Wall Street shakes off unemployment claims.
Boeing rose almost 90 percent this week. American Airlines jumped by almost 50 percent. Carnival Corporation has also risen almost as much.
Wall Street was in rally mode when investors offered shares in companies to receive support from Washington’s $ 2 trillion coronavirus relief law.
With the advance of the package by the Senate, profits continued on Thursday. The S&P 500 rose 6.2 percent, even after the government reported an astonishing rise in unemployment claims for workers.
Boeing increased nearly 14 percent on Thursday because the package specifically earmarks $ 17 billion for “companies that are critical to national security” – a language that is at least partially applicable to the aircraft manufacturer and major Pentagon Contractor was intended.
Other companies that were badly hit in the early days of the coronavirus outbreak continued to grow. Americans and Delta Airlines rose by almost 2 percent. The carnival grew by around 14 percent.
Thursday’s gains also spread to Europe, with key benchmarks reversing their losses to end the day significantly higher. The FTSE 100 in the UK rose more than 2 percent.
The three-day rally lifted the S&P 500 by more than 17 percent, according to Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. This is the best run since 1933. Most of these gains came on Tuesday, when stocks rose 9.4 percent, in the growing hope that the big stimulus package would be an economy crippled by the outbreak and efforts to curb the spread of the virus would support.
But the economic crisis is perhaps the most daunting one since World War II. A government report on Thursday showed a record rise in weekly unemployment claims jumped from 282,000 in a week to almost 3.3 million.
So far, the record was set in the fall of 1982, when 695,000 Americans applied for benefits within a week. At that point, the United States had been in recession for more than a year and the unemployment rate had exceeded 10 percent.
The numbers released by the Department of Labor on Thursday are some of the first hard data on the economic burden of the coronavirus pandemic that has brought entire sectors of American life to a standstill.
G.M. ceases production indefinitely and announces layoffs and wage cuts.
General Motors said on Thursday that it would indefinitely shut down production at its North American factories, lay off 6,500 employees and cut executive salaries, signaling that the automaker believes coronavirus will seriously impact its business.
“We are actively monitoring the situation and the possible impact of the crisis on consumer demand,” said a G.M. Spokesman David Barnas said. “If we can safely resume production, we will.”
G.M. and other automakers have closed their North American plants in recent days to prevent the virus from spreading. Most had hoped to resume production next week, but have now scaled back those plans.
Ford Motor plans to resume production at several plants in the United States on April 14 and one in Mexico on April 6. Fiat Chrysler said its plants would remain closed until April 14, “depending on the various government contracts that remain in place and the readiness of each plant to return to production. Toyota Motor said its North American plants would remain closed at least until April 17.
The United Automobile Workers union has urged G.M., Ford and Fiat Chrysler to keep their factories closed.
“The only guideline in a boardroom should be to ask management:” Would I send my family – my son or daughter – to the plant and be 100 percent sure that they are safe? “Said Rory Gamble, the union’s president, in a statement.
To reduce costs, G.M. said it would stop developing some new models. Executives will cut wages by 5 percent or 10 percent and postpone 20 percent of their salaries to pay them later. The 6,500 employees who go on vacation receive 75 percent of their normal wages.
Ford has taken similar steps and postponed the salaries of its 300 best executives.
THE HELP PLAN
Here’s what you need to know about the Washington spending package:
Managers could still get millions in compensation.
Legislators restrict the remuneration of managers whose companies receive state support under the law to address one of the criticisms of bailouts of banks and other companies during the 2008 financial crisis. But the limits won’t lift the multi-million dollar payday for company bosses.
Executives who earned more than $ 3 million in 2019 could receive $ 3 million plus half of all amounts over $ 3 million. As a result, a director who earned $ 20 million in 2019 would receive compensation of $ 11.5 million or $ 3 million plus half of $ 17 million a year.
Supported companies are only allowed to increase the remuneration of executives who earned $ 425,000 in 2019 to $ 3 million one year after the end of government support.
Small businesses get help paying workers when they can wait.
The package includes more than $ 370 billion of much-needed help for small businesses. The law allows banks to grant loans directly to companies, and these loans are secured by the Small Business Administration.
It may take at least two weeks for the money to flow after the bill is signed.
Small businesses would not have to pay back part of the loans that were spent on employee payments, a mortgage, rent, or utilities. The banks that lend the money would be reimbursed by the Ministry of Finance.
Banks are not the focus, but they still get help.
The role of banks in the bailout bill is to provide companies and taxpayers with much-needed capital. “This is about incentivizing banks to lend,” said Mike Mayo, who examines large banks for Wells Fargo.
To ensure that access to cash is not hampered by a number of new customer needs or market developments, the Fed has encouraged banks to use the so-called discount window, lending to major banks, and at least eight major financial institutions.
