Stock sell-off resumes, highlighting fear that Washington’s response won’t be enough.
Stocks on Wall Street tumbled on Wednesday, as volatile trading throughout global markets signaled continued investor concern about how governments would deal with the coronavirus fallout.
The S&P 500 fell more than 4 percent on Wednesday, undoing most of the previous day’s surge. On Tuesday, the benchmark index had posted its best single-day performance in more than a year, rising almost 5 percent.
Benchmark American crude dropped 2 percent, to less than $34 a barrel, after the Saudi Arabian state oil company said for the second time this week that it would expand production capacity.
Yields on Treasury bonds fell again, with those on the 10-year note nosing below 0.7 percent in early trading. The decline reflects a combination of dour expectations for global economic growth, as well as high levels of nervousness from investors, who have bought U.S. bonds as a haven during the market tumult in March. When bond prices rise, yields fall.
Investors are vacillating between the threat that the coronavirus poses to the global economy and the hopes that governments will unveil a series of measures to help businesses. On Wednesday, World Health Organization officials officially designated the spread of the coronavirus as a global pandemic.
President Trump has signaled he would consider ways to stimulate the economy. Options include cutting payroll taxes and extending the American tax filing deadline past April 15. But so far, the White House has not announced any specific measures, and most experts say a payroll tax cut is not an effective way to combat the problems facing the economy.
“What we’ve seen over the past 36 hours is hope for something from a fiscal policy perspective and then this sense that this it’s not going to come, or it’s not thought out, so I think that’s the disappointment right now,” said William Delwiche, an investment strategist at Baird, an investment banking and money-management firm based in Milwaukee.
In Europe, major indexes fell, giving up early gains that had come after the Bank of England said it would cut interest rates to help British businesses. Shares in Asia also fell.
Mnuchin says a tax delay for “virtually all” Americans would pump $200 billion into the economy.
Treasury Secretary Steven Mnuchin told lawmakers on Wednesday that he would recommend to the president that the Internal Revenue Service allow a delay of tax payments without penalty or interest that would apply to “virtually all Americans other than the superrich.”
He noted that all individuals are allowed to request tax payment extensions online but that this would be a special provision meant to help small and medium-size businesses and “hardworking individuals.”
Mr. Mnuchin said that this would not apply to large corporations or the wealthiest Americans, but did not elaborate on what the threshold will be. “That will have the impact of putting over $200 billion back into the economy and that will create a very big stimulus,” he said.
He also said the White House was particularly concerned about how the virus was affecting the cruise ship, airline and hotel industries and that the administration was considering providing loan guarantees, like those that were offered after the Sept. 11 attacks to keep those industries afloat.
These stocks are the hardest hit.
The worst-performing stocks on Wednesday cut across industries, reflecting how broad the concern among investors was.
With oil falling again, energy stocks like Apache Corporation and Occidental Petroleum led the slide in the S&P 500. Apache was down about 17 percent, while Occidental fell 14 percent.
Boeing tumbled 13 percent, the biggest drop among components of the Dow Jones industrial average. A person with knowledge of the matter said the carrier planned to drawdown a $13.8 billion credit line to shore up its cash position in the face of uncertainty over the coronavirus outbreak. Boeing also reported that it had lost more orders for its grounded 737 Max.
Boeing’s top executives said in a letter to employees that the company was facing a “global economic disruption” caused by the outbreak. As a result, the company is limiting travel and discretionary spending, restricting overtime and freezing hiring until further notice, they said.
And companies dependent on travel and tourism continued to fall. Norwegian Cruise Line fell 17 percent and MGM Resorts fell 13 percent. Earlier Wednesday, the Global Business Travel Association said the coronavirus epidemic stood to wipe out more than $820 billion in spending on global business travel.
Democrats have a plan, and it doesn’t include a payroll tax cut.
Senate Democrats prepared to release a new fiscal response plan to the coronavirus outbreak, featuring paid sick leave for affected workers as well as breaks on federal student loans and mortgages, block grants to help communities and assistance to help public transit systems stay in operation.
House Democrats were preparing to release a wide-ranging plan of their own on Wednesday, including proposals for government paid sick leave and increased safety net spending on programs like food stamps and unemployment insurance. House Speaker Nancy Pelosi was aiming for a possible House vote on Thursday before lawmakers are scheduled to leave Washington for a weeklong recess.
