Here’s what you need to know:
- OPEC and Russia reach a deal to temporarily trim oil output.
- Fed programs could pump $2.3 trillion into the economy.
- Jobless claims now exceed 16 million in the United States.
- Wall Street rallies again, ending week higher despite grim news.
- Regional airports suffer as delays and cancellations mount.
OPEC and Russia reach a deal to temporarily trim oil output.
The Organization of the Petroleum Exporting Countries and other countries including Russia reached an agreement on Thursday to temporarily cut large volumes of production, according to a person with knowledge of the matter.
OPEC and the other oil-producing countries agreed to cut about 10 million barrels a day, or about 10 percent from normal production levels, in May and June, said this person, who spoke on condition of anonymity because the announcement had not been made official.
Possible further trims could come from a meeting of the Group of 20 nations on Friday.
OPEC, Russia and other oil producers gathered for a teleconference on Thursday. The meeting was called by Saudi Arabia, OPEC’s de facto leader, after President Trump spoke to Crown Prince Mohammed bin Salman, the kingdom’s main policymaker, by telephone.
The Saudis have been engaged in a price war with Russia after Moscow refused to go along with a Saudi proposal in early March to trim output to deal with the effects of the coronavirus pandemic. The spat threatened to swamp oil markets with vast oversupplies of crude.
Still, crude oil prices fell sharply on Thursday afternoon, in part because the production cuts were not expected to offset the fact that slowing economies and coronavirus-related shutdowns have dampened demand for oil.
Analysts at Rystad Energy, a consulting firm, said that cuts would “still not be enough” given that an oversupply of more than 20 million barrels a day is expected in the second quarter.
OPEC’s secretary general, Mohammad Barkindo, acknowledged in his introductory remarks that the glut of oil on world markets had put his organization in a weak position. The Saudis, for instance, have loaded huge volumes of crude on tankers, but are said to be having trouble finding a home for all the oil.
Producers in the United States also face difficulty selling and storing their oil. Analysts from Wood Mackenzie, a market research firm, said during a webinar on Thursday that storage tanks at Cushing, Okla., probably the most important such location in the United States, were filling at record speeds.
Fed programs could pump $2.3 trillion into the economy.
The Federal Reserve on Thursday announced an expansive effort to help companies and state and local governments gain access to funding, ramping up its already extensive efforts to protect the economy and financial markets from the impact of a severe downturn.
The central bank said it could pump $2.3 trillion into the economy through the new and expanded programs. It rolled out the relief package just as the government announced that 6.6 million more Americans were newly jobless, laying bare the severe damage to the economy from the coronavirus pandemic.
About 16 million people have filed for unemployment in the past three weeks. Also on Thursday, a reading of consumer confidence plummeted to its lowest level since 2011, potentially forecasting a pullback in spending that could lead to a further cascade of business closings and layoffs.
The Fed’s new program makes use of funds recently authorized by Congress to buy municipal bonds and expand corporate bond-buying programs to include some lower-rated and riskier debt. Doing so will keep credit flowing through the economy, including to companies and state and local governments that might otherwise struggle to get access to it.
“They understand the gravity of the situation,” said Julia Coronado, founder of MacroPolicy Perspectives, an economic consultancy. “This recession is not going to be a joke, and the Fed gets that.”
Stocks rose Thursday after the Fed’s announcement, with the S&P 500 up more than 1 percent. The index has gained more than 23 percent since March 23, rebounding from a steep drop earlier in the month, in part as a result of the central bank’s efforts to bolster the economy.
The markets that local governments use to issue bonds and finance themselves have been in turmoil, which threatened to make it difficult for officials to fund their governments just as sales tax and other revenues dried up and the need for cash skyrocketed.
The new program will buy up to $500 billion of short term notes straight from U.S. states, counties with at least two million residents, and cities with a population of at least one million residents, according to the Fed release. The Fed also rolled out a business lending program that focuses on midsize companies, including those not eligible under a Small Business Administration loan program.
It came as a $250 billion package to replenish a small-business loan program created by the stimulus law stalled in the Senate after Republicans and Democrats clashed over what should be included.
With Congress in recess and lawmakers scattered around the country, Senator Mitch McConnell, Republican of Kentucky and the majority leader, tried to push through the small-business loan funding during a procedural session. But Democrats objected, proposing to double the size of the emergency relief bill by adding $100 billion for hospitals and $150 billion for state and local governments.
