Stock markets rally, with a focus on reopening.
Wall Street’s focus was on economic recovery Tuesday, and stocks rallied along with crude oil prices.
The S&P 500 rose more than 2 percent in early trading, with shares of companies most likely to benefit from the lifting of restrictions on travel and commerce faring well. Shares of Delta Air Lines, United Airlines and other big carriers rose, as did Marriott International.
Oil prices, which have been climbing all month, continued their rebound as the restarting of factories and resumption of travel has raised expectations that demand will rise. West Texas intermediate crude rose 3 percent, and shares of companies in the energy industry, like Chevron and Halliburton, were also higher.
It’s been a turbulent period for stocks, with the S&P 500 swinging from gains to losses and back each day last week, as expectations for an eventual recovery from the coronavirus pandemic have squared off against the reality that the damage is still severe and likely to continue for some time.
News of progress on vaccine development — albeit small scale and early stage — has been one factor fueling the gains. Tuesday was no exception, after the biotech company Novavax said on Monday that it was starting trials of its vaccine on humans, with preliminary results expected in July. It is one of a number of drugmakers racing to test promising vaccine programs.
The reopening of businesses has been another. One largely symbolic opening on Tuesday was that of the New York Stock Exchange’s trading floor. A small number of traders were returning to the floor on, wearing masks and following social-distancing rules, the exchange said.
Shares in Europe and Asia were also higher on Tuesday.
But any gains are susceptible to sudden change in sentiment, if the reopenings results in new outbreaks or fresh concerns about the longevity of economic slowdown emerge.
On Tuesday, investors shrugged off negative news like rising tensions between the United States and China and the combustible political situation in Hong Kong. Instead, they focused on Japanese leaders gradually lifting emergency measures there, while European leaders have also moved to ease travel restrictions.
The European Central Bank warns of financial aftershocks.
The European Central Bank warned Tuesday that the pandemic could create huge aftershocks in the financial system, destabilizing banks as well as highly indebted corporations and governments.
Banks have so far withstood the crisis, largely because regulators forced them to reduce their reliance on borrowed money following the financial crisis and recession in 2008, the central bank said in its annual survey of the health of the eurozone financial system.
But it’s too early to sound the all-clear, the report said. Eurozone banks are plagued by low profitability and the stock market values them at only one-third the book value of their assets. Lenders such as BBVA in Spain or Société Générale in France reported big losses for the first quarter of 2020 while others like Deutsche Bank were just barely profitable.
The central bank praised governments for quickly deploying tax cuts and other measures to help businesses and consumers survive loss of income. But the central bank also warned that the economic stimulus will leave governments with much higher debt that could be a major burden in the future.
The central bank also singled out industries such as airlines and automobile manufacturers as a risk. Many face downgrades in their creditworthiness, which in turn will make it difficult for them to roll over their debts. Some could go bankrupt as a result, the central bank said.
“The coronavirus pandemic has affected virtually all aspects of economic activity,” the central bank said.
Italy’s $180 billion fashion industry is known for its glamorous brands, but it is built on a vast and tightly woven network of designers, manufacturers, distributors and retailers, large and small, that help make up the backbone of one of Europe’s largest economies.
For these companies, and for this style of doing business, the future has never looked more uncertain.
Production of fashion collections have been either delayed or scrapped by large global fashion retailers and luxury brands. With the July couture shows in Paris canceled, and a cloud of uncertainty hanging over the fashion weeks in September, many specialist workshops remain in limbo.
Italy’s fashion manufacturing sector is expected to contract by up to 40 percent this year, said Claudia D’Arpizio, a partner at the consulting firm Bain & Company.
“The big brands are enduring tough times but generally have some liquidity and a strong consumer profile,” Ms. D’Arpizio said. “However, they all have networks of small suppliers scattered all over Italy. Those are the businesses more likely to disappear.”
The Department of Health and Human Services has disbursed $72 billion in grants since April to hospitals and other health care providers through a program that was part of the CARES Act economic stimulus package. The money was intended to prevent them from capsizing during the coronavirus pandemic.
So far, the riches are flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.
This spring, Providence Health System, one of the country’s largest and richest hospital chains, received at least $509 million in government funds, one of many wealthy beneficiaries of a bailout. A Providence spokeswoman said the grants helped make up for losses from the coronavirus.
Twenty large recipients, including Providence, have received a total of more than $5 billion in recent weeks, according to an analysis of federal data by Good Jobs First, a research group. Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond-rating firms S&P Global and Fitch.
By contrast, hospitals that serve low-income patients often have only enough cash on hand to finance a few weeks of their operations.
California is in ‘economic free fall’ after its early shutdown.
California was the first state to shut down to fight the spread of the virus and has avoided the staggeringly high infection and death rates in the Northeast. But the debilitating costs of that aggressive stance are mounting every day, write Tim Arango and Thomas Fuller.
California has an estimated unemployment rate above 20 percent, according to Gov. Gavin Newsom — far higher than the 14.7 percent national rate. In Los Angeles, with movie productions shut down, theme parks padlocked and hotels empty, things are even worse: The jobless rate has reached 24 percent, roughly equal to the peak unemployment of the Great Depression, in 1933.
“Economic free fall” is how Tom Steyer, the former presidential candidate, described it. He is leading the state’s economic recovery task force, a group of business leaders, labor activists, economists and former governors who have begun plotting a way out.
With a gross domestic product larger than 25 states combined, California’s pace of recovery has significant implications for the future of the United States. After 2008, California helped lead the nation in economic growth and job creation, powered by Silicon Valley, which remains relatively resilient.
But this time the pain is shared across a much broader area of the economy, including rotten strawberries in fields along the Pacific Coast, the empty wine-tasting rooms of Napa Valley and the deserted campuses of the nation’s largest public university system.
