Stocks Waver as Consumer Survey Shows Continued Concern: Live Updates

Investors are betting a handful of companies will emerge from the crisis even stronger.

Long before the coronavirus pandemic, a shift was underway in the stock market: A few tech giants were responsible for a large chunk of the gains on Wall Street.

The outbreak, which dovetails perfectly with the kinds of remote-working and shop-from-home products offered by companies like Microsoft, Apple and Amazon has supercharged this shift, Matt Phillips reports.

The top five companies in the S&P 500 — Microsoft, Apple, Amazon, Alphabet and Facebook — now account for 20 percent of the index, according to data from Goldman Sachs. And all five are up more than 20 percent since the market hit its low on March 23, which means gains in just this handful of stocks has been a big factor in the market’s rebound from that low.

The difference in investor expectations for large and small companies is stark: The Nasdaq 100, an index of the largest technology companies — which also happen to be the largest companies in the country — is up 1.2 percent this year. The Russell 2000 index, which tracks small public companies, is down 23 percent.

“Investors are telling you that the bigger, stronger, more stable balance sheet company is going to win versus its smaller peer,” said Stuart Kaiser, head of equity derivatives research at UBS.

As the coronavirus outbreak ebbs in China, the country’s companies and officials have made big strides in restarting its economy. Its factories, brought to a standstill when the coronavirus outbreak swept through the country in January, are humming again, and even the air pollution is coming back.

But empowering consumers could be the tougher task, writes Keith Bradsher of The New York Times. Many lost their jobs or had their pay slashed. Still others were shaken by weeks of idleness and home confinement, a time when many had to depend on their savings to eat. For a generation of young Chinese people known for their American-style shopping sprees, saving and thrift hold a sudden new appeal.

China’s consumer confidence problem offers potential lessons for the United States and Europe, which are only beginning to plan their recoveries. Even if companies reopen, the real challenge may lie in enabling or persuading stricken and traumatized consumers to start spending money again.

A number of economists have called on China to do more to help consumers. The United States and other countries have unleashed major spending programs that include direct payments to households, but China has largely refrained so far, in part because of debt concerns.

Simon Property Group, the biggest operator of shopping malls in the United States, plans to reopen 49 properties between Friday and Monday, according to documents that were shared with retailers on this week and obtained by The New York Times. The states with the most Simon properties were Texas, Indiana and Georgia, though it also listed shopping centers in Missouri, Oklahoma and Arkansas.

The malls will be open from 11 a.m. to 7 p.m. Monday through Saturday and from 12 p.m. to 6 p.m. on Sunday, to allow “enhanced sanitizing and disinfecting,” the company said in the documents, which were first reported by CNBC. Simon Property outlined safety protocols for employees, contractors and vendors, including required temperature screenings before work, protective face masks and social distancing.

Some of the guidelines suggest a somewhat dystopian mall experience. Security officers and employees will “actively remind and encourage shoppers” to maintain a proper distance from other shoppers and employees and to refrain from shopping in groups. Food court seating will be altered and spaced to encourage social distancing. Play areas and drinking fountains will be closed while in restrooms, every other sink and urinal will be taped off.

Simon Property said that it would make regular announcements on its audio system “to remind shoppers of their part in maintaining a safe environment for everyone.” The company also said that it would use “traffic measurement technologies” to make sure that property occupancy does not exceed “a targeted level of 1 person per 50 square feet of space.” New signs and floor decals will aim to improve traffic flow at entrances and other common areas.

The company said that it would also provide masks, free temperature testing and sanitizing wipe packets to shoppers upon request. Simon Property did not return requests for comment.

An early rally on Wall Street gave way to selling, in a reversal that began soon after new data on consumer confidence in the United States showed that views on current business and job market conditions in April fell by the most on record.

Investors had been encouraged by the possible easing of restrictions in major economies around the world. In the United States, at least a dozen states are moving to lift business shutdowns and several European countries have loosened rules. Hope for an economic rebound has helped to fuel a nearly 30 percent rally in the S&P 500 over the past month.

