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Wall Street Shakes Off Unemployment Report as Aid Nears: Live Updates Wall Street Shakes Off Unemployment Report as Aid Nears: Live Updates
(32 minutes later)
Stocks rose for the third straight day on Thursday, as investors looked past a startling rise in applications for unemployment benefits and bid up the shares of companies set to receive support from the $2 trillion coronavirus aid bill recently approved by the Senate.Stocks rose for the third straight day on Thursday, as investors looked past a startling rise in applications for unemployment benefits and bid up the shares of companies set to receive support from the $2 trillion coronavirus aid bill recently approved by the Senate.
The S&P 500 was up more than 4 percent, while the Dow Jones industrial average rose even further, lifted by a 15-percent surge in Boeing’s share price.The S&P 500 was up more than 4 percent, while the Dow Jones industrial average rose even further, lifted by a 15-percent surge in Boeing’s share price.
Stocks have been rallying since Tuesday, when the S&P 500 had its best day since October 2008 with a 9.4 percent climb, as investors anticipated Washington’s support for a number of industries.Stocks have been rallying since Tuesday, when the S&P 500 had its best day since October 2008 with a 9.4 percent climb, as investors anticipated Washington’s support for a number of industries.
The bill that passed the Senate on Wednesday night specifically sets aside $17 billion for “businesses critical to maintaining national security” — language that’s seen as intended at least partly for Boeing, the aircraft manufacturer and key Pentagon contractor. Other companies that were hit hard in the early days of the coronavirus outbreak continued to soar. Cruise lines Carnival Corporation and Norwegian Cruise Line, were up 20 percent and 15 percent. Airlines also rallied. The bill that passed the Senate on Wednesday night specifically sets aside $17 billion for “businesses critical to maintaining national security” — language that’s seen as intended at least partly for Boeing, the aircraft manufacturer and key Pentagon contractor. Other companies that were hit hard in the early days of the coronavirus outbreak continued to soar. The cruise line Carnival Corporation was up 20 percent, and Norwegian Cruise Line rose 15 percent. Airlines also rallied.
The gains on Thursday also spread to Europe, with major benchmarks there reversing their losses to end the day sharply higher. The FTSE 100 in Britain climbed more than 2 percent.The gains on Thursday also spread to Europe, with major benchmarks there reversing their losses to end the day sharply higher. The FTSE 100 in Britain climbed more than 2 percent.
Since bottoming on March 23, the S&P 500 has soared by nearly 16 percent, amid growing hope that the large stimulus package would offer support to an economy crippled by the outbreak and efforts to curtail the spread of the virus.Since bottoming on March 23, the S&P 500 has soared by nearly 16 percent, amid growing hope that the large stimulus package would offer support to an economy crippled by the outbreak and efforts to curtail the spread of the virus.
But the economic crisis is perhaps the most daunting since World War II. On Thursday, a government report showed an unprecedented rise in weekly applications for unemployment benefits, which jumped from 282,000 to nearly 3.3 million in a week. But the economic crisis is perhaps the most daunting since World War II. On Thursday, a government report showed a record rise in weekly applications for unemployment benefits, which jumped to nearly 3.3 million from 282,000 in a week.
That report, however, had been widely anticipated by investors.That report, however, had been widely anticipated by investors.
Still, there were signals that investors remain nervous about the economy. Prices for longer-term U.S. Treasury bonds were up, sending yields lower and suggesting investors were looking for safe places to park their money, and oil prices fell. Still, there were signals that investors remain nervous about the economy. Prices for longer-term Treasury bonds were up, sending yields lower and suggesting investors were looking for safe places to park their money, and oil prices fell.
Early Thursday, Jerome H. Powell, the Federal Reserve chair, said during a rare television interview that the United States “may well” be in a recession already, but that it should get the coronavirus under control before getting back to work.Early Thursday, Jerome H. Powell, the Federal Reserve chair, said during a rare television interview that the United States “may well” be in a recession already, but that it should get the coronavirus under control before getting back to work.