Jobless claims now exceed 16 million in the United States.
6
million
16,780,000
5
Claims were filed in
the last three weeks
4
Initial jobless claims, per week
Seasonally adjusted
3
2
RECESSION
1
0
’04
’08
’09
’12
’16
’20
6
million
16,780,000
5
Claims were filed in
the last three weeks
4
3
RECESSION
2
Initial jobless claims, per week
Seasonally adjusted
1
0
’04
’08
’09
’12
’16
’20
16,780,000
6
million
Claims were filed in
the last three weeks
5
Initial jobless claims, per week
4
Seasonally adjusted
3
RECESSION
2
1
0
’04
’08
’09
’12
’16
’20
16,780,000
6
million
Claims were filed in
the last three weeks
5
4
3
RECESSION
2
Initial jobless claims, per week
Seasonally adjusted
1
0
’04
’08
’09
’12
’16
’20
Another 6.6 million people filed for unemployment benefits last week as the coronavirus outbreak continued its devastating march through the American economy, the Labor Department reported on Thursday.
The release came as the Federal Reserve said it could pump $2.3 trillion into the economy through new and expanded programs it announced on Monday, ramping up efforts to help companies and state and local governments suffering financially amid the coronavirus outbreak.
With astonishing swiftness, the pandemic has shut down both longstanding and new businesses, leaving veteran workers and recent hires in nearly every type of industry without a paycheck. In just three weeks, more than 16 million Americans have lost their jobs — more losses than the most recent recession produced over two years.
It’s as if “the economy as a whole has fallen into some sudden black hole,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. Many Wall Street analysts concede that at this point, forecasts are not much more than gussied-up guesses: The purposeful and sudden halt in economic activity has no precedent, and no one knows when the restrictions on movement and commerce will be lifted.
Given the current information, though, several economists expect that by the end of the month more than 20 million people will have been thrown out of work, pushing the unemployment rate toward 15 percent. In February, it was 3.5 percent, a result of 113 straight months of job growth.
Wall Street rallies again, ending week higher despite grim news.
Stocks rose on Thursday after the Federal Reserve announced an expansion of its emergency lending powers in another bid to backstop the U.S. economy, but the gains faded in the afternoon after oil prices fell and shares of energy companies followed.
Still, the S&P 500 rose about 1.5 percent, bringing its gains this week to 12 percent. Markets in the U.S. are closed on Friday, ahead of Easter.
The Fed’s announcement coincided with more grim news about the American economy. Another 6.6 million people filed for unemployment benefits last week, the Labor Department reported on Thursday.
But investors largely shrugged off the bad news, as they had on several occasions recently. As economically damaging as the pandemic will be, Wall Street is starting to see a path forward that was not clear a few weeks ago. Slowing infection rates, hefty government relief packages and the Federal Reserve’s efforts to calm the markets have helped eased investors’ minds.
Shares of companies that have been hardest hit by the outbreak rallied. Retailers Gap, Nordstrom and Kohls all rose more than 10 percent, while United Airlines gained more than 14 percent.
On the flip side, energy stocks weighed on the S&P 500 as crude oil futures fell. Schlumberger dropped about 4 percent and Halliburton fell about 6 percent.
Regional airports suffer as delays and cancellations mount.
The steep drop in demand caused by the pandemic has airlines instituting last-minute cancellations while significantly reducing future schedules, making it hard for passengers to know if a purchased ticket will result in an actual flight. Major airlines including American,Alaska,Delta and United have all announced domestic flight reductions of about 70 percent.
But as bad as things are at major airports, for small-market cities, which may have a limited number of carriers, the effect has been amplified.
On April 5, 21 of 27 flights scheduled to depart from the Charlottesville, Va., airport were canceled, according to Flightradar24, a global flight tracking service and app. Alaska and United, which began commercial flights to California, Denver and Las Vegas from Paine Field Airport north of Seattle in March 2019, had 38 departures scheduled for March 8 of this year. Scheduled departures fell to 24 by April 5, 13 of which were canceled.
Cities that may have only recently gained nonstop flights are losing them, and passengers hoping to travel from those cities may have to fly circuitous routes that go through an airline’s hubs.