But the sudden shift in sentiment on Tuesday — the S&P 500 initially rose by more than 1 percent before it gave up most of those gains — shows how fragile this optimism is.

The survey that seemed to spook investors on Tuesday, conducted by the Conference Board, did show that expectations for the near-term improved, which the organization attributed to “the possibility that stay-at-home restrictions will loosen soon.”

But with millions of people suddenly out of work in the United States, the country’s most substantial economic engine — consumer spending — has taken a hit.

Investors will have more data to consider soon. Companies like Ford Motor and Starbucks are scheduled to report financial results for the first quarter of the year on Tuesday. The earnings reports may further cloud the hopes for a healthy global recovery, but they may also give companies a chance to outline the steps they are taking to reopen.

Oil prices were also volatile on Tuesday. The price of West Texas Intermediate, the type of oil used to determine industry prices in the United States, fell nearly 20 percent before rebounding.

At just over $12 a barrel, the price is still at a level virtually unheard-of before the double whammy of the coronavirus outbreak and a price war between Saudi Arabia and Russia. Brent crude, the international benchmark, wavered between gains and losses and was about $22 a barrel.

Trump announced he would sign an order to address ‘liability problems’ with the food industry.

President Trump said on Tuesday that he planned to sign an executive order later in the day to address what he called the “liability problems” in the food supply without elaborating.

“There’s plenty of supply,” he said. “It’s distribution and we will probably have that today solved. It was a very unique circumstance because of liability.”

His comment to reporters came several hours after he reposted a Twitter message from a news site that covers the food industry saying that “there is no shortage of meat destined for the grocery store shelf” but slower restocking because of “supply chain disruptions.”

The president mentioned the pending order during a meeting in the Oval Office with Gov. Ron DeSantis of Florida, whose state is one of the most watched parts of the country as governors begin reopening businesses and public life because of its high concentrations of vulnerable older residents and its early resistance to closing public beaches.

Treasury Secretary Steven Mnuchin said on Tuesday that companies that received more than $2 million in small-business loans would be audited by the Small Business Administration and could face “criminal liability” if it turned out that they were not eligible to apply for the relief money.

Mr. Mnuchin’s comments come as backlash grows over big, publicly traded companies receiving millions of dollars in loans while many small businesses have been unable to gain access to the $660 billion pot of bailout money. At least 116 public companies have taken loans of more than $2 million and have not returned those funds.

“We want to make sure this money is getting to where it should be,” Mr. Mnuchin said on CNBC.

The second round of the small-business loan program started on Monday and it was marred by technical glitches and frustration among banks and borrowers. Last week, the Treasury Department and the S.B.A. clarified the certification requirements for borrowers to dissuade big companies that have access to other forms of capital from applying. Several companies returned their loan money in recent days amid the backlash.

Mr. Mnuchin said on Tuesday that he thought it was “outrageous” that the Los Angeles Lakers basketball franchise had taken about $4.6 million from the program. The team said on Monday that it repaid the loan.

“The purpose of this program was not social welfare for big business,” Mr. Mnuchin said.

The Treasury secretary noted that banks had been encouraged to process the loans as quickly as possible and that the onus was on the borrowers to honestly assess whether they were eligible for the loans, which are meant for businesses with fewer than 500 workers.

“It’s really the fault of the borrowers,” Mr. Mnuchin said. “It’s the borrowers who have criminal liability if they made this certification and it’s not true.”

A slew of companies are reporting their quarterly earnings this week, offering a glimpse of how the coronavirus pandemic affected business in the first three months of the year and a prediction for what that damage will look like going forward.

  • PepsiCo reported strong earnings in the first quarter as consumers stocked up snacks and beverages for the Super Bowl and, later, the coronavirus quarantines. PepsiCo said net sales in the quarter rose 7.7 percent to $13.88 billion with its snack, beverages and food divisions all seeing robust sales. Other companies have suspended share buybacks or dividends to shareholders because of the effect of the pandemic, but PepsiCo said it intended to repurchase $2 billion in shares and provide $5.5 billion in dividends.

