Panic is seizing investors worldwide as an oil price war set off by the coronavirus is sending global markets into a tailspin and pointing to an another ugly day for U.S. stocks.
This continued turmoil is sending President Trump into attack mode against familiar targets: He began his morning with a tweet accusing the media and Democrats “doing everything… to inflame the CoronaVirus situation, far beyond what the facts would warrant.” Bad news for the president: economic indicators suggest the fallout will get significantly worse before it gets better.
U.S. stock futures pointed to a nearly 5 percent drop at the opening. The full extent of the turmoil is difficult to predict in part because the overnight selloff was steep enough to trigger automatic trading limits.
The carnage abroad could offer a preview. Per my colleagues Adam Taylor and Teo Armus, “London’s FTSE 100 fell more than 8 percent initially to its lowest in three years; Japan’s Nikkei index slumped more than 5 percent and Australia’s benchmark shed more than 7 percent.”
Investors are digesting weekend developments indicating governments are taking more drastic action to combat the spread of the disease, including a lockdown in Italy that will quarantine some 17 million people. And a burgeoning oil price war between Russia and Saudi Arabia has sent the price of the commodity into a free fall. “The price of West Texas International crude, largely used in the U.S., fell from about $41 to $32 a barrel Sunday night, a low not seen in four years,” my colleague Will Englund reports.
Cheaper energy provides a potential lift to spooked consumers and struggling airlines but spells bad news for the energy sector, a key domestic industry, and the stock market. “The U.S. -- once a winner from low oil -- is now an exporter rather than a buyer. And the hit to economic demand from the virus dulls the impact of any stimulus that cheap oil might provide,” Bloomberg News's Verity Ratcliffe, Akshat Rathi, and Enda Curran write. “Oil shocks -- on the way up -- used to be feared for their impact on inflation. Now in a world where central bankers desperately pursue price growth, the opposite dynamic is at play.”
In a sign investors believe the worst is yet to come, they continue to flock to the relative safety of U.S. government debt, briefly pushing the yield on 10-year Treasury bills below .5 percent, a record low. In another historic first, the entire yield curve fell below 1 percent. Traders now expect the Federal Reserve to act again next week, piling more interest rate cuts onto the emergency half-point cut it announced last week.
Otherwise, not much out of Washington is calming anxieties among investors and business leaders. Trump appears more focused on public perceptions of his administration’s response that the response itself:
We have a perfectly coordinated and fine tuned plan at the White House for our attack on CoronaVirus. We moved VERY early to close borders to certain areas, which was a Godsend. V.P. is doing a great job. The Fake News Media is doing everything possible to make us look bad. Sad!— Donald J. Trump (@realDonaldTrump) March 8, 2020
He acknowledged in tweeting this that he wasn’t sure what it means:
Who knows what this means, but it sounds good to me! https://t.co/rQVA4ER0PV— Donald J. Trump (@realDonaldTrump) March 8, 2020
Trump insisted 11 days ago that the U.S. caseload “within a couple of days is going to be down to close to zero.” Now, with more than 550 confirmed infected across 34 states, both current and former Trump administration health officials are taking a graver tone.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said in an appearance on NBC’s “Meet the Press” that the latest assessment of the situation in the United States is “not encouraging because we're seeing community spread.”
And Scott Gottlieb, the former Food and Drug Administration head, said on CBS’s “Face the Nation” the country is entering a crucible. “The next two weeks are really going to change the complexion in this country,” said Gottlieb, who led the FDA between May 2017 and April 2019. “We'll get through this, but it's going to be a hard period. We're looking at two months probably of difficulty.”
But the measures that public health officials are suggesting to limit the scope of the outbreak could also result in an economic hit. Gottlieb said states and cities are going to need to “shut down” their economies to limit spread: “Close businesses, close large gatherings, close theaters, cancel events.” And he predicted “a very big federal bailout package” for individuals, businesses and local governments.
Economists increasingly agree. Former top Obama administration economist Jason Furman, for example, is calling for a $350 billion stimulus package.
Yet top Trump officials remain at odds over how to respond. While Fed chair Jerome Powell has the central bank on high alert over the economic fallout of the coronavirus, economic policymakers in the administration have been slower to register the threat.
“Not only do the Fed and the White House appear to disagree on the severity of the potential economic hit, they’re at odds about the power of interest rate cuts to stem the panic,” my colleagues Heather Long and Jeff Stein report.
“Trump and [White House economic adviser Larry] Kudlow have emphasized the Fed’s power to cut interest rates as the primary economic response to the crisis. But although they have moved to cut rates, Powell and others at the Fed have suggested that they have only a limited role to play, with some Fed officials arguing that spending or tax stimulus from Congress and the president would have a greater effect,” they write. “The White House hasn’t, however, shown consistent support for such stimulus, with Trump and his top advisers showing daylight among themselves.”
The ideas under consideration: a payroll tax cut, a tax cut for investment income, more targeted help for specific industries, and rolling back tariffs on Chinese imports.
Coronavirus response in the United States:
- White House worries over Trump's safety. “A growing sense of concern and uncertainty about the reach of the novel coronavirus has begun to take hold in the White House, after an attendee at a recent political conference where President Trump spoke tested positive for covid-19, the disease caused by the virus,” The Post's Toluse Olorunnipa, Josh Dawsey and Juliet Eilperin report. “There is growing tension among Trump administration officials, who now see the rapidly spreading outbreak as a black swan event that could consume the president’s fourth year in office, even as Trump remains reluctant to see much cause for concern."