Notably absent from either the Senate or House proposals is a payroll tax cut, which President Trump has pushed for.
The coronavirus is hitting consumer confidence.
The spread of the coronavirus, along with the tumult it is stirring in financial markets, has begun to drag on consumer confidence, according to a nationwide poll conducted by the online research firm SurveyMonkey for The New York Times.
The poll found the largest single-month drop in confidence since President Trump took office, driven by rising concern about the nation’s economic outlook. The decline was evident among Republicans, Democrats and independent voters alike.
Still, more people (44 percent) expected good or somewhat good business conditions in the coming year than those who expected bad or somewhat bad conditions (23 percent).
The polling was begun last week and completed on Sunday, so it does not reflect any further impact from this week’s market upheaval.
High consumer confidence has buoyed Mr. Trump’s presidency, and Americans have given him better marks for his handling of the economy than for his overall job performance. But Mr. Trump’s performance rating in the survey slipped this month, with 51 percent of respondents registering disapproval — including 40 percent who disapproved strongly of how he was handling the job.
Two words explain why the world’s central banks are taking action.
For years, experts warned that corporations around the world were developing a dangerous addiction to debt. Interest rates were so low that borrowing money was essentially free, enticing companies to avail themselves with abandon. Something bad was bound to happen eventually, leaving borrowers struggling to make their debt payments. Lenders would grow agitated, tightening credit for everyone. The world would confront a fresh crisis.
Something bad is now happening.
The economic prescription for coronavirus? “Go fast”
The Federal Reserve’s surprise rate cut last week did not reassure financial markets. Nor, it appears, did the Bank of England’s similar move this morning. So what could policymakers do to prevent a recession?
If the financial crisis is any guide, the answer is to act aggressively, and to act now.
So far, at least, the Trump administration does not seem to be heeding that advice. Mr. Trump is weighing a temporary elimination of the payroll tax, a measure that would have a big dollar figure (it could cost nearly $700 billion) but would provide only a trickle of extra cash into workers’ bank accounts.
A more effective move, according to many economists, would be to provide lump-sum payments to every American.
Christine Lagarde warns of 2008-like crisis if officials don’t act decisively.
Christine Lagarde, the European Central Bank’s new president, told European Union leaders on a conference call late Tuesday that the situation could become as bad as 2008 if governments do not act decisively enough, according to a person familiar with her remarks.
But there’s one big problem. The E.C.B. has been in nearly nonstop crisis mode since 2008, and it has few cards left to play. The bank’s main interest rate, the one it charges commercial banks for short-term loans, is already zero. It can only tinker with a secondary rate that is already negative.
On Wednesday, the Bank of England made an emergency cut to its key borrowing rate by half a percentage point, saying that it was intended “to support business and consumer confidence at a difficult time.”
Here’s what else is happening.
Trump administration officials met on Wednesday with Facebook, Google, Amazon, Twitter and others about how they could help the efforts to stem the spread of the coronavirus. Officials told the companies that the government would soon launch a research database and asked them to develop tools that could help researchers delve into the data.
The Federal Aviation Administration said on Wednesday that it would allow airlines to run fewer flights without running the risk of losing their coveted slots at some busy airports.
President Trump plans to meet with top officials from the nation’s banks at the White House Wednesday afternoon to discuss the coronavirus outbreak that has roiled markets and threatened economic growth.
In what appears to be more jousting with Russia, Saudi Aramco said Wednesday that it had been directed by the country’s ministry of energy to increase its oil output capacity to 13 million barrels a day from the current 12 million barrels a day.
Fiat Chrysler warned Wednesday that it might have to close some of its factories in Italy because of the coronavirus epidemic. Any closures would be for health reasons, not because of problems getting parts or raw materials needed to keep assembly lines running, a Fiat spokesman said.
ABC’s “Live With Kelly and Ryan” was the latest talk show to temporarily ban its studio audience. “It feels like we’re auditioning,” said the co-host Ryan Seacrest on Wednesday morning to a mostly empty studio, which is in Manhattan.
Reporting was contributed by Alan Rappeport, Ben Casselman, Alexandra Stevenson, Ben Dooley, Niraj Chokshi, Kevin Granville, Carlos Tejada, Jim Tankersley, Matthew Goldstein, Jack Ewing, John Koblin and Marc Tracy.