Here’s what you need to know:
- Wall Street is set to open higher as investor sentiment improves.
- Delta reports its first quarterly loss in years.
- China highlights other countries’ missteps on the pandemic, and plays down its own.
- An oil glut in a pandemic is yielding economic chaos worldwide.
- Families are cutting expenses, from rent to auto insurance.
Wall Street is set to open higher as investor sentiment improves.
U.S. stock futures rose on Wednesday, offering hopes that Wall Street could break its two-day slump amid signs that oil prices might be stemming their tremendous losses.
European stocks were also higher after several Asian markets turned positive near the end of their trading day.
A plunge in the oil market has unnerved investors for several days, but on Wednesday there were tentative signs of stability. Brent crude, the international benchmark, fell nearly 18 percent earlier in the day but then recovered to be almost flat, at about $19.50 a barrel — still a remarkably low price. Futures contracts for June delivery of West Texas Intermediate crude, the American benchmark, were down about 4 percent, at $11.08 a barrel.
On Tuesday, the S&P 500 dropped more than 3 percent, its biggest daily decline in three weeks. Investors were worried by the oil markets, as the price of one oil benchmark dipped below zero for the first time, meaning some holders were ready to pay people to take a barrel off their hands.
The inversion in oil prices reflected disappearing demand for petroleum, and the fact that there are few places left to store all the crude still being pumped.
Bond prices on Wednesday signaled some returning investor optimism. U.S. Treasury bond prices fell, a signal that the markets were favoring putting money in places considered less conservative.
Delta reports its first quarterly loss in years.
Delta Air Lines reported a loss of $607 million between January and March, its first quarterly loss in five years, as the travel industry started to collapse in the wake of the pandemic.
The airline said it ended March with about $6 billion in cash on hand, but added that it was also burning through $100 million in cash per day by the end of that month. After cutting costs and expenses, Delta expects to slow that rate to $50 million per day by the end of June.
“The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical to our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity,” said Paul Jacobson, the chief financial officer, in a statement. On Tuesday, Delta announced that Mr. Jacobson had reversed his decision to retire in order to help guide the airline through the crisis.
Under the stimulus passed last month, Delta received $5.4 billion in grants and loans to pay its employees. It said it is also eligible for a $4.6 billion loan under the law, should it decide to take it. The airline also said it plans to cut schedules by 85 percent in the second quarter, in line with competitors like United Airlines, which reported a $2.1 billion quarterly loss on Monday.
Since early March, Delta had raised about $5.4 billion in capital, including a $3 billion loan, selling and leasing back $1.2 billion in aircraft and other measures. It also drew down an existing credit line of $3 billion and cut spending.
By the end of June, the airline expects to cut expenses in half, a saving of $5 billion, as it parks hundreds of aircraft and consolidates operations. Already, 37,000 of its 90,000 employees have taken short-tern unpaid leave. Delta also said it expects to save after cutting pay for its executives.
China highlights other countries’ missteps on the pandemic, and plays down its own.
Early this winter, as dying patients flooded China’s hospitals and medical workers begged for protective gear on social media, some people in the country started asking why the government had suppressed information early on — and who should be held accountable.
But when the United States and other countries bungled their own responses to the virus, China’s propaganda machine saw an opportunity, Li Yuan of The Times reports.
Chinese news outlets — relying on the West’s free flow of information — have used words like “purgatory” and “apocalypse” to describe the tragic hospital scenes in Italy and Spain. They have also run photos of British and American medical workers wearing garbage bags as protective gear.
Reports about similar miseries in China are called “rumors” and censored, and the state-run media’s overall message is that Western countries should copy China’s model. It’s all part of how the ruling Communist Party maintains a facade of positive news — and, by extension, its own legitimacy.
The propaganda push is mostly working, and some young people are waging online attacks against individuals and countries that contradict their belief in China’s superior response. Their tools? A mix of lies and partial truths.
An oil glut in a pandemic is yielding economic chaos worldwide.
From Iraq to Venezuela, nations reliant on oil sales have seen the combination of the price collapse and the coronavirus pandemic create new threats of poverty and political instability.
Countries with economies that are heavily reliant on oil production are finding themselves in a dual crisis, and others have been forced to change policies that no longer make economic sense.
While Russia, Saudi Arabia and the United States — the biggest oil producers — have large financial cushions, the steep drop in demand the world was put under lockdown has upended everything. It was a possibility even veteran industry experts did not foresee.
“No one imagined a crisis of this scope,” said Daniel Yergin, an expert on global energy and vice chairman of IHS Markit, a research firm. “This was in no scenario.”
In the United States, where oil prices fell below zero this week for the first time on record — meaning sellers had to pay customers to take oil off their hands — the glut is threatening severe economic pain in what had been a thriving domestic industry. The oversupply also has forced the Trump administration to negotiate with Russia and Saudi Arabia to curtail production.
“The idea that we are energy dominant or independent is a fallacy,” said Jason Bordoff, a professor at Columbia University’s School of International and Public Affairs and founding director of its Center on Global Energy Policy. The global market’s effect on the United States, he said, has “revealed that when oil prices rise, we feel the pain, and when oil prices collapse, we need to call Moscow and Riyadh to do something about it.”
Families are cutting expenses, from rent to auto insurance.
As millions of Americans lose jobs, take pay cuts, close businesses and absorb family members into their homes, they are being forced to rethink where their money goes. Even before the scramble for new jobs can begin, people are cajoling creditors, looking for gig work or simply cutting back to get through the first few disorienting weeks.
