Stocks swing wildly and close higher: March 10, 2020

By CNN Business

Updated 7:58 p.m. ET, March 10, 2020
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9:23 a.m. ET, March 10, 2020

The US economy will contract next quarter, BMO predicts

From CNN Business' Anneken Tappe

America's economy is expected to grow by far less this year than most economists expected just a month or two ago. The global coronavirus outbreak is responsible for the damage.

BMO has cut its second-quarter GDP growth estimate to -2% to account for a hit to the US oil industry and the likelihood that parts of the economy could be shut down to control the outbreak. For the full-year, GDP growth is expected at 1%.

This would be by far, the weakest year for the economy since the great recession," BMO chief economist Michael Gregory said in a note Tuesday.

Before the outbreak, the bank expected the US economy would grow by 1.8% this year.

America's employment rate, which is sitting at a historically low level of 3.5%, is also expected to rise. BMO forecasts 3.9% in the second quarter.

With a downturn in the oil industry because of a price war amid oil-producing countries, and a hit to demand, US inflation will likely also remain sluggish. This will give the Federal Reserve the room to cut rates further, Gregory said.

8:27 a.m. ET, March 10, 2020

Why this market shock is not like 2008

From CNN Business' Julia Horowitz

Markets are moving back up on Tuesday as some investors dip their toes back in.

But investors still want to know: Is this a repeat of the 2008 financial crisis?

The BlackRock Investment Institute acknowledged Monday that the scale of market moves have been "reminiscent" of 2008. But the asset manager sees fundamental differences.

BlackRock said in a note to clients:

"The economy is on more solid footing and, importantly, the financial system is much more robust than it was going into the crisis of 2008."

Wall Street has been quick to note that banks are better capitalized this time around due to new regulations, and that debt levels, while high, are concentrated in less risky areas.

Corporate debt, particularly in the energy sector, could pose a problem, but doesn't look "large enough (yet) to trigger a global crisis," Neil Shearing, group chief economist at Capital Economics, said Monday.

This should allow for a faster economic rebound after the coronavirus is brought under control. "Fear can take [the market] lower, but expect [a] quick recovery when health threat recedes," former Goldman Sachs CEO Lloyd Blankfein tweeted Monday. "Unlike '08, will avoid systemic damage."

One issue, however, is that governments and central banks were able to throw massive amounts of money at the problem in 2008. That may not be as effective this time around.

President Donald Trump said Monday he would press for a payroll tax cut, but if people are staying at home, they're unlikely to pump that money back into the economy.

Central banks, meanwhile, have far less ammunition at their disposal, with interest rates already at or near historic lows. And there are concerns that monetary policy remedies take time to flow through the system.

8:41 a.m. ET, March 10, 2020

Netflix and chill due to coronavirus? Not so fast

From CNN Business' Paul R. La Monica

There is a belief among some investors that Netflix (NFLX) actually could benefit from the coronavirus outbreak. The stock is still up 7% this year despite Monday's massive sell-off.

Why? The rationale is that more nervous consumers will stay home and binge watch shows. But Netflix may not be positioned for a coronavirus boost after all, according to Needham analyst Laura Martin.

Martin gave three reasons why (13 might have been more fitting) Netflix won't get a COVID-19 bump in a research report Tuesday morning.

  1. Netflix charges a fixed monthly rate. It doesn't matter if people watch more.
  2. International subscribers might cut back on luxury items and would be more likely to cancel subscriptions if the coronavirus spreads
  3. Netflix's bonds are rated junk, which might make it more difficult for the company to raise capital it needs to fund its massive content budget.

Martin currently has an "underperform" rating on Netflix, which is essentially a sell.

9:01 a.m. ET, March 10, 2020

Global stocks and oil mount a recovery while Dow futures gain 1,100 points

Markets in Asia and Europe staged a modest recovery Tuesday, and Dow futures gained more than 1,000 points a day after novel coronavirus fears and an oil price war sparked a worldwide panic.

The mood among investors was helped by news of President Donald Trump's plan to propose "significant relief" in the form of a payroll tax cut and help for hourly workers most affected by the coronavirus, and expectations of more stimulus measures elsewhere.

