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Wall Street enters the second half of 2020 on uncertain footing.
Stocks inched higher on Wednesday as investors started a new quarter on a cautious note, balancing tentative signs of economic resilience and a steady climb in coronavirus cases in the United States.
The S&P 500 rose slightly, while European markets were modestly lower, following a mixed day in Asia.
Markets on Tuesday completed a topsy-turvy first half of 2020. Over the course of six months, stocks on Wall Street experienced their biggest quarter-to-quarter swing in more than 80 years, propelled by the global pandemic and economic shutdowns, followed by extra big helpings of fiscal stimulus by central banks.
In the three months that just ended, the S&P 500 rose 20 percent, the best calendar quarter for the broad market index since 1998.
What’s ahead is anyone’s call. In the United States, the world’s largest economy, more than 48,000 coronavirus cases were announced on Tuesday, the most of any day of the pandemic. Dr. Anthony S. Fauci, the United States’ top infectious disease expert, said that virus’s march across states in the South and the West “puts the entire country at risk.”
Lawmakers continue to look for ways to respond to the crisis, and the U.S. Senate on Tuesday agreed to extend the application period for a relief program for small businesses, granting five additional weeks for the remaining money left in the program to be spent. The program still has about $130 billion available.
Germany on Wednesday reported a small increase in unemployment, but the overall figure — 6.2 percent in May — suggested that efforts to keep people on payrolls through government support schemes, a strategy used in several European countries, may be dampening the chance of widespread joblessness.
There’s so much uncertainty about the coronavirus crisis that roughly 40 percent of the S&P 500, about 200 companies, have withdrawn their customary forecasts about how their businesses will perform in the months ahead, according to data from S&P Capital IQ.
The companies’ silence has unnerved analysts, who have already axed their expectations for profit growth substantially. They’re now expecting that second-quarter profits will fall more than 40 percent, according to numbers compiled by the data provider FactSet.
That’s an ugly forecast, but investors face a crucial question: Is it ugly enough?
“The numbers are sort of all over the place,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said of analysts’ predictions. — Matt Phillips
United Airlines adds scores of flights to August schedule.
United Airlines said on Wednesday that it plans to operate about three times as many flights in August as it did in June, increasing its traffic to the equivalent of about 40 percent of its August 2019 schedule.
Even as much of the West and South see a surge in new coronavirus cases, the airline said that it was responding to growing demand for domestic and international flights. In particular, United said it would increase service to vacation destinations such as Aspen, Colo., Bozeman, Mon., and Jackson Hole, Wyo. United will also restart service to Tahiti and add flights to Hawaii, the Caribbean and Mexico.
United’s move comes as some policymakers have criticized airlines for allowing their planes to fill up with vacationers and other travelers at a time when new coronavirus cases are regularly reaching new daily highs. The director of the Centers for Disease Control and Prevention, Dr. Robert Redfield, expressed “substantial disappointment” in American Airlines at a Senate hearing on Tuesday for allowing its flights to be fully booked.
The airlines have said they are taking extensive precautions to limit the spread of virus to passengers and employees.
Still, some of United’s plans appear to be at odds with the approach government officials are taking. For example, United said it would add flights in August to Brussels, Frankfurt, London, Munich, Paris and Zurich. Yet, the European Union this week said it would bar travelers from the United States, along with a number of other countries that have not brought the pandemic under control, when it allows international air travel to resume on Wednesday.
All told, United’s August schedule represents about 48 percent of the domestic flight schedule the airline operated during the same month last year and 25 percent of last year’s international flights. The company’s July schedule was just 30 percent of last year’s domestic schedule and 16 percent of the international schedule. — Niraj Chokshi
U.S. Senate votes to extend program to help small businesses.
The Senate on Tuesday evening approved extending the application period for a relief program for small businesses, granting five additional weeks for the remaining money left in the program to be used.
Less than four hours before the Paycheck Protection Program was scheduled to close with $130 billion still available for loans to small businesses seeking to maintain their payrolls, the Senate approved extending the application period and allowing small businesses to receive aid until Aug. 8.
The legislation now heads to the House, and will require President Trump’s signature for the program to continue. “The resources are there,” said Senator Benjamin L. Cardin, Democrat of Maryland and one of the architects of the program. “The need is there. We just need to change the date.”