For some, the question is as simple as whether to spring for a jigsaw puzzle to keep from going corona crazy, and how much to tip the person who delivers it. But for many others, the stakes are far higher: a good credit score sacrificed to pay off certain bills before others, or ramen dinners rationed so that cash for groceries can be repurposed for an emergency fund, Tiffany Hsu of The Times reports.
More than half of lower-income adults in the United States say they will struggle to pay bills this month, compared with a quarter of their middle-income counterparts and 11 percent of those in the upper-income tier, according to a survey of nearly 5,000 adults by the Pew Research Center.
Researchers defined a three-person household earning $37,500 to $112,600 annually as middle-income. Over all, more than half of those who expect a federal stimulus infusion will use most of the money to cover essential expenses, while one in five say they plan to save the funds.
To cut costs, heaters have been turned down, clothing sales ignored and auto insurance policies canceled. Retail sales tumbled 8.7 percent in March, by far the largest monthly decline ever recorded. Plans to visit Disneyland, which is closed, turned into at-home re-enactments and long sessions with Disney Plus, Animal Crossing and Zoom. Rents are going unpaid as people spend weeks waiting for government aid to arrive.
Italy’s south braces for more economic carnage.
Italy’s coronavirus epidemic first exploded in its wealthy north. But its poorer south is fighting both the virus and economic carnage not seen since the late 1940s, Jason Horowitz of The Times reports from Rome.
Southern Italy’s economic woes — and fragile health care system — figured prominently in the government’s decision to lock down the nation last month. So far the south only has about 1,500 of the 24,000 nationwide deaths that have been linked to the virus.
But the south’s unemployment rate of about 18 percent is almost triple that of the north. The region also accounts for much of the country’s off-the-books street economy, where many informal-sector workers have been unable to gain access to government relief packages.
“We don’t start from zero,” Cateno De Luca, the mayor of the Sicilian city of Messina, said of the local economy. “We start from less than zero.”
Now, as the Italian government plans to begin a gradual reopening on May 4, some southern officials have suggested that they would ban northerners from their regions if they rushed to lift the lockdown.
Vincenzo De Luca, the president of the southern region of Campania, said he had prepared a nearly billion-euro relief package for workers, and was urging the federal government to find a way to motivate thousands to come out of the black market’s shadows to ask for help.
He said one reason to pass an ambitious relief package was that organized crime may seek to exploit the crisis. The local media has reported that the local mob is using pretext of delivering food to be on the streets to sell drugs, or to shake down shop owners for donations to the poor.
With film shoots on lockdown, ad agencies are making ‘deepfake’ commercials.
Unable to film new commercials during the coronavirus pandemic, advertising agencies are turning to technologies that can seamlessly alter old footage, sometimes putting viewers in a position of doubting what they are seeing.
During Sunday’s episodes of “The Last Dance,” the ESPN documentary series about Michael Jordan and the Chicago Bulls, State Farm ran a commercial featuring expertly doctored footage of the longtime “SportsCenter” anchor Kenny Mayne.
In the ad, a much younger Mr. Mayne is seated at the “SportsCenter” desk in 1998. He reports on the Bulls’ sixth championship title — before taking a turn toward the prophetic.
“This is the kind of stuff that ESPN will eventually make a documentary about,” Mr. Mayne says. “They’ll call it something like ‘The Last Dance.’ They’ll make it a 10-part series and release it in the year 2020. It’s going to be lit. You don’t even know what that means yet.” As a vintage State Farm logo appears in the background, he adds, “And this clip will be used to promote the documentary in a State Farm commercial.”
The producers made the commercial by layering video of Mr. Mayne’s 60-year-old mouth onto footage of his 38-year-old face. To many viewers, the stunt provided a welcome moment of levity in depressing times. Others were made uneasy by the smoothness of the patch, describing it as a type of deepfake.
Ad agencies said similarly manipulated ads will become more common.
Catch up: Here’s what else is happening.
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Australia will capitalize on historically low oil prices by spending $59 million to buy oil to bolster its fuel reserves, the country’s energy minister said. He said the oil would be initially kept in the United States as the Australian government explored local storage options. Australia is highly dependent on imports of liquid fuel from Asia and the Middle East.
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China’s state-controlled banking sector is pushing out extra loans as part of a government-led effort to limit the economic effects of the coronavirus pandemic. But non-performing loans are already starting to increase across the banking system, Chinese regulators announced on Wednesday morning.
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General Motors said on Tuesday that it was shutting down its four-year-old car-sharing service, Maven, the latest such venture to close its doors. Maven, which allows customers to rent cars by the hour, has struggled to build a substantial following. It was forced to suspend services in March because of the coronavirus outbreak.
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Lyft said Tuesday that it was withdrawing its financial guidance for 2020. The ride-hailing company had said it expected revenue of $4.5 billion to $4.6 billion this year, but demand has plummeted since early March.
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Netflix reported first-quarter earnings on Tuesday that showed a surge in demand for the service with stay-at-home orders in place around the world. The company said 15.7 million new customers signed up in the first three months of the year. Before the pandemic, Netflix expected about seven million.
Reporting was contributed by Isabella Kwai, Niraj Chokshi, Keith Bradsher, Edmund Lee, Clifford Krauss, Vindu Goel, Kate Conger, Neal E. Boudette, Mohammed Hadi, Alan Rappeport, Carlos Tejada, Mike Ives and Kevin Granville.
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April 22, 2020 at 07:27PM
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