By The New York Times

(Suggestion by Petros Petrikkos)

Corporate earnings reports will be an important barometer of the economy.

The U.S. stock market has soared off its recent low as the federal government has stepped up efforts to shore up the economy and health data suggests that efforts to slow the spread of the coronavirus are working.

But investor optimism could be tested over the next three weeks as big companies report earnings for the first three months of the year and discuss the outlook for their businesses on conference calls with analysts. What corporate executives say could provide important insights about the economy.

Among those reporting earnings next week are the country’s six largest banks, as well as Johnson & Johnson, Bed Bath & Beyond and Schlumberger, which provides services to oil and gas companies.

The banks, which include JPMorgan Chase, Bank of America and Goldman Sachs, play a crucial economic role, but their importance is heightened now. Any sign that the banks are reducing lending significantly would suggest that the coronavirus shock is feeding on itself and could lead to a prolonged recession. In addition, the federal government is relying on banks to deliver much of its financial support to businesses. Senior executives on earnings calls are likely to discuss how such efforts are going.

Shares of pharmaceutical companies have done better than the stock market as a whole, in part because the pandemic has increased demand for their products. The stock of Abbott Laboratories, which has introduced a test for coronavirus, and which reports earnings on Thursday, is down 1 percent this year compared with a 14 percent decline in the S&P 500 index. Johnson & Johnson, which reports earnings on Tuesday, is down 3 percent.

Earnings will also be a chance to assess just how bad business is for retailers like Bed Bath & Beyond, which is scheduled to report earnings on Wednesday. That company’s shares have lost two thirds of their value this year.

Over all, analysts at Goldman Sachs forecast that earnings of companies in the S&P 500 will decline by 33 percent this year, but then surge by more than 50 percent in 2021.

The announcements have come every few days since early March, with airline after airline cutting ever more flights. Now, one is reversing course.

After slashing the majority of its trips domestically and abroad, United Airlines said it would add a few international routes to its schedule next month. The carrier plans to start daily service on May 4 on three routes: Chicago to London, Newark to Amsterdam and Washington to Frankfurt. It also plans to offer three flights a week between Washington and Buenos Aires starting on May 5.

In addition to those new routes, United will continue flying between locations in the United States and Frankfurt; London; São Paulo, Brazil; Sydney, Australia; Tel Aviv; and Tokyo. The airline will also continue running flights carrying only cargo and those intended to repatriate citizens stuck abroad.

The airline said it was introducing the routes to connect its hubs and key business markets in Europe and South America where it has seen some passenger demand.

Because of declining demand, United will eliminate planned seasonal summer service from Newark to Palermo, Italy; Prague; Reykjavik, Iceland; and Stockholm.

American airline companies have been locked in negotiations with Treasury Secretary Steven Mnuchin over the terms of getting government money.
Credit – Olivier Douliery/Agence France-Presse — Getty Images

The Treasury Department said on Friday evening that it would not require airlines that receive up to $100 million in bailout money to give the government equity stakes or other compensation.

The announcement comes as American airline companies have been locked in negotiations with Treasury Secretary Steven Mnuchin over the terms of taking government money. The $2 trillion economic stabilization package that Congress passed last month earmarked $25 billion in grants and another $25 billion in loans for the industry. Cargo carriers were also allocated $8 billion of grants and loans.

The support is intended to help the airlines continue paying their workers, but some lawmakers fear that onerous restrictions placed on the money by the Trump administration could prompt the companies to declare bankruptcy instead.

Mr. Mnuchin said that the Treasury had received 230 applications for payroll support and that the majority of those sought less than $10 million. Those seeking less than $100 million will receive the money soon after their applications are approved, the Treasury said.

“The payroll assistance program is critical to providing much-needed relief to Americans who work in the aviation industry,” Mr. Mnuchin said in a statement. “Small and medium-sized passenger aviation businesses are particularly vulnerable to the disruption from Covid‑19.”

He added: “This determination will provide significant support to workers and businesses across the country, while also appropriately compensating taxpayers.”

However, negotiations continue with the larger airlines. Mr. Mnuchin said that the 12 airlines seeking more than $100 million would need to provide “appropriate financial instruments to compensate taxpayers.”

Negotiations between the Trump administration and the larger airlines are continuing over the weekend and, according to a person briefed on the talks, the Treasury is pushing for the companies to agree to repay 30 percent of the money they receive over five years. Such a stipulation would effectively turn the grants into loans.

To manage some of its interventions in the bond markets, the Federal Reserve has turned to Wall Street’s biggest investors. Now, we’re learning what those firms will be paid for the effort.