European shares opened higher after Monday's plunge. In the opening minutes of trade, the FTSE 100 (UKX) and Germany's DAX (DAX) were all trading more than 3% higher. The French CAC 40 (CAC40rose more than 4%.

6:52 a.m. ET, March 10, 2020

What could trigger a global recession?

Analysis from CNN Business' Julia Horowitz

The coronavirus is encouraging people to stay at home and avoid travel, slashing demand for flights, hotel rooms and restaurant bookings.

At the same time, factory shutdowns in China and elsewhere, and fears of more disruption in other parts of the world, have snarled supply chains. This dynamic is squeezing companies, which have issued a steady stream of warnings about how the virus will hit their profits.

The longer the pandemic lasts, and the more dramatic the efforts are to contain it, the more profound the effects will be for the global economy. Right now, the situation is highly uncertain.

"The length and depth of the global economic contraction depends most importantly on whether health officials can materially slow the spread of the virus via a ramp-up in testing, restrictions on mass gatherings, and quarantines of infected people as well as their contacts," Jan Hatzius, chief economist at Goldman Sachs, told clients Monday.

In China, which has been slammed the hardest by the outbreak, activity plunged in February, setting the country up for its first economic contraction since the 1970s. That was already rippling through the global economy.

But as the number of global cases ticks up above 100,000, and governments outside China announce more restrictions, economists have begun to weigh a more severe gut punch to the global economy. With each day that passes, the odds are rising.

6:46 a.m. ET, March 10, 2020

Oil prices are rebounding

US oil futures were last up about nearly 6% to $33 a barrel, while the global benchmark Brent crude rose 4.9% to nearly $36 a barrel.

Oil prices suffered their worst day since 1991 on Monday after Saudi Arabia shocked the market by launching a price war against onetime ally Russia. US oil prices dropped as much as 34%, ending at a four-year low of $27.34 a barrel.

7:17 a.m. ET, March 10, 2020

Australian stock exchange has its best day in more than 3 years

Australia's S&P/ASX 200 closed up 3.1%, the index's best day since November 2016. The strong showing saved the index from entering into a bear market, defined as a 20% drop below a recent high.

Hong Kong's Hang Seng Index (HSIclosed up roughly 1.5%, while China's Shanghai Composite (SHCOMPwas up 1.8%.

Japan's Nikkei 225 (N225increased 0.9%. The Japanese government is expected to announce more emergency measures to support families and small businesses hurt by the coronavirus outbreak.

6:54 a.m. ET, March 10, 2020

Qantas cuts almost a quarter of all flights

From CNN Business' Michelle Toh

Qantas has announced sweeping cost-cutting measures in light of the worsening novel coronavirus crisis, including slashing almost a quarter of all flights for the next six months and significantly reducing executive pay.

For the rest of this fiscal year, CEO Alan Joyce will forgo a salary, according to the Australian flagship carrier. Qantas (QABSY) Chairman Richard Goyder will stop taking management fees, and the executive leadership team will take a 30% pay cut.

The bulk of the cancellations will take place in Asia, where the virus outbreak originated. Flights in the region have been reduced by 31%. The airline will also lower capacity in the United States and the United Kingdom.

Read more here.

6:56 a.m. ET, March 10, 2020

Apple sales are getting battered in China. But analysts predict a quick recovery

From CNN Business' Sherisse Pham

Apple's iPhone sales in China were decimated last month as the novel coronavirus outbreak slashed demand for smartphones. But analysts predict a big recovery is just a few months away.

Apple (AAPLsold fewer than 500,000 iPhones in China in February, according to government data released this week, a plunge of more than 60% compared to the same month last year.

The drop undercut progress the company had been making in its bid to close the gap with Chinese rivals. Sales for the iPhone jumped in December, propelling Apple's stock to a record high on Wall Street earlier this year.

The coronavirus outbreak slowed Apple's momentum, but it handicapped domestic rivals, too. Overall smartphone sales in China fell 55% in February to 6.3 million compared to the same period last year. Analysts say everyone will be competing to make up for lost sales later this year.

Read more here.