“The first order of business will be to get the spread of the virus under control, and then to resume economic activity,” Mr. Powell said, speaking on NBC’s “Today” show. “The virus is going to dictate the timetable here.”“The first order of business will be to get the spread of the virus under control, and then to resume economic activity,” Mr. Powell said, speaking on NBC’s “Today” show. “The virus is going to dictate the timetable here.”
Mr. Powell’s comments contrast those of President Trump, who has suggested that he wants many Americans to get back to work as soon as Easter, less than three weeks away, and that efforts to slow the spread of the virus by shuttering large parts of the economy should not be worse than the disease itself.Mr. Powell’s comments contrast those of President Trump, who has suggested that he wants many Americans to get back to work as soon as Easter, less than three weeks away, and that efforts to slow the spread of the virus by shuttering large parts of the economy should not be worse than the disease itself.
THE AID PLANTHE AID PLAN
Lawmakers put some restrictions on the compensation of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms about bailouts of banks and other companies during the 2008 financial crisis. But the limits will not do away with multimillion-dollar paydays for corporate bosses.Lawmakers put some restrictions on the compensation of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms about bailouts of banks and other companies during the 2008 financial crisis. But the limits will not do away with multimillion-dollar paydays for corporate bosses.
Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million, or $3 million plus half of $17 million per year.Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million, or $3 million plus half of $17 million per year.
Companies receiving assistance will not be allowed to increase the compensation of executives who earned between $425,000 and $3 million in 2019 until a year after government support ends. Companies receiving assistance will not be allowed to increase the compensation of executives who earned $425,000 to $3 million in 2019 until a year after government support ends.
The package includes more than $370 billion in much-needed help for small businesses. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration.The package includes more than $370 billion in much-needed help for small businesses. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration.
It could take at least two weeks after the bill is signed into law for the money to begin flowing.It could take at least two weeks after the bill is signed into law for the money to begin flowing.
Small businesses would not have to repay portions of loans that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department.Small businesses would not have to repay portions of loans that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department.
The role of banks in the rescue bill is to provide much-needed capital to businesses and taxpayers. “This is all about preserving the incentives for banks to lend,” said Mike Mayo, who researches large banks for Wells Fargo.The role of banks in the rescue bill is to provide much-needed capital to businesses and taxpayers. “This is all about preserving the incentives for banks to lend,” said Mike Mayo, who researches large banks for Wells Fargo.
To ensure access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged banks to use the so-called “discount window,” its lending operation for big banks, and at least eight major financial institutions already have. To ensure access to cash is not hampered by a raft of new client demands or market developments, the Fed has encouraged banks to use the so-called discount window, its lending operation for big banks, and at least eight major financial institutions already have.
Banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses, or CECL. Banks can opt out of observing new federal accounting standards for estimating future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses.
The bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.The bill revives a crisis-era program to guarantee all bank debt, a move that once again puts taxpayers on the hook if a bank runs into trouble.
Though the coronavirus outbreak has walloped much of the energy industry by driving down oil prices and making it harder to finance new renewable energy projects, the Senate bill does not help much.Though the coronavirus outbreak has walloped much of the energy industry by driving down oil prices and making it harder to finance new renewable energy projects, the Senate bill does not help much.
The bill did not include $3 billion the Trump administration had requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil somewhat, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks.The bill did not include $3 billion the Trump administration had requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil somewhat, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks.
Solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.Solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.
Nearly 3.3 million people filed for unemployment benefits last week, sending a collective shudder throughout the economy that is unlike anything Americans have experienced. The nearly 3.3 million new jobless claims filed last week dwarfed any previous weekly figure. Until now, the record occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that point, the United States was more than a year into a recession, and the unemployment rate had passed 10 percent.
The numbers, released by the Labor Department on Thursday, are some of the first hard data on the economic toll of the coronavirus pandemic, which has shut down whole sectors of American life faster than government statistics can keep track. In that case, the recession was caused not by a health crisis, but by a decision by political leaders and the Federal Reserve that raging inflation had to be shoved down, despite the cost to workers. The central bank sharply reduced the money supply while benchmark interest rates neared an astounding 20 percent.