  • Southwest Airlines lost $94 million in the first quarter of the year, a relatively light blow in an industry ravaged by the coronavirus pandemic. Still, the company ended the quarter with $4.2 billion in revenue, nearly 18 percent less than the same period last year. Southwest has more than $9 billion in cash and short-term investments, slightly more than Delta and well above the approximately $6 billion that United has in reserve.

  • BP said Tuesday that profit for the first quarter fell by two-thirds compared with a year earlier. The London-based oil giant said that “underlying replacement cost profit,” the metric most closely followed by analysts, was $791 million for the quarter, down from $2.36 billion a year earlier. The company reported a $4.4 billion loss for the period, mostly because of a $3.7 billion inventory loss on holdings of oil.

  • United Parcel Service reported $18 billion in revenue in the first quarter of the year, 5 percent more than in the same period last year. Still, earnings per share missed forecasts and the company warned that disrupted supply chains had taken a toll on its customers and withdrew its forecasts for the rest of the year.

  • Sales and profits increased at 3M in the first three months of the year as demand surged for face masks and other personal protective equipment. Global sales grew 21 percent in its health care division, while consumer sales went up 4.6 percent, the company said Tuesday. 3M said it would begin reporting sales every month, even as it withdrew full-year financial forecasts it had made in late January.

  • Harley-Davidson on Tuesday reported a steep drop in retail sales of motorcycles in the first quarter. In the United States, sales were up 6.6 percent until mid-March, and then ended the quarter 15.5 percent below the same period last year, the company said.

Citigroup will donate small-business aid profits to charity.

Banks are not helping the government pass out money to small businesses for free. Each time they make a forgivable loan under the new Paycheck Protection Program, they earn a fee that varies according to the size of the loan. On Tuesday, Citigroup announced it would donate those proceeds to charity.

The money will go to a group of nonprofit development organizations that make loans and grants to people in low-income neighborhoods, entities known as community development financial institutions. These organizations are often the only source of seed money for minority-owned small businesses in poor neighborhoods where for-profit banks don’t do much business.

It’s not clear how much Citigroup has earned by making loans for the small-business aid program. Brandee McHale, the head of the bank’s charitable giving operation, said in a blog post about the plan that the bank would announce the total amount donated after the Paycheck Protection Program ends.

Catch up: Here’s what else is happening.

  • YouTube said on Tuesday that it was introducing fact-check information on some video searches in the United States to combat misinformation about the coronavirus, a problem so rampant online that the World Health Organization has said it was confronting an “infodemic.” The video service will show users searching for some debunked claims a box, or panel, that directs them to accurate information.

  • IAG, the European airline group, said Tuesday it was notifying unions that it was preparing to lay off as many as 12,000 British Airways employees, or more than a quarter of the airline’s work force, because it will take “several years” for passenger demand to return to levels before the coronavirus pandemic. British Airways has already furloughed more than 22,000 workers through Britain’s job subsidy program.

  • Amazon may have violated federal worker safety laws and New York State’s whistle-blower protections when it fired an employee from its Staten Island warehouse who protested the company’s response to the coronavirus outbreak, according to a letter the office of the New York attorney general, Letitia James, sent the company last week.

  • JetBlue announced on Monday that it would require all passengers to wear a face covering during travel starting May 4. The mask must cover the nose and mouth throughout the entire journey, from check-in to deplaning. JetBlue did not say whether it would provide masks to its passengers.

Reporting was contributed by Emily Flitter, Karen Weise, David Gelles, Matt Phillips, Keith Bradsher, Davey Alba, Alan Rappeport, Stanley Reed, Gregory Schmidt, Su-Hyun Lee, Brett Sokol, Michael Corkery, Sapna Maheshwari, Niraj Chokshi, Shira Ovide, Stacy Cowley, Carlos Tejada, Kevin Granville and Daniel Victor.

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