The unexpected approval of the extension, which required agreement from all 100 senators, came as lawmakers began to debate the contours of another coronavirus relief package. With multiple parts of the $2.2 trillion stimulus law set to expire at the end of July and new outbreaks forcing many states to slow efforts to reopen their economies, lawmakers widely recognize that another measure will be necessary. — Emily Cochrane
Deal makers are getting cold feet.
The pandemic’s effect on boardroom confidence put mergers and acquisitions in a deep freeze in the first half of the year, notes today’s DealBook newsletter.
At the halfway point of the year, nearly $1.2 trillion worth of deals have been announced, down 42 percent from the same time a year ago. It was the slowest first half for M.&A. since 2013, according to Refinitiv.
The drop in activity was even more noticeable for larger transactions: The overall value of deals worth more than $5 billion was down 53 percent year-on-year. That’s despite some notable transactions being announced in the first half, including Aon’s $30 billion acquisition of Willis Towers Watson and Just Eat’s $7.3 billion takeover of Grubhub.
If anything, deal makers are just as busy trying to undo acquisitions agreed on before the pandemic. Among them are the mall operator Simon Property’s effort to end its takeover of rival Taubman Centers and the private equity group Sycamore Partners successfully backing out of a deal to buy control of Victoria’s Secret. — Michael J. de la Merced
German unemployment reaches 6.2 percent.
Germany’s federal employment office reported Wednesday that an additional 40,000 workers lost their jobs in May from the month before, for an overall unemployment rate of 6.2 percent.
The relatively low figure — the U.S. unemployment rate is 13.3 percent — despite the economic lockdown to curb the pandemic reflects the widely-used program of “Kurzarbeit,” a federal scheme that temporarily helps pay workers’ wages to prevent layoffs or reduced hours. Since the shutdown in March, more than 12 million German workers have received wages through the program.
In response to the pandemic, Chancellor Angela Merkel’s government has spent more than 130 billion euros in stimulus money. One effort starts Wednesday: a reduction on a value-added sales tax of up to 3 percent, designed to bolster consumer spending.
By law, VAT must be added by merchants and service providers in the advertised price, meaning that the new VAT rules have lowered sticker prices on everything from food to new cars. When she announced the program last month, Ms. Merkel insisted that the program would not be extended past six months. — Christopher F. Schuetze
Airbus will cut 10 percent of its work force, the largest downsizing in its history.
The coronavirus pandemic continued to wreak havoc on global aviation as the aerospace giant Airbus announced Tuesday it would cut 15,000 jobs across its global work force, the largest downsizing in the history of the company.
Citing a 40 percent slump in commercial aircraft business activity and an “unprecedented crisis” facing the airline industry, the company said it would slash around 10 percent of its 135,000 employees worldwide, with layoffs hitting plants in Britain, France, Germany and Spain.
Airbus’s chief executive, Guillaume Faury, had been preparing employees for hard times in a series of recent memos warning it would be necessary to adapt to a “lasting decline” in the demand for airliners. The company said it doesn’t expect air travel to return to pre-pandemic levels before 2023 at the earliest and potentially not until 2025. — Liz Alderman
Catch up: Here’s what else is happening.
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The Mexican airline Group Aeromexico, which has been hurt by a sharp drop in travel during the coronavirus pandemic, filed for bankruptcy protection on Wednesday in New York. Delta Air Lines owns about 51 percent of Aeromexico’s outstanding shares, according to the company’s bankruptcy filing. Aeromexico reported a loss of 2.5 billion pesos ($110 million) in the first quarter and its liabilities totaled $5.1 billion at the end of March, up from $4.2 billion at the end of December.
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FedEx on Tuesday reported a loss of $334 million in its fourth quarter, compared with a loss of $1.97 billion in the same period a year ago, as a surge in deliveries during the pandemic and lower fuel costs helped offset increased costs. The results were better than expected, and the delivery company’s shares climbed 9 percent in after-hours trading. The company did not provide guidance for its 2021 fiscal year, but “FedEx is well positioned to support and benefit from the reopening of the global economy,” said Frederick W. Smith, the company’s chairman and chief executive.
Reporting was contributed by Niraj Chokshi, Vikas Bajaj, Matt Phillips, Liz Alderman, Christopher F. Schuetze, Emily Cochrane, Michael J. de la Merced and Gregory Schmidt.
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July 01, 2020 at 09:13PM
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