Wall Street is set for another strong start.
U.S. stock futures rose on Tuesday and global markets extended Wall Street’s rally from the day before amid continued signs that the coronavirus outbreak may be peaking in a number of hard-hit places.
Futures for the S&P 500 were up nearly 3 percent, suggesting the index would open higher for a second day.
The global economy still faces daunting challenges before it can get back on track, and many companies continue to announce furloughs of employees and sustained shutdown of operations in the wake of an uncertain path forward. For example, the homebuilder D.R. Horton said Tuesday that it had withdrawn its previous financial forecasts for 2020.
But the rally was fueled in part by signs of progress in the fight against the pandemic in the United States and Europe. In New York, the epicenter of the global outbreak, Gov. Andrew M. Cuomo offered some glimmers of hope that the city was beginning to make progress in controlling the crisis. China reported its first day since January with no deaths.
Major European markets were trading 2 to 4 percent higher after Asian markets picked up steam later in their trading day.
There were signs of improved investor confidence in other markets. U.S. Treasury bond prices fell, signaling sharper appetite for riskier investments. Oil prices rose too on hopes that Russia and Saudi Arabia could reach a price war truce.
On Monday, investor optimism drove U.S. stocks sharply higher. The S&P 500 rose 7 percent, its biggest gain since March 24, when it climbed more than 9 percent.
Still, there was a strong defensive tilt to trading. The utilities sector — typically an area dominated by risk-averse investors — was one of the best performing in the S&P 500, with a gain of almost 8 percent.
That suggests investors still see plenty of reason to be cautious.
Cruise ship companies have virtually no revenue. They have become symbols of deadly contagion. And despite assurances from President Trump, they were left out of the $2 trillion stimulus package Congress passed last month.
The Carnival Corporation, which serves nearly 11.5 million travelers a year, or roughly 50 percent of the global cruise market, is at the center of the crisis. Over the last couple of months, the company has had highly publicized outbreaks on several of its ships, including the Diamond Princess and the Zaandam, which has been trying to unload sick passengers in Florida.
Since the beginning of the year, the company’s share price has plummeted more than 80 percent, though it rose to $10.21 a share on Monday after Saudi Arabia’s state investment fund said it had acquired an 8 percent stake in the company. And last week, Carnival, which has already drawn on bank credit lines, began an attempt to raise $6 billion by selling stock, bonds and other securities. It was selling some of those bonds with a suggested 12.5 percent interest payment to investors, a strikingly high figure.
Carnival’s chief executive, Arnold Donald, said in an interview that the sale would generate enough cash for the company to survive without revenue for the rest of the year and into 2021.
“If you run out of cash, you lose the company, and we can’t live with that,” Mr. Donald said. “So we want to make sure we’re prepared for an extreme case.”
The two major cruise lines besides Carnival — Royal Caribbean and Norwegian Cruises — are also looking for cash. Norwegian has tapped an existing $1.55 billion credit line. In March, Royal Caribbean secured a $2.2 billion loan, using its ships as collateral, an unusual step for a cruise line.
Industry executives and analysts expect the renewable energy business to continue growing in 2020 and next year even as the coronavirus outbreak has delayed some projects and as oil, gas and coal companies struggle financially or seek bankruptcy protection.
In many parts of the world, including California and Texas, wind turbines and solar panels now produce electricity more cheaply than natural gas and coal. That has made them attractive to electric utilities and investors alike. It also helps that while oil prices have been more than halved since the pandemic forced most state governments to order people to stay home, natural gas and coal prices have not dropped nearly as much.
Even the decline in electricity use in recent weeks as businesses halted operations could help renewables, according to analysts at Raymond James & Associates. That’s because utilities, as revenue suffers, will try to get more electricity from wind and solar farms, which cost little to operate, and less from power plants fueled by fossil fuels.
“Renewables are on a growth trajectory today that I think isn’t going to be set back long term,” said Dan Reicher, the founding executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford University and a former assistant energy secretary in the Clinton administration. “This will be a bump in the road.”
Will the pandemic lead to a deal apocalypse?
Plenty of deals agreed before the outbreak are now at risk, writes Steven Davidoff Solomon of the U.C. Berkeley School of Law in today’s DealBook newsletter. It’s more common, he says, for one side of an agreed deal — the buyer — to try the pull the plug during downturns.
Last week, when the auto supplier Delphi Technologies maxed out its corporate credit line, BorgWarner said it was grounds to terminate its $3 billion deal signed in January but not yet closed. Other acquirers could look to trigger the “material adverse change” clauses as the value of targets plunges during market turmoil. Regulators may also give buyers an out: privacy concerns loom over Google-Fitbit while antitrust issues threaten Mellanox-Nvidia and Cypress-Infineon. If the economic logic of these and other deals doesn’t survive the crisis, buyers may not be sorry to see them undone.
Everyone wants to know when we are going to be able to leave our homes and reopen the United States. That’s the wrong way to frame it.
The better question is: “How will we know when to reopen the country?”
Any date that is currently being thrown around is just a guess. It’s pulled out of the air.
To this point, Americans have been reacting, often too late, and rarely with data. Since the virus appears to be everywhere, we have to shut everything down. That’s unlikely to be the way we’ll exit, though.
Some cities or states will recover sooner than others. It’s helpful to have criteria by which cities or states could determine they’re ready.
A recent report by Scott Gottlieb, Caitlin Rivers, Mark B. McClellan, Lauren Silvis and Crystal Watson staked out some goal posts that involve the ability of hospitals to treat patients; the ability to test everyone who has symptoms; monitoring of confirmed cases; and a sustained reduction in cases.
Catch up: Here’s what else is happening.
Exxon Mobil said Tuesday it would reduce its 2020 capital spending by 30 percent, to $23 billion from $33 billion, as the company responds to the steep drop in oil prices. The oil giant said it would also lower cash operating expenses by 15 percent.
WhatsApp, the Facebook-owned messaging app, announced a new limit on message forwarding on Tuesday in an attempt to slow the dissemination of misinformation. Users will be allowed to send a frequently-forwarded message to only one chat at a time, instead of five.
Eric Artz, the chief executive of the outdoor apparel retailer REI, said on Monday that the company would furlough the majority of its employees for 90 days beginning April 15, but it will continue to provide health care and other benefits. Mr. Artz will forgo his salary for six months and senior executives will take a 20 percent pay cut.
Samsung Electronics said it expected that its operating profit for the first quarter rose slightly, to $5.2 billion, compared with $5.1 billion a year earlier, with the coronavirus boosting the sale of chips for data centers and laptops used by workers forced to stay home. But the pandemic was expected to eat into demand for smartphones, televisions and other consumer electronics over the coming year.
Reporting was contributed by David Yaffe-Bellany, Ivan Penn, Aaron E. Carroll, Geneva Abdul, Carlos Tejada, Daniel Victor, Jason Karaian, Kevin Granville and Austin Ramzy.