- Federal agencies prepare. “Federal agencies are preparing to deploy emergency plans to maintain essential services—from directing air traffic to delivering mail and making Social Security payments—as the novel coronavirus epidemic widened and the nation’s capital diagnosed its first case,” per the WSJ's Kate Davidson. “Some agencies are canceling nonessential travel. All are planning for widespread absences and making provisions for working remotely. Some workers, like food-safety inspectors, won’t have that option; the challenge will be keeping them safe and healthy.”
- Big pharma hopes it can get in Trump's good graces: “While meeting with Trump, pharmaceutical executives sought to hammer the point that they are well prepared for the crisis, because of the money they’ve already invested in R&D, said two people familiar with the industry’s strategy. That message came with the implicit defense of their business model and pushback against regulation,” CNBC's Lauren Hirsch reports.
- Uber, DoorDash eyeing fund for infected drivers: “Uber Technologies Inc., Lyft Inc., DoorDash Inc., Postmates Inc. and Instacart Inc. are involved in the discussions and are weighing how to band together for potential payments, according to people familiar with the matter,” the Wall Street Journal's Preetika Rana reports. “Some drivers say compensation that is only available after a diagnosis or quarantine may not be enough. As independent contractors, most don’t receive paid time off, which would allow them to stop working if they were to experience any symptoms.”
- Amazon won't dock warehouse workers: “The company informed employees … that it will not count any unpaid time off should they need to take it during the month of March,” CNBC's Annie Palmer reports. “Amazon made the change to ensure there are no repercussions for needing to stay home due to illness, the company told CNBC.” (Amazon CEO Jeff Bezos owns The Washington Post.)
- Japan downgrades economic outlook: “Japan’s economic performance at the end of last year was worse that initially thought, the country’s government said …as it issued new economic data sure to increase concerns about the future of the country’s economy,” the New York Times reports. The country was already bracing for a hit from covid-19, but now it “could mean the economy will continue to shrink in the first quarter of 2020, pushing the country into recession, generally defined as two straight quarterly contractions.”
- Mass confusion in Italy: “Italy launched a complicated and urgent plan to restrict the movement of roughly 16 million people, a measure that unleashed confusion about how it could be enforced and whether it would be enough to slow the spread of the coronavirus,” my colleagues Chico Harlan and Stefano Pitrelli report from Rome.
— Carson says minimum wage is too low: “Housing and Urban Development Secretary Ben Carson told [Axios] that the $7.25-an-hour federal minimum wage would be ‘very difficult’ to live on and that in his view it should be higher,” Jonathan Swan reports.
“ 'I don't have any problem with raising the minimum wage,' Carson said. ‘My personal opinion is that it should be indexed.’ ”
— FAA poised to delay 737 Max's return even more: “U.S. air-safety regulators are poised to order electrical wires relocated inside Boeing Co. BA 737 MAX jets in the latest complication and potential delay for their return to commercial service, according to people briefed on the deliberations,” the Wall Street Journal's Andy Pasztor and Andrew Tangel report.
“The preliminary decision, which hasn’t been reported before, covers all of the nearly 800 MAX airliners produced so far. The decision could be affected by further internal discussions and additional data the plane maker may submit to the regulator. But in the past few weeks, these people said, Federal Aviation Administration managers and engineers have concluded that the potentially hazardous layout violates wiring-safety standards intended to prevent dangerous short-circuits.”
— Boeing's new CEO regrets slamming predecessor: “Boeing Co. Chief Executive Officer Dave Calhoun said he regretted berating his predecessor in an interview with the New York Times this week, backtracking almost immediately from a harsh critique that rattled employees of the embattled planemaker,” Bloomberg News's Julie Johnsson and Anders Melin report.
“The about-face suggests an attempt at damage control just two months after Calhoun took over as CEO following a decade of service on Boeing’s board. The new boss’s first extensive print interview as CEO left many inside Boeing dumbfounded and angry, said current and former employees. The article spread like wildfire both inside the company and among the wide network of Boeing alumni, and a stunned “wow” was a common response, one of the people said. A veteran of General Electric Co. and Blackstone Group Inc., Calhoun, 62, is one of only a handful of outsiders to ascend to the top job at Boeing.”
— Tech firms seek to head off facial recognition bans: “Amid rising calls for regulation, technology companies are pushing for laws that would restrict use of facial-recognition systems — and head off the more severe prohibitions some cities and states are weighing,” the WSJ's Ryan Tracy reports.
“Microsoft Corp., Amazon.com Inc. and others stand to profit as government agencies and businesses expand use of the technology, which can require large investments in machine-learning and cloud-computing capacity … San Francisco and six other cities have passed laws to block government use of facial recognition. Lawmakers in New York, Massachusetts, Hawaii and Michigan are considering some form of ban or strict limitation.” (Amazon CEO Jeff Bezos owns The Washington Post.)
- Casey's General is among the notable companies to report its earnings, per Kiplinger.
- CFPB Director Kathleen L. Kraninger testifies in front of the Senate Banking Committee for the agency's semiannual report to Congress
- Wells Fargo CEO Charles W. Scharf testifies in front of the House Financial Services Committee
- Dick's Sportings Goods is among the notable companies to report its earnings
- The Financial Services committee holds a second day of Wells Fargo related hearings, this featuring testimony from Elizabeth Duke, the bank's chair
- The Financial Services Subcommittee on National Security, International Development, and Monetary Policy holds a hearing about how financial systems “facilitate the illicit trade in people, animals, drugs and weapons”
- Dollar General, Gap, Tupperware, Slack Technologies, Broadcom and Adobe are among the notable companies to report their earnings
- The University of Michigan releases a preliminary report on consumer sentiment for March