Just three weeks ago, barely 200,000 people applied for jobless benefits, a historically low number. In the half-century that the government has tracked applications, the most applications filed in a single week had been fewer than 700,000. Industries that relied heavily on borrowing like construction and manufacturing were hit hard. The jobless rate in construction reached 22 percent; among autoworkers, it was 24 percent.
“In the whole history of initial claims, there’s never been anything remotely close to that,” said Ben Herzon, executive director of IHS Markit, a business data and analytics firm. Today, the circumstances are markedly different. Despite uneven rewards, the economy had achieved the longest expansion in history. The jobless rate had been below 4 percent for more than a year. A preoccupation of the Fed was raising the persistently low inflation rate toward 2 percent. Interest rates are near zero.
As staggering as the figures are, they almost certainly understate the problem. Some part-time and low-wage workers don’t qualify for unemployment benefits. Nor do gig workers, independent contractors and the self-employed, although the emergency aid package being considered by Congress would broaden eligibility. Others who do qualify may not know it. And the sudden rush of layoffs led to jammed phone lines and overwhelmed computer servers at unemployment offices across the country, leaving many people unable to file claims. Efforts to slow the spread of the coronavirus meant the service industry bore the initial brunt of layoffs — workers at restaurants, bars, hotels, nail salons, gyms and more.
The worst could be yet to come. Mr. Herzon said he expected a similarly large number next Thursday, when the Labor Department releases its report on new claims filed this week. “This will probably be the world’s first recession that starts in the service sector,” said Gabriel Mathy, an assistant professor at American University.
That won’t be where it finishes, though. The shutdown is rippling throughout all sectors. GE Aviation announced it was laying off 10 percent of its workers, about 2,600 people. An auto industry trade group, the Alliance for Automotive Innovation, said 42 of 44 assembly plants were closed at the end of last week or planning to close because of the coronavirus.
And more layoffs are to come.
THE AID PLANTHE AID PLAN
Boeing appeared poised to capitalize on the stimulus bill. The struggling aerospace giant, which had lobbied for government aid, signaled its approval of the bill on Wednesday night, though neither the federal government nor the company detailed exactly what it would receive.
THE DETAILS Though Boeing was not named in the text of the bill, the inclusion of $17 billion in loans “for businesses critical to maintaining national security” is intended at least in part for Boeing. Besides being the largest manufacturing exporter in the United States and one of two major commercial airplane makers, Boeing is a major defense and space contractor, making systems for the military and NASA.
Boeing may also be eligible for funds from the larger $454 billion pool of loans. What’s not clear is exactly how much Boeing might receive, or on what terms. On Tuesday, Boeing’s chief executive, David Calhoun, suggested he was not interested in the government taking an equity stake in the company.
THE CONTEXT Boeing is reeling. The yearlong grounding of the 737 Max after two crashes that killed a total of 346 people has sapped the company of critical revenue, badly damaged its brand and led to the ouster of Mr. Calhoun’s predecessor. The coronavirus has stretched the company to the breaking point. A number of its employees in Washington State have fallen ill, and Boeing said this week that it was shutting down its main factories in the Seattle area.
THE AID PLAN
How much money will individuals get — and how will it be distributed? How are unemployment benefits changing? Are gig workers included?How much money will individuals get — and how will it be distributed? How are unemployment benefits changing? Are gig workers included?
The Senate unanimously passed a $2 trillion economic stimulus plan on Wednesday that will offer assistance to tens of millions of American households affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes the self-employed, loans for small businesses and nonprofits, temporary changes to withdrawal rules from retirement accounts, and more. The Senate unanimously passed a $2 trillion economic stimulus plan on Wednesday that will offer assistance to tens of millions of American households affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes the self-employed, loans for small businesses and nonprofit organizations, temporary changes to withdrawal rules from retirement accounts, and more.
