Stocks turn positive after Fed says it will keep stimulus coming for years: June 10, 2020

By CNN Business

Updated 5:52 p.m. ET, June 10, 2020
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10:05 a.m. ET, June 10, 2020

Airline stocks sink after JPMorgan analyst's warning

From CNN Business' Chris Isidore

A JPMorgan analyst is warning that the recent rally in airline stocks is overdone.

Airline analyst Jamie Baker downgraded United and JetBlue shares Wednesday. He also warned the entire sector could be in for more trouble once the summer travel season ends in August.

Baker's research note to clients helped send almost all airline shares down at least 7% in early trading Wednesday. Southwest was off 5%.

"We do not believe the current pace of equity ascent can be potentially maintained for much longer," Baker wrote, adding that the recent modest rebound in US air travel is "likely to moderate this fall as corporate demand inadequately backfills pent-up summer leisure travel."

He cut his sales estimates for the three largest carriers -- American, Delta and United -- to a 75% drop for the third quarter and a 50% drop in the fourth quarter. He had previously forecast declines of 50% and 25%, respectively.

Baker also raised his estimates for fuel costs in the second half of the year. Sharply lower fuel prices have been the one bright spot for airlines during the crisis, as fuel is typically their second-largest expense after labor.

9:51 a.m. ET, June 10, 2020

Mall owner Simon terminates its purchase of rival Taubman because of the pandemic

From CNN Business' Jordan Valinsky and Chris Isidore

Simon Property Group (SPG), the largest owner of US malls, has terminated its $3.6 billion purchase of rival mall operator Taubman Centers (TCO).

Simon announced the deal in February, just a month before the coronavirus pandemic caused US malls to temporarily shut down.

The company explained that its merger agreement lets Simon "terminate the transaction in the event that a pandemic disproportionately hurt Taubman."

In Simon's eyes, it did, writing in a release that the pandemic had a "uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry."

Simon said that Taubman didn't do enough in conserving cash during the pandemic including "making essential cuts in operating expenses and capital expenditures."

Taubman's stock dropped 30% in early trading, while Simon's shares fell nearly 5%.

9:33 a.m. ET, June 10, 2020

American Airlines brings 141 planes back from storage

From CNN's Pete Muntean

American Airlines (AAL) says it will activate more than 140 planes than have been in storage due to the coronavirus pandemic. 

"We’re expecting to move 83 Airbus A320 Family (A319, A320 and A321) aircraft and 58 Boeing 737 aircraft from storage to the active fleet to support July flying," American Airlines spokesperson Ross Feinstein told CNN. 

He cautions that July is still expected to be “way down” from a year ago. At its peak this July, the airline will operate about 4,000 flights, compared to about 7,000 flights in July 2019, he said.

Still, activating theses planes is a sign that demand for air travel is starting to trickle back. 

The Transportation Security Administration recently announced it had screened 400,000 people nationwide for the first time since March, but that is well below the levels of a year ago. 

9:31 a.m. ET, June 10, 2020

Stocks open mixed

From CNN Business' Anneken Tappe

US stocks kicked off mixed on Wednesday, with the Nasdaq Composite on track for yet another all-time high. The index hit closing records on Monday and Tuesday and climbed above 10,000 points for the first time in history.

Investors are focused on this afternoon’s Federal Reserve meeting to hear the central bank’s assessment of last week’s jobs report and the reopening of the economy so far. No change in interest rates is expected.

8:56 a.m. ET, June 10, 2020

Prices keep falling, even as the economy starts to reopen

From CNN Business' Anneken Tappe

Consumer prices continued to fall in May even as the economy began to reopen.

Although lockdown measures eased across the country, consumers kept their wallets closed, keeping prices low.

The consumer price index declined 0.1% in May on a seasonally adjusted basis, the Bureau of Labor Statistics reported Wednesday. This is the the third-straight month of falling prices.

In April, prices declined 0.8% on a seasonally adjusted basis, the largest drop since December 2008.

America is in a recession and it will need consumer spending that can stimulate price increases to get its way out of the dire situation.

Read more here.

8:36 a.m. ET, June 10, 2020

Starbucks forecasts a $3 billion loss this quarter

From CNN Business' Jordan Valinsky

Starbucks (SBUX), which has reopened 95% of its US stores, said sales are becoming less dire.

For May, same-store sales fell 43% compared to the same month a year prior — an improvement from a 63% decline in sales for April.

Sales also continue to trend higher: Starbucks said that sales in the final week of May were just 32% lower compared to the same week in 2019, marking the "sixth consecutive week of sequential improvement from a weekly low of -65% in mid-April."

Starbucks also said in a regulatory filing that it expects to lose $3.2 billion for the third quarter, which ends on June 28.

It also plans to accelerate the roll out of its pick-up only stores to major US cities over the next 18 months.

8:12 a.m. ET, June 10, 2020

Most MGM Resorts will be reopened by July 1

From CNN Business' Jordan Valinsky

A surge in demand has forced MGM Resorts (MGM) to reopen some Las Vegas resorts and casinos earlier than anticipated.

The Luxor will reopen on June 25, followed by Aria and Mandalay Bay (including its Four Seasons) on July 1. Bellagio, MGM Grand and New York-New York opened earlier this month and the Excalibur reopens Thursday.

Reopening dates for Park MGM (and the NoMad tucked on top), Mirage, Vdara and the Delano towers, which is part of Mandalay Bay, have not yet been announced.

"We are eager to get more of our employees back to work and enhance the Las Vegas experience with additional resorts," Bill Hornbuckle, MGM Resorts' acting CEO, said in a press release.

7:49 a.m. ET, June 10, 2020

This is the worst peacetime recession in 100 years, OECD says

From CNN Business' Charles Riley

The global economy is plunging into the worst peacetime recession in a century, according to the Organization for Economic Cooperation and Development.

The Paris-based agency said Wednesday it expects the global economy to contract 6% this year before rebounding in 2021, a prediction that ranks among the gloomiest offered by multilateral financial institutions. And it warned that a second wave of coronavirus infections would lead to even more disruption and economic scarring.

The World Bank forecast earlier this week that global output would shrink 5.2% in 2020, while the International Monetary Fund estimated a 3% contraction in April.

Read more here.

6:57 a.m. ET, June 10, 2020

Why this is the weirdest recession ever

From CNN Business' Anneken Tappe

America is in a recession, but this downturn is unlike any the country has ever seen.

There was no boom and bust, no bubble that burst, no shocking attack on our shores. Rather, the government flipped the off switch on the economy in March to limit the spread of Covid-19 infections.

People stayed home, businesses shuttered, millions of workers were laid off, and economic activity ground to a halt. This recession is more "man made" than any before it.

Now economists wonder whether the economy can as easily be switched back on. Predictions about the future are more difficult in these unprecedented times, making it harder for policy makers to gauge how much stimulus is needed to get the country through the downturn.

This became abundantly clear in last week's jobs report, for which economists had predicted 8 million lost jobs. Instead 2.5 million jobs were gained, the largest number on record, blowing all forecasts out of the water.

But can a recession and record jobs growth coexist simultaneously? Economists think the answer is yes. After all, a recovery needs more than one positive data point.

Read the full analysis here.