Stocks drop as economic fears resurface on Texas closures.
Stocks tumbled Friday, with losses accelerating after Texas said it would reinstate some measures aimed at curbing the coronavirus outbreak there, a move that added to investors’ concerns that a recent surge in Covid-19 cases would put a halt to the economic recovery.
The S&P 500 was down more than 2 percent, a loss that erased any remaining gains the index had for the month of June.
Though stocks started the day only slightly lower, the selling quickly picked up pace after the governor of Texas ordered all bars to close on Friday, a day after he paused the state’s reopening amid surging cases there.
Shortly after Texas’s announcement, Florida’s governor also ordered bars in that state to stop serving food and alcohol for on-site consumption.
“The Texas response to close bars and restaurants is a the real driver of lower markets today, as it portends to a possible second shutdown across the country if we see Covid spikes,” said Doug Rivelli, president of institutional brokerage firm Abel Noser in New York. “And a second shutdown would be devastating to the overall economy.”
Shares of big banks led the declines, dropping after the Federal Reserve said it would put a temporary cap on their dividend payments to preserve cash during the pandemic. Goldman Sachs fell more than 8 percent. JPMorgan Chase and Bank of America were about 6 percent lower.
The decision to limit payouts is an admission by the Fed that large financial institutions, while far better off than they were in the financial crisis, remain vulnerable to an economic downturn unlike any other in modern history, The New York Times’s Jeanna Smialek reported. With virus cases across the United States still surging and business activity subdued, it remains unclear when and how robustly the economy will recover.
Shares of Facebook and Twitter also fell sharply after Unilever, one of the biggest advertisers in the world, said on Friday that it would stop running ads on Facebook, Instagram or Twitter in the United States for at least the rest of the year, citing a “polarized election period.” Both companies were down about 7 percent.
Markets have seesawed all week as new data made clear that the United States is far from bringing its coronavirus outbreak under control. At the same time, mass infections breaking out in a number of European and Asian countries underscored the fact that the disease will be a fact of life until vaccines become widely available.
Still, investors have also seen signs of recovery in economic data. Consumer spending data released on Friday by the Commerce Department showed a sharp increase of 8.2 percent in May, as businesses started to reopen.
Several analysts also pointed out that recent weakness in the stock market could be related to the approach of the end of the second quarter on Tuesday.
Institutional investors — such as pension funds — typically rebalance their portfolios at quarter end, resulting in sales of assets that have outperformed.
Stocks are up roughly 17 percent in the second quarter, trouncing the roughly 2 percent gains for the broadest measure of the bond market.
“Money managers will look to take profits and lock in gains ahead of quarter end,” Steven Ricchiuto, U.S. chief economist, Mizuho Americas, wrote in a note to clients on Friday. “Doing so before the weekend allows them to better enjoy the more seasonal weather rather than worry about the markets.”
Consumer spending surged in May as businesses began reopening.
Consumer spending rose by a record 8.2 percent in May, the Commerce Department said Friday, as businesses began reopening and the economy slowly started to recover.
The increase followed record drops in spending in March and April at the start of the coronavirus pandemic, when businesses were shuttered and millions of Americans lost their jobs, sending the economy into a recession.
The report showed that the spending came despite personal income dropping 4.2 percent in May, the most since January 2013, after surging by a record 10.8 percent in April when the government handed out one-time $1,200 stimulus payments to millions of people and bolstered unemployment benefits.
Spending by consumers is closely watched because it accounts for more than two-thirds of economic activity in the United States. A surge of new infections, however, is causing some businesses to close once more, and could affect the recovery.
Economists cautioned against reading much into last month’s surge in consumer spending. They noted that the increase followed two record declines and that it still left spending 11 percent below its pace before the pandemic hit.
“Amid rapidly rising infections across many states, risks to the outlook are dangerously tilted to the downside,” Gregory Daco, chief U.S. economist at Oxford Economics, said in a research note.
The commerce report showed that among the categories for which consumers ramped up spending in May, the sharpest increase — a 29 percent jump — was for durable goods such as autos. Spending on a category called nondurable goods, which includes food and clothing, rose nearly 8 percent. And spending on services — everything from cellphone contracts to hospital visits — rose more than 5 percent.
Virgin Australia, which like other airlines has been struggling to stay afloat during the coronavirus pandemic, has been bought by Bain Capital, the Boston-based private equity firm. The decision was announced on Friday by Deloitte, the carrier’s administrator, after a rival bidder in the sale, Cyrus Capital Partners, withdrew its offer.
“We appreciate how difficult the current situation is for Virgin Australia staff,” Mike Murphy, the managing director for Bain Capital in Australia, said in a statement.
“Our investment and plan for the airline will support and celebrate Virgin Australia’s unique culture and protect as many jobs as possible,” he said. Financial terms were not disclosed.
Virgin Australia entered voluntary administration in April, with debt totaling 6.8 billion Australian dollars, or $4.7 billion, after the Australian government refused to bail the company out. The filing made the airline one of Australia’s biggest corporate casualties of the coronavirus and left its rival Qantas Airways with an effective monopoly over the Australian airline industry.
Qantas has struggled as well, however. This week, it cut about 6,000 workers and grounded about 100 planes for up to a year. Local flights have slowly begun to resume, but international travel is likely to be off the table for most Australians until there is a vaccine, and a surge this week in coronavirus cases in the state of Victoria has again raised questions about even domestic travel.
Another pause for Hollywood’s plans.
Hollywood is postponing its planned comeback. Again.
