNX): yielding 0.794%, up 6.6 basis points
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9:25 a.m. ET: Wall Street is already declaring a global recession
Stock’s ugly bear market, combined with the resulting shut-downs of major economies, has made Wall Street analysts waste no time in declaring a global recession. Within the last day or so, S&P, Morgan Stanley, Barclays and Goldman Sachs have all predicted the world will see at least 2 quarters of negative GDP print as the COVID-19 crisis morphs from bad to worse in the Western world.
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9:00 a.m. ET: Saudis to open oil spigots
A picture taken on March 12, 2020 shows the logo of energy giant Saudi Aramco at the entrance of its main building in Riyadh. – Stock markets in energy-rich Gulf states tumbled with Saudi shares down 3.0 percent following worldwide losses amid fears over the coronavirus pandemic and an oil price war. Saudi Aramco dipped 3.0 percent and ended the week down 12.1 percent as the energy giant prepares to announce its first annual earnings. (Photo by FAYEZ NURELDINE / AFP) (Photo by FAYEZ NURELDINE/AFP via Getty Images)
Making good on its unspoken promise to use low oil prices to its advantage, Saudi Arabia announced a plan to ramp up daily exports to a record 10 million barrels. This comes barely a week since its agreement with Russia ended in shambles, and sent crude prices through the floor.
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8:30 a.m. ET: U.S. retail sales unexpectedly drop 0.5% in February, missing expectations
U.S. retail sales unexpectedly declined in February as the coronavirus outbreak began to escalate domestically, underscoring a deeper than expected early economic hit from the pandemic.
Headline retail sales dropped 0.5% month on month in February, nearly fully reversing January’s upwardly revised 0.6% gain, the Census Bureau said Tuesday. Consensus economists had expected retail sales to rise 0.2%.
The drop was led by a 2.8% decline in gas sales amid a broad slump in energy prices in February. Electronics and appliance stores also posted large losses, with sales down 1.4% over last month.
Excluding more volatile auto and gas sales, retail sales dropped 0.2%, versus a rise of 0.3% expected. In January, retail sales excluding autos and gas had risen 0.7%.
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8:15 a.m. ET: L Brands closes stores, withdraws guidance amid coronavirus outbreak
L Brands, the parent company of Bath & Body Works and Victoria’s Secret, will temporarily close all of its U.S. and Canada retail locations Tuesday through March 29.
“With the wellbeing of its customers, associates and communities as its top priority, and to help limit the spread of the Coronavirus, L Brands will temporarily close all Bath & Body Works, Victoria’s Secret and PINK stores in the United States and Canada, effective March 17 through March 29, 2020,” the company said in a statement Tuesday.
All employees will continue to receive pay and benefits during the closure period, the company said.
The company also withdrew its previously issued earnings guidance, which had been for a 2020 adjusted loss of about 5 cents per share.
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7:57 a.m. ET: Stock futures up slightly in early trading
Futures for each of the three major indices were up slightly Tuesday morning, stabilizing after Monday’s steep declines.
Here were the main moves in markets, as of 7:58 a.m. ET Tuesday:
S&P 500 futures (ES=F): 2,428.00, up 11.75 points or +0.49%
Dow futures (YM=F): 20,375, up 114 points or +0.56%
Nasdaq futures (NQ=F): 7,115.25, up 57.75 points or +0.82%
Crude oil (CL=F): $29.12 per barrel, up $0.42 or 1.46%
Ten-year Treasury note: yielding 0.778%, up 5 basis points
NEW YORK, March 16, 2020 — Traders work on the floor at the New York Stock Exchange in New York, the United States, March 16, 2020. (Photo by Michael Nagle/Xinhua via Getty) (Xinhua/Michael Nagle via Getty Images)
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