United changed about 130 nonstop flights to connecting flights through one or even two of its hubs. Appleton, Wis., a small city in the northeast part of the state, got its first nonstop flights to Denver in June 2018. Now, fliers are being offered a route that goes from Denver south to Atlanta, back north to Chicago, and then on to Appleton.
The hedge fund manager who predicted lockdowns.
Paul E. Singer has amassed billions as the head of Elliott Management through canny bets on the corporate world. But he also proved prescient, today’s DealBook newsletter explains, after he warned employees of his hedge fund in early February to prepare for coronavirus quarantines.
Mr. Singer wrote in an internal memo on Feb. 1 that employees around the world should “try to make arrangements so that you do not have to leave your home for a month if that becomes necessary.” (The Elliott founder is known for being cautious about anything that could affect the markets, including solar storms.)
In his memo, which was first reported by Bloomberg News, Mr. Singer wrote that Elliott’s workers should make sure to have “access to sufficient food, water and medicines.” It was focused on employee safety and did not address decisions about the firm’s investments. That said, the hedge fund recorded a 2.2 percent return for the first quarter, far better than the loss suffered by the average hedge fund during that time.
The British government will get cash directly from the central bank.
Britain moved a step closer to printing money to fight the coronavirus Thursday after the Bank of England said it would give the government cash to help it get through the crisis.
The central bank said it would temporarily extend an existing program that allows the government to overdraw its account. The government will pay the money back, the Bank of England said. The British government pays the same interest rate as commercial banks, currently 0.1 percent.
Still, the action appears to be a form of so-called monetary financing, in which the central bank prints money to support government spending.
Other countries may be tempted to follow suit. By getting money from the central bank, rather than borrowing it on financial markets, governments would avoid accumulating huge debt loads as they try to counteract the economic effects of the pandemic.
The downside is that too much money-printing can fuel inflation. That is one of the reasons that the European Central Bank is, by law, not allowed to engage in monetary financing. But some central bankers may conclude that, in the face of an economic upheaval not seen since World War II, it’s worth breaking the rules.
The humble phone call makes a comeback.
Phone calls are making a comeback. The nation’s biggest telecommunications companies were prepared for a huge shift toward more internet use from home, but did not expect the return of plain old voice calls.
Verizon is now handling an average of 800 million wireless calls a day during the week, more than double the number made on Mother’s Day, one of the busiest call days of the year. Verizon added that the length of voice calls was up 33 percent from an average day before the outbreak. AT&T said that the number of cellular calls had risen 35 percent and that Wi-Fi-based calls had nearly doubled from averages in normal times.
In contrast, internet traffic is up only 20 percent to 25 percent from typical daily patterns, AT&T and Verizon said.
Catch up: Here’s what else is happening.
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The University of Michigan’s consumer sentiment index fell 18.1 points in the first week of April, the steepest one-month decline in the more than four decades that the survey has been conducted. Over the past two months, the index has fallen by 30 points, 50 percent more than any other drop on record. The April data, released Thursday, was preliminary; the university will release final data for the month on April 24.
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Yelp said on Thursday that it had laid off 1,000 employees and furloughed 1,100 more in response to a substantial decline in its business caused by the coronavirus pandemic. Jeremy Stoppelman, Yelp’s chief executive, said in a blog post that he would not take a salary or vest any of his 2020 stock awards for the rest of the year. The collapse of local businesses has hit Yelp hard, with interest in restaurant listings on the site dropping 64 percent since early March. Interest in nightlife dropped 81 percent.
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WeWork has not made scheduled rent payments to the landlords of some of the buildings where it operates its co-working spaces, according to a person briefed on the situation. The decision to hold back rent is part of WeWork’s efforts to renegotiate better deals with building owners as the company tries to cut costs and limit its losses.
Reporting was contributed by Jeanna Smialek, Andrew E. Kramer, Ben Casselman, Stanley Reed, Julie Weed, Graham Bowley, Keith Bradsher, Cecilia Kang, Patricia Cohen, Tiffany Hsu, Jack Ewing, Ben Sisario, Carlos Tejada, Nicole Perlroth, Matt Phillips, Motoko Rich, Hisako Ueno and Makiko Inoue.
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OPEC and Russia Reach a Deal to Cut Oil Production: Live Updates - The New York Times
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