On Friday, the Federal Reserve Bank of New York said Pacific Investment Management Company, or Pimco, will be paid about $8.5 million over the course of the first year to cover fixed costs and personnel as it handles the central bank’s emergency lending effort that targets short-term business debt, or commercial paper.

Pimco will also make a 0.01 percentage point asset management fee on the first $200 billion under management, or up to $20 million, and 0.0075 percentage point on the next $100 billion.

The Fed has said it will buy up some short-term business debt, called commercial paper, to help ensure that the market continues to function smoothly. That will allow businesses to get access to credit. After the first year of the program, Pimco will be paid $1 million for each quarter that it continues to run the program.

The central bank has extensive in-house expertise, but it looks for specialists to run its programs — Pimco managed a similar program in the 2008 financial crisis, for instance. The new commercial paper facility will be up and running on April 14, and is set to run through March 21, 2021.

Thousands of minority business owners are at risk of being shut out of the federal government’s $349 billion relief program for small businesses, known as the Paycheck Protection Program, because of limits set by lenders grappling with overwhelming demand.

These loans, which do not have to be repaid if the money is used for payroll, rent or mortgage expenses, could be a lifeline for struggling businesses — if they can get them.

For minority business owners, the hurdles could be much higher. That’s because minority-owned businesses often have weaker banking relationships than their white-owned counterparts — one legacy of the practice of redlining, or refusing to lend to people in communities of color. Research shows that black and Latino business owners are denied loans at higher rates.

Anticipating that minority business owners could struggle to tap federal aid, some lawmakers are proposing ways to earmark additional funds specifically for minority-owned businesses. And on Wednesday, a group of prominent black investors, including John W. Rogers Jr., the billionaire co-chief executive of Ariel Investments, a mutual fund manager, sent a letter to lawmakers expressing concern that the emergency loan program was already leaving black borrowers behind.

President Trump said Friday that he had offered to cut U.S. oil production to help advance an agreement between the Organization of the Petroleum Exporting Countries, Russia and other countries. But it was not clear what exactly he had promised and whether it would even work.

As the coronavirus pandemic has led to the shutdown of large swaths of the global economy, oil prices have plunged, jeopardizing companies and jobs and forcing the largest producers to consider drastic cuts in how much crude they put on the world market.

In a highly unusual move, Mr. Trump said he had told President Andrés Manuel López Obrador of Mexico that he would cut U.S. oil production by 250,000 barrels a day so that Mexico would cut its output by only 100,000 barrels a day. Mexico’s reluctance to cut output was a key sticking point in a Thursday conference call between OPEC and other oil producers.

“We are trying to get Mexico, as the expression goes, over the barrel. And Mexico is committing to do 100,000 fewer barrels,” Mr. Trump said at a White House news conference.

“The United States will help Mexico along,” he continued, “and they will reimburse us at a later date when they’re prepared to do so.”

But Mr. Trump added that he was not sure his deal with Mexico would be “acceptable to the other oil-producing nations.”

American oil executives said it was not clear to them how the president would cut production. The federal government controls permitting on federal lands and offshore, but drilling for oil is done by private companies and it would be highly unusual for the federal government to force them to cut production.

In addition to the meeting between OPEC, Russia and other oil producers on Thursday, energy ministers from the Group of 20 countries spoke on a teleconference on Friday.

The ministers did not endorse a production cut, and instead offered a much more generic statement about the importance of taking “all the necessary and immediate measures to ensure energy market stability.”

Mr. Trump also spoke on Friday to President Vladimir Putin of Russia about energy markets but the White House did not provide details about the conversation. Separately, the Kremlin issued a statement saying Mr. Putin spoke with Crown Prince Mohammed bin Salman of Saudi Arabia about the production cut agreement between OPEC and other oil producing nations.

Oil markets were closed on Friday for the Good Friday holiday.

The coronavirus-related economic downturn has led to pay cuts, layoffs and shutdowns at many news outlets, from weeklies like Seven Days in Burlington, Vt., to Gannett, the nation’s largest newspaper chain.

Finding a sizable audience has not been a problem for publishers. Hunger for news in a time of crisis has sent droves of readers to many publications. But with businesses paused or closed — and no longer willing or able to pay for advertisements — a crucial part of the industry’s support system has cracked.

“The traffic numbers are still way up,” said David Chavern, the president and chief executive of the News Media Alliance. “The digital subscriptions are hanging in there.”

He added, “The ad contraction is brutal and continuing.”

All told, 28,000 workers in the news media industry have been laid off, furloughed or had their pay reduced, a New York Times survey of the industry has found.

Executives like Jonah Peretti of BuzzFeed and Ben Lerer of Group Nine Media are forgoing their salaries. Publications like The Stranger, a weekly in Seattle, and the fashion magazine W have suspended publication. Tribune Publishing, the publicly traded company behind The Chicago Tribune and The New York Daily News, has cut the salaries of those making more than $67,000.