“Mulan,” a $200 million live-action Disney movie, and WarnerMedia’s $205 million “Tenet” were supposed to revive moviegoing by rolling out late next month — the first big releases from Hollywood since theaters shut down in March. But on Thursday Warner pushed back “Tenet” to Aug. 12 because of surging coronavirus infections in much of the United States. Underscoring how quickly market conditions are changing, “Tenet,” directed by Christopher Nolan, last shifted dates two weeks ago.
The Coming Pandemic Documentary
Disney is considering a new release plan for “Mulan,” according to two people with knowledge of the matter, who spoke on the condition of anonymity to discuss a private process. Disney declined to comment.
Theater chains like AMC, Regal and Cinemark have announced plans to reopen most of their locations by mid-July. But it is increasingly unlikely that cinemas in New York will be open by then; Gov. Andrew M. Cuomo said on Wednesday that he was slowing down plans to reopen theaters, gyms and shopping malls. Also spooking studios: China, the No. 2 film market after North America, recently canceled a plan to reopen some theaters.
The summer blockbuster season, which runs from the first weekend in May until Labor Day, delivered $4.32 billion in ticket sales last year. So far this year, ticket sales since early May stand at about $2.4 million, largely from drive-in theaters showing classics and independent films. Some theater companies face bankruptcy if ticket sales and concessions are not generating adequate revenue by Thanksgiving, analysts say.
Studios have been making money by selling unreleased movies to streaming services like Netflix or making them available for video-on-demand rental.
Unilever, the consumer products giant, joins a Facebook advertising boycott.
Unilever, one of the biggest advertisers in the world, joined a growing boycott against Facebook, following other companies displeased with the social media giant’s hands-off attitude toward posts from President Trump amid widespread protests against racism and police brutality.
The consumer goods giant, which owns brands such as Dove and Lipton, said on Friday that it would stop running ads on Facebook, Instagram or Twitter in the United States for at least the rest of the year, citing a “polarized election period.”
“Continuing to advertise on these platforms at this time would not add value to people and society,” Unilever added in comments that were first reported by The Wall Street Journal.
“The complexities of the current cultural landscape have placed a renewed responsibility on brands to learn, respond and act to drive a trusted and safe digital ecosystem,” said Unilever, which plans to shift its spending to other platforms.
Ben & Jerry’s, an ice cream brand owned by Unilever, said earlier this week that it is participating in the advertising boycott. Other companies involved include Verizon, Patagonia and Eddie Bauer.
Marc Pritchard, the chief brand officer of Procter & Gamble, said in an online speech on Wednesday for the Cannes Lions festival that the company would not be “advertising on or near content that we determine is hateful, denigrating or discriminatory.” Ad agencies like IPG Mediabrands said they were working with companies that wanted to cut ties with Facebook.
The pandemic may force older workers to face retirement decisions sooner.
One of the most important factors affecting your retirement security is how long you work.
Additional years make it easier to increase annual Social Security benefits through delayed filing. Working longer also can mean saving more, living off those savings for fewer years and getting more years of employer-subsidized health insurance.
Many older workers, generally those over 40, say they will need to work longer because of the economic crisis. Here are some of the key issues facing older workers navigating the last part of their careers in the pandemic.
In a typical recession, the unemployment rate for older workers remains below that of their younger counterparts, but that’s not the case this time. The pandemic already has fueled a surge in early retirements, according to a report published recently by three economists. They found that among people who had left the labor force through early April, 60 percent said they were retired, up from 53 percent in January, before the pandemic.
Your health risks
Guidance from the Centers for Disease Control and Prevention states that adults over 65 are at higher risk of severe illness from the coronavirus than others. Most at-risk workers can’t afford to stay away from work for long periods. An analysis by the Kaiser Family Foundation shows that the average earnings of workers 65 and older in 2018 was $49,100.
The recession itself is likely the biggest obstacle to returning to work. The best odds for older workers to land or retain a job are typically found when the economy is strong, noted Peter Cappelli, a professor of management at the Wharton School at the University of Pennsylvania. Some experts worry about an increase in pandemic-related workplace age discrimination.
The motion-sensing lights sense nothing. The swivel chairs do not swivel. Only one sign of life remains in the abandoned corporate floor plan: potted plants.
Intended as a note of vibrancy amid bland surroundings, workplace greenery now seems an eerie symbol of the suddenness with which workers abandoned their routines.
Yet the cactuses and philodendrons we left behind have not been forgotten. During the pandemic, some have had their own essential workers keeping them alive. So-called interior horticulturalists water — and occasionally pet — the plants every few weeks, tending to a patch of the American economy.
“Most people just call me the plant guy when I walk in,” said Mac Rogers, an interior horticulturalist with Cityscapes, which designs and maintains interior landscapes.
“It’s kind of eerie going into spaces when there’s nobody around,” he said. “Now, there’s a lot less air movement. People have turned heat down. Plants are dormant and growing slower.”
Catch up: Here’s what else is happening.
Microsoft said Friday that it would permanently close its retail store locations, after having shuttered them since March because of the coronavirus outbreak. The company did not directly tie the closures to the outbreak, saying only that “our product portfolio has evolved to largely digital offerings.” The company will take a $450 million charge related to the closing. According to its website, Microsoft has 83 stores worldwide, including 72 stores in the United States, where it showcases its laptops and other hardware.
Reporting was contributed by Matt Phillips, Tiffany Hsu, Mark Miller, Alex Traub, Livia Albeck-Ripka, Mohammed Hadi, The Associated Press, Clifford Krauss, Katie Robertson, Carlos Tejada and Niraj Chokshi.