Banks can refuse to comply with new federal accounting standards for estimating future credit losses during the statutory period. This rule is called the current expected credit loss.
The law revives a crisis program to guarantee all bank debts. This brings taxpayers back on the hook when a bank gets into trouble.
The last time when unemployment claims set a record, the economic shock was not sudden.
That almost 3.3 million new unemployment claims filed last week eclipsed every previous weekly number. So far, the record was set in the fall of 1982, when 695,000 Americans applied for benefits within a week. At that point, the United States had been in recession for more than a year and the unemployment rate had exceeded 10 percent.
In this case, the recession was not caused by a health crisis, but by a decision of the political leaders and the Federal Reserve that raging inflation had to be cut despite the cost to workers. The central bank cut the money supply sharply, while key interest rates approached an astonishing 20 percent.
Sectors such as construction and manufacturing, which relied heavily on credit, were severely affected. The unemployment rate in the construction industry reached 22 percent; It was 24 percent for auto workers.
Today the circumstances are very different. Despite unequal rewards, the economy had seen the longest expansion in history. The unemployment rate has been below 4 percent for more than a year. The Fed was concerned to raise the persistently low inflation rate to 2 percent. Interest rates are close to zero.
Efforts to slow the spread of the coronavirus caused the service industry to bear the initial brunt of layoffs – workers in restaurants, bars, hotels, nail salons, gyms, and more.
Hollywood is working hard to get help from Washington.
With theater chains across the country closed and the box office declared dead, the National Association of Theater Owners knew that the only way their companies could survive was to receive a federal aid package.
Therefore, the trade association carried out an aggressive lobby campaign, in which two law firms and a PR agency were employed. The group also coordinated an aggressive letter campaign and phone call, in which theater owners of all sizes contacted congress members.
But maybe the piece of resistance was the opinion article that filmmaker Christopher Nolan wrote for the Washington Post and reminded Congress that the film business wasn’t just about Hollywood and celebrities. Nolan called the cinema experience “an important part of social life and wrote:” The film business is about everyone: the people who work on the concession stands, operate the equipment, take tickets, book films, sell advertisements and clean bathrooms in the local theaters . “
“We plastered it all over Congress,” said the theater group’s executive director, John Fithian. “Many of these members are fans of films and cinemas. Hearing from the directors was a moving thing for us. “
THE HELP PLAN
An F.A.Q. on the stimulus calculation and your paperback.
How much money will individuals receive – and how will it be distributed? How are Unemployment benefit changes? Are gig workers included?
The Senate unanimously passed a $ 2 trillion stimulus plan on Wednesday to support tens of millions of coronavirus-affected American households. Its components include payments to individuals, expanded unemployment insurance for the self-employed, loans to small businesses and nonprofits, temporary changes to the rules for withdrawing pension accounts, and more.
The House of Representatives was expected to quickly take up and forward the law and send it to President Trump for signature.
We have collected answers to frequently asked questions about the invoices.
Catching up: The following is still happening today.
The growing interest of people who are protected at home in video games has led to a shortage of Nintendo Switch consoles among retailers such as Best Buy and Target. Nintendo of America Acknowledged the lack of availability and gave players hope in a statement: “Nintendo Switch hardware is sold out at various retail locations in the United States, but more systems are in the pipeline. We apologize for the inconvenience. “
Some banks are expanding the list of things their employees receive in exchange for coping with the coronavirus crisis to include job security. James Gorman, the managing director of Morgan Stanley, told employees in a memo that the bank will not use layoffs in 2020, according to a copy of the New York Times. Citigroup takes a similar, albeit smaller, step. A spokeswoman said the bank has suspended planned layoffs for the time being.
Hilton Worldwide Holdings said on Thursday that a large proportion of the company’s employees had taken 90 days off or reduced working hours as of April 4. Vacation workers will maintain the health benefits. Employees who are not on leave will be cut by 20 percent for the duration of the crisis. The company will suspend dividends and buy back shares. Hilton’s chief executive officer, Christopher Nassetta, will be foregoing his salary for the rest of the year.
AT & T. announced that it would pay a 20 percent bonus to all union workers, including those who work locally or from home. The company did not announce how many workers should be covered, but had negotiating agreements with approximately 100,000 employees as of March.
The freight volume in the port of Los Angeles, one of the largest in the United States, is about 80 percent below normal, according to its managing director, Gene Seroka. The effects of the corona virus pandemic, combined with a “poorly advised” trade war with China, would suppress freight traffic all year round, he added.
The coverage was provided by Marc Tracy, Neal Boudette, David Gelles, Niraj Chokshi, Vindu Goel, Kate Kelly, Peter Eavis, Neil Irwin, Tara Siegel Bernard, Ron Lieber, Clifford Krauss, Ivan Penn, Matt Phillips, Peter S. Goodman and Patricia composed by Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy.