Dow sinks after Fed chair calls out risks to the economy: May 13, 2020

By CNN Business

Updated 7:47 p.m. ET, May 13, 2020
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9:30 a.m. ET, May 13, 2020

Powell: We're still not looking at negative rates

From CNN Business' Anneken Tappe

The Fed is saying no to subzero rates.

When the Federal Reserve slashed interest rates to near zero in March, investors began to wonder whether the United States could see negative benchmark rates.

After all, other central banks around the world have had to resort to them. But the Fed has long held a stance against subzero rates -- and its chief says the coronavirus crisis hasn't altered that thinking.

"The [Federal Open Market] Committee's view on negative rates has not changed," Fed Chairman Jerome Powell said during a virtual event at the Peterson Institute of International Economics. "That's not something we're looking at."

9:22 a.m. ET, May 13, 2020

Powell: When the crisis is over, emergency tools will be put away

From CNN Business' Anneken Tappe

The Federal Reserve has reached deep into its monetary policy toolbox -- but the emergency programs deployed by the central bank won't stick around forever.

"When this crisis is behind us, we will put these emergency tools away," Fed Chairman Jerome Powell said during a virtual event at the Peterson Institute of International Economics.

Powell also stressed that the central bank has only lending power, not spending power, which means fiscal policy to stimulate spending might be required in the future.

Those fiscal tools might be costly, he noted. But they're also necessary.

9:14 a.m. ET, May 13, 2020

Welp, so much for the stock rally. Thanks, Mr. Powell

From CNN Business' David Goldman

Dow futures were up only a few points just ahead of the open after Federal Reserve Chairman Jerome Powell said that the US economy continues to face significant risks and may need more action to help stimulate it.

Stock futures had been much higher before Powell began speaking at 9 am ET.

S&P 500 and Nasdaq futures were still pointing higher but gave up most of their gains.

9:19 a.m. ET, May 13, 2020

Powell: The burden of this crisis has 'fallen most heavily on those least able to bear it'

From CNN Business

The coronavirus crisis has devastated the US economy over the past weeks -- and the "scope and speed of this downturn are without modern precedent," according to Federal Reserve Chairman Jerome Powell.

It's "significantly worse than any recession since World War II," the Fed chief said in prepared remarks at a virtual event hosted by the Peterson Institute of International Economics.

Powell noted the country has already erased the job gains of the last decade, and the labor woes are hurting low-income families in particular.

Almost 40% of households earning less than $40,000 a year as of February lost their jobs in March, he added, citing a forthcoming Fed survey.

While we are all affected, the burden has fallen most heavily on those least able to bear it," Powell said.
8:52 a.m. ET, May 13, 2020

Producer prices plummet at the biggest rate since 2009

From CNN Business' Anneken Tappe

Producer prices dropped sharply in April, falling 1.3% on a seasonally adjusted basis. It was the largest drop in the index since the Bureau of Labor Statistics began tracking it in 2009.

The lion's share of this decline -- more than 80% -- was due to a 3.3% drop in prices for goods, which in turn was driven by a 19% collapse in demand for energy.

The oil market crisis, driven by a global demand rout and storage limitations, pushed one oil futures contract to trade in negative territory last month. This pushed down energy prices across the board. Two-thirds of the April demand decrease for goods is linked to a 56.6% fall in gasoline prices, according to the BLS.

Excluding food, energy and trade services, the index still fell 0.9% in April, which was its largest decline in the series.

On an unadjusted basis, producer prices have fallen 1.3% over the past twelve months, their largest decline since November 2015.

This follows yesterday's drop in consumer prices, which fell at the fastest level since 2008. The drop was largely driven by energy prices, but also pushed down by lower prices on apparel and vacation spending.

8:03 a.m. ET, May 13, 2020

Goldman Sachs issues warning about US unemployment

From CNN Business' Matt Egan

The unemployment rate in the United States will peak at 25%, rivaling the worst period of the Great Depression, Goldman Sachs warned.

The unemployment rate spiked to 14.7% in April as the economy lost more than 20 million jobs during the self-imposed shutdown to fight the coronavirus pandemic.

Economists at Goldman Sachs downgraded their labor market forecast "to assume that more workers will lose their jobs and a larger share of them will be classified as unemployed," the Wall Street bank wrote in a report to clients.

8:02 a.m. ET, May 13, 2020

All 👀 on Jerome Powell

From CNN Business' David Goldman

Federal Reserve Chairman Jerome Powell will speak at the Peterson Institute for International Economics at 9 am ET, and investors are already getting their 🍿 ready.

Powell, who has orchestrated the most extraordinary economic rescue plan in the history of the Federal Reserve, could to discuss the Fed's future stimulus plans.

To boost the economy, Powell's Fed has taken rates to zero, bought hundreds of billions of dollars of government debt and Tuesday began to shore up the consumer lending market by buying up $100 billion of asset-backed securities.

The Fed did all of that during the last financial crisis starting in 2008. But Powell's Fed has gone beyond what Ben Bernanke's Fed did, buying up debt from small towns and cities and buying corporate bonds to keep companies afloat.

Powell may hint at more stimulus during his speech Wednesday.

7:56 a.m. ET, May 13, 2020

Stocks point to a good start

From CNN Business' David Goldman

Stock futures are rising higher after two straight days of declines.

Investors are eagerly awaiting Federal Reserve Chairman Jerome Powell's speech at the Peterson Institute for International Economics at 9 am ET, in which he could to discuss future stimulus measures the Fed may take to boost the economy.

  • Dow futures were up 170 points, or 0.7%
  • S&P 500 futures rose 0.6%
  • Nasdaq futures were 0.8% higher

Investors had been giddy about the US economy beginning to reopen. But epidemiologists, including Dr. Anthony Fauci, have cautioned against overzealous lifting of stay-at-home orders. Fauci, the nation's top infectious disease expert, said Tuesday that the "consequences could be really serious" if states reopen ahead of the guidelines issued by the White House.