Raises have been put on hold at Condé Nast, the publisher of Vogue, Vanity Fair and The New Yorker. A hiring slowdown has also gone into effect. And company leaders are considering layoffs for staff members and pay cuts for executives, according to two people with knowledge of discussions. In a March 27 staff memo, Roger J. Lynch, the chief executive, acknowledged the difficulties for a company dependent on the luxury industry: “Overall, we’re seeing many advertisers shift their investments with us to the second half of the year,” he wrote. “Others are decreasing or pausing their spend.”

  • Boeing plans to bring about 2,500 Seattle-area employees back to work on its defense programs, 737 MAX storage and other essential work, possibly as soon as Monday, the company said in a statement. The company temporarily suspended operations in the area on March 23.

  • At least 715 pilots at American Airlines have signed up for early retirement, according to the Allied Pilots Association union. Under the terms of the offering, the airline will continue to pay about half of their salaries until they reach the mandatory retirement age of 65. Nearly 4,800 more have signed up to take short-term leave.

  • After closing lounges and scaling back food service in flight, airlines are starting to donate their huge stockpiles of food. Delta Air Lines said it was distributing more than 200,000 pounds of perishable food to various charities nationwide and American Airlines said it would donate about 81,000 pounds of food.

  • European Union finance ministers agreed Thursday night to a plan calling for more than half a trillion euros worth of new measures to buttress their economies against the onslaught of the coronavirus, but dealt a blow to their worst-hit members, Italy and Spain, by sidestepping their pleas for the bloc to issue joint debt.

  • Lear Corporation, a global supplier of car seating and vehicle interiors, said Friday that it would temporarily cuts the salaries of its employees by 20 percent in response to the impact of the coronavirus outbreak. Its chief executive and president, Ray Scott, will have his salary reduced by a further 10 percent for the rest of 2020.

Reporting was contributed by Peter Eavis, Alan Rappeport, Emily Flitter, Jack Nicas, Daisuke Wakabayashi, Marc Tracy, Jeanna Smialek, Tara Siegel Bernard, Niraj Chokshi, Michael Corkery, David Gelles, Peter S. Goodman, Neil Irwin, Katie Thomas, Michael Crowley, Kirk Semple, Sui-Lee Wee, Jeffrey Gettleman, Clifford Krauss, Carlos Tejada, Stanley Reed, Katie Robertson and Daniel Victor.

 

  • Updated April 11, 2020

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • When will this end?

      This is a difficult question, because a lot depends on how well the virus is contained. A better question might be: “How will we know when to reopen the country?” In an American Enterprise Institute report, Scott Gottlieb, Caitlin Rivers, Mark B. McClellan, Lauren Silvis and Crystal Watson staked out four goal posts for recovery: Hospitals in the state must be able to safely treat all patients requiring hospitalization, without resorting to crisis standards of care; the state needs to be able to at least test everyone who has symptoms; the state is able to conduct monitoring of confirmed cases and contacts; and there must be a sustained reduction in cases for at least 14 days.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • How does coronavirus spread?

      It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can be carried on tiny respiratory droplets that fall as they are coughed or sneezed out. It may also be transmitted when we touch a contaminated surface and then touch our face.

    • Is there a vaccine yet?

      No. Clinical trials are underway in the United States, China and Europe. But American officials and pharmaceutical executives have said that a vaccine remains at least 12 to 18 months away.

    • What makes this outbreak so different?

      Unlike the flu, there is no known treatment or vaccine, and little is known about this particular virus so far. It seems to be more lethal than the flu, but the numbers are still uncertain. And it hits the elderly and those with underlying conditions — not just those with respiratory diseases — particularly hard.

    • What if somebody in my family gets sick?

      If the family member doesn’t need hospitalization and can be cared for at home, you should help him or her with basic needs and monitor the symptoms, while also keeping as much distance as possible, according to guidelines issued by the C.D.C. If there’s space, the sick family member should stay in a separate room and use a separate bathroom. If masks are available, both the sick person and the caregiver should wear them when the caregiver enters the room. Make sure not to share any dishes or other household items and to regularly clean surfaces like counters, doorknobs, toilets and tables. Don’t forget to wash your hands frequently.

    • Should I stock up on groceries?

      Plan two weeks of meals if possible. But people should not hoard food or supplies. Despite the empty shelves, the supply chain remains strong. And remember to wipe the handle of the grocery cart with a disinfecting wipe and wash your hands as soon as you get home.

    • Should I pull my money from the markets?

      That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.

 

 

Source: The Next Gauge of the Economy Will Be Corporate Earnings – The New York Times