The House of Representatives was expected to quickly take up the bill and pass it, sending it to President Trump for his signature.The House of Representatives was expected to quickly take up the bill and pass it, sending it to President Trump for his signature.
We collected answers to common questions about what’s in the bill.We collected answers to common questions about what’s in the bill.
Fiat Chrysler said on Thursday that it was extending the closure of its North American factories to at least April 14, from March 30. The company said its plans were contingent on orders by local and state governments. Toyota Motor said Thursday its North American plants would stay shut until April 17, resuming production on April 20.Fiat Chrysler said on Thursday that it was extending the closure of its North American factories to at least April 14, from March 30. The company said its plans were contingent on orders by local and state governments. Toyota Motor said Thursday its North American plants would stay shut until April 17, resuming production on April 20.
Cargo volumes at the Port of Los Angeles, one of the largest in the United States, are about 80 percent below normal, Gene Seroka, its executive director, said. The effects of the coronavirus pandemic coupled with what an “ill-advised” trade war with China will suppress cargo traffic throughout the year, he added.
The Energy Department said Thursday that it was withdrawing a proposal to purchase 30,000 barrels of oil for the Strategic Petroleum Reserve because the $2 trillion stimulus package working its way through Congress did not include the Trump administration’s request for money to buy the crude.The Energy Department said Thursday that it was withdrawing a proposal to purchase 30,000 barrels of oil for the Strategic Petroleum Reserve because the $2 trillion stimulus package working its way through Congress did not include the Trump administration’s request for money to buy the crude.
The Transportation Security Administration screened just 240,000 travelers on Wednesday, about 11 percent of its typical volume. Alaska Airlines plans to cut its schedule for April and May by 70 percent, and Hawaiian Airlines said it would eliminate most long-haul flights next month, focusing instead on all-cargo flights.The Transportation Security Administration screened just 240,000 travelers on Wednesday, about 11 percent of its typical volume. Alaska Airlines plans to cut its schedule for April and May by 70 percent, and Hawaiian Airlines said it would eliminate most long-haul flights next month, focusing instead on all-cargo flights.
The chief executive of NBCUniversal, Jeff Shell, said that he had been infected by the coronavirus. “Although the virus has been tough to cope with, I have managed to work remotely in LA and am improving every day,” he wrote in a companywide email Thursday morning. In his note, Mr. Shell added that the company had committed over $150 million to continue paying staff across its various units, including the theme parks, film studios and television departments. The chief executive of NBCUniversal, Jeff Shell, said that he had been infected by the coronavirus. “Although the virus has been tough to cope with, I have managed to work remotely in LA and am improving every day,” he wrote in a companywide email Thursday morning. In his note, Mr. Shell added that the company had committed more than $150 million to continue paying staff across its various units, including the theme parks, film studios and television departments.
Ford Motor said it was aiming to restart production at some North American plants in early to mid-April. It said it planned to resume one assembly shift in Hermosillo, Mexico, on April 6, and aimed to resume some production by April 14 at several plants in Michigan, Ohio, Kentucky and Missouri “while the company introduces additional safety measures to protect returning workers.”Ford Motor said it was aiming to restart production at some North American plants in early to mid-April. It said it planned to resume one assembly shift in Hermosillo, Mexico, on April 6, and aimed to resume some production by April 14 at several plants in Michigan, Ohio, Kentucky and Missouri “while the company introduces additional safety measures to protect returning workers.”
Reporting was contributed by Niraj Chokshi, Vindu Goel, Kate Kelly, Peter Eavis, Neil Irwin, Tara Siegel Bernard, Ron Lieber, Clifford Krauss, Ivan Penn, Matt Phillips, Peter S. Goodman, Patricia Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy. Reporting was contributed by 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, Patricia Cohen, Edmund Lee, Tiffany Hsu, Kevin McKenna, Ben Casselman, Geneva Abdul, Amie Tsang, Carlos Tejada, Alexandra Stevenson, Su-Hyun Lee and Heather Murphy.