“I’d say this will be the most serious economic dislocation that America has faced,” said Jerry Brown, the governor of California until 2019, who left office with billions in the state’s rainy day fund. “The response should be a Rooseveltian intervention and effort to mobilize the economy the best way we can.”
Millions of adults have signed up for online classes in the last two months — a jolt that could signal a renaissance for big online learning networks that had struggled for years.
One network, Coursera, added 10 million new users from mid-March to mid-May, seven times the pace of new sign-ups in the previous year. Enrollments at edX and Udacity, two smaller education sites, have jumped by similar multiples.
“Crises lead to accelerations, and this is the best chance ever for online learning,” said Sebastian Thrun, a co-founder and chairman of Udacity.
Coursera, Udacity and edX sprang up nearly a decade ago as high-profile university experiments known as MOOCs, for massive open online courses. They were portrayed as tech-fueled insurgents destined to disrupt the antiquated ways of traditional higher education. But few people completed courses, grappling with the same challenges now facing students forced into distance learning because of the pandemic. Screen fatigue tends to set in, and attention strays.
The online ventures adapted through trial and error, gathering lessons that could provide a road map for school districts and universities pushed online. The instructional ingredients of success, the sites found, include short videos of six minutes or less, interspersed with interactive drills and tests; online forums where students share problems and suggestions; and online mentoring and tutoring.
The Transportation Department said late Friday that it would tentatively allow 15 airlines to stop flights to about 60 mostly small and midsize cities, though none of the destinations stand to lose service entirely.
The destinations are mostly in secondary markets where airlines have said there is little demand for flights or that could be served by other nearby airports.
American Airlines, for example, would be allowed to stop flying to an airport in Worcester, Mass., which is a little over an hour’s drive from Boston Logan International Airport. It would also be allowed to stop flying to Aspen and to Eagle, in Colorado.
Delta Air Lines would be able to stop service to Erie, Pa.; Flint, Mich.; Lincoln, Neb.; and Williston, N.D., among others. United Airlines would be able to stop flights to Fairbanks, Alaska; Kalamazoo, Mich.; Myrtle Beach, S.C.; and others.
The decision is rooted in the federal stimulus passed in late March, known as the CARES Act. Under that law, any airline that received federal assistance, including all of the major carriers, is required to maintain a minimum number of flights to locations that it had served before the pandemic erased virtually all demand for air travel. But the law also allowed the Transportation Department to grant exceptions, which it has done regularly for weeks.
On the afternoon of May 14, Joanne Patten sat down at her computer in her home in Houston and logged in to a Zoom call with her employer, WW International, the company formerly known as Weight Watchers.
She listened as her boss, reading from a script, said she and the other employees on the Zoom call were being fired, effective when the three-minute session ended. It was one of numerous Zoom calls that occurred simultaneously across the country, resulting in the firing of an undisclosed number of WW employees.
For employees of WW, the mass terminations were especially painful because in recent years the company, under its chief executive, Mindy Grossman, and its high-profile investor and board member Oprah Winfrey, has moved from focusing on weight loss to a more full-on embrace of the broader wellness movement. In 2018, the company changed its five-decade-old moniker from Weight Watchers to WW and introduced the slogan “Wellness That Works.”
“This is supposed to be a caring, wellness corporation,” said Ms. Patten, who said she would have preferred to be let go in a one-on-one conversation with her boss. “The way they did it, it was just heartless.”
Nick Hotchkin, the chief financial officer for WW, declined to say how many employees were fired through the Zoom calls; the company had more than 17,000 employees at the end of last year, most of them part-time workers.
For millions of college students, internships can be a steppingstone to full-time work, a vital source of income and even a graduation requirement.
Students who had locked down internships as early as September are now jobless. Others who had hoped to experience an office setting for the first time are instead looking for work at fast-food restaurants. Many low-income undergraduates, already saddled with student loans, are concerned that a jobless summer could put them at a disadvantage in future application cycles, making it harder to find full-time work after graduation.
“I feel like I had such a strong plan,” said Lydia Burns, whose internship at a nonprofit organization in Washington was canceled. “I knew what I was going to do — I had been working for it all of college. Now I don’t know what I’m going to do.”
Some companies are continuing to pay interns to work from home, sending corporate laptops in the mail and holding get-to-know-you sessions over Zoom. But students fear that remote internships will not afford the networking opportunities that can make spending a summer in an office so valuable, especially for interns who have few professional contacts.
Catch up: Here’s what else is happening.
Latam, the largest airline in Latin America, said on Tuesday it had filed for bankruptcy protection, the latest carrier to fall victim to the pandemic. The company, based in Santiago, Chile, said it had secured $900 million in financing from major shareholders, including the Cueto and Amaro families and Qatar Airlines, and that it would work with creditors to reduce its debt while it continues operating. Avianca, Colombia’s flagship airline and one of the world’s oldest carriers, filed for bankruptcy protection earlier this month.
Hertz, which started with a fleet of a dozen Ford Model T’s a century ago and became one of the world’s largest car rental companies, filed for bankruptcy protection late Friday after falling victim to its mountain of debt. Hertz said that it would use more than $1 billion in cash on hand to keep its business running while it proceeds with the bankruptcy process. The bankruptcy filing excludes operations in Australia, Europe and New Zealand as well as the company’s franchisee locations.
Reporting was contributed by Elizabeth Paton, Jack Ew aing, Jesse Drucker, Jessica Silver-Greenberg, Sarah Kliff, Tim Arango, Thomas Fuller, Niraj Chokshi, Mohammed Hadi, Julie Creswell, Neal E. Boudette, David Yaffe-Bellany and Kevin Granville.
— to www.nytimes.com