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Stocks close in the red despite Fed’s rescue efforts: March 23, 2020

Updated 4:58 PM EDT, Mon March 23, 2020
What else can the Fed do?
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Dow wipes out all gains since 2016 election at session low

At its low point today, the Dow erased all the gains it accumulated since the November 2016 election of President Donald Trump.

The index briefly fell below 18,333 points, the level at which it closed on Election Day in 2016.

Since that date, the Dow climbed more than 60% to its all-time high of 29,551 in February. The coronavirus crisis has made these gains vanish in a matter of weeks.

The Dow has bounced back since dropping below that key level today. Where it closes today remains an open question.

Royal Caribbean secures $2 billion in financing to stay afloat

Royal Caribbean Cruises (RCL) has received a $2.2 billion revolving line credit to help the beleaguered company stay afloat, it announced Monday.

The move was made to “bolster its liquidity,” bringing its total to $3.6 billion.

The cruise industry is in dire straits as the world shuts down because of coronavirus. Royal Caribbean’s stock briefly halted trading. It fell 1% Monday and is down more than 80% for the year.

“This is a period of unprecedented disruption for the cruise industry,” said Jason Liberty, the company’s chief financial officer said in a release. “We continue to take decisive actions to protect the company’s financial and liquidity positions as they enable us to keep focused on our guests, our crew and our long-term plans.”

Stocks are near session lows at midday

Stocks are deep in the red at midday. The Washington gridlock on fiscal stimulus measures has overshadowed hopes that the Federal Reserve’s onslaught of new monetary moves would lift markets higher.

  • The Dow is down nearly 4%, or 770 points.
  • The S&P 500 has dropped 4%, which means it has erased all of its gains accumulated during the Trump administration.
  • The Nasdaq Composite, which even managed to turn positive this morning, is down 2.4% at midday.

Zoom and Teladoc are the ultimate stay at home stocks

The novel coronavirus outbreak has forced many people to stay home and work – and kids are “going” to school virtually as well. That’s a big reason why video conferencing company Zoom Video Communications (ZM) has been one of the rare Wall Street winners while the broader market has plunged into bear status.

Shares of Zoom soared nearly 20% Monday to a new all-time high and are now up an astonishing 130% so far in 2020. CEO Eric Yuan said during an earnings conference call earlier this month that “overnight, almost every business really understands they needed a tool like this. This will dramatically change the landscape. I truly believe in the future, every business would turn to video for the remote workers for the collaboration.”

Another web video company, virtual medicine firm Teladoc, is also surging on social distancing measures. Teladoc (TDOC) shares were up about 15% Monday to a new record highs and have nearly doubled this year.

Teladoc said in a release last week that it is “experiencing unprecedented daily visit volume in the United States as the novel coronavirus continues to spread globally.” Patient visits were up 50% from the prior week to about 100,000 – and a big chunk are reporting breathing problems due to the virus.

“We are seeing more patients and more of those patients are experiencing upper respiratory issues,” said Teladoc chief medical officer Lew Levy, MD, in the release. 

The S&P 500 has erased all its Trump gains

The S&P 500 – the broadest measure of US stocks – has dropped below the key level of 2,264 points, erasing all of the gains it achieved under the Trump administration.

The index was down 4.1% in the late morning on Monday.

It has been a wild ride for stocks over the past weeks. The Dow already eliminated all of its Trump gains last week.

Zillow will pause home buying because of coronavirus

Zillow is temporarily halting home-buying through its Zillow Offers division, as government and public health officials urge people to self-isolate to stop the spread of coronavirus.

The company said Monday it will pause home buying in all 24 markets where it operates Zillow Offersits home buying and selling division launched in 2018. It does plan to continue marketing and selling homes it already owns through the program.

The company had already suspended open houses and shifted to virtual tours last week. As of March 19, it had about 1,860 houses in its inventory.

In 2019, Zillow Offers bought 6,511 homes, sold 4,313 – and lost $312 million before taxes.

The company is also halting plans to launch Zillow Offers in new markets.

“Given the concerns for public safety and rapid developments by governments that restrict local real estate activities, we determined it was prudent to pause our home buying to preserve our capital,” Zillow Group CEO Rich Barton said in a statement.

Airline stocks price targets cut by Bank of America

Bank of America slashed its price targets for the full range of US airline stocks Monday, as it said the hit to revenue from the coronavirus will be about twice as bad as experienced after 9/11 or during the Great Recession.

Overall, Bank of America said that full-year revenue at US airlines is expected to fall 36%, compared to a 19% drop following the 2001 terrorist attack and a 17% decline during the financial crisis.

Bank of America said its previous cut of price targets in the sector on March 10 is already out of date due to continue drop in demand for tickets.

The bank now has only a $5 price target for American Airlines, less than half of its current price and well off the previous $18 target. It cut its price target for Spirit Airlines to $8 from $30, which also put it below the current price. It also reduced price targets for all the other airlines, but in each of those cases, it gave a 12-month price target that is above current market price.

Hasbro CEO says China factories almost back up

The CEO of toy giant Hasbro said things are slowly starting to get back to normal in China following the novel coronavirus outbreak. That’s obviously good news since Hasbro makes a fair amount of its products in China.

Brian Goldner told CNBC Monday morning that it expects to be back at full production capacity in China by the end of this week. What’s more, he said demand in China – as well as the rest of the world – is strong. That’s especially the case for Play-Doh and other toys for young kids who have been largely stuck inside during the coronavirus pandemic.

Shares of Hasbro (HAS) surged more than 15% Monday on Goldner’s comments, as investors bet that the company will report solid first-quarter sales in April.

But with so many people losing paychecks as a result of businesses around the nation shutting down, will parents really be able to spend money on toys right now?

For what it’s worth, shares of Hasbro rival Mattel (MAT) and smaller toy maker Funko (FNKO) both plunged Monday.

'This is a planned shutdown of the US economy,' says Fed's Bullard

The US economy is expected to contract and unemployment is expected to jump in the second quarter of the year.

“This is a planned temporary shutdown of the US economy. This is going to be, throttle back the US economy from what it usually is,” said James Bullard, President of the Federal Reserve Bank of St. Louis, on CNN’s “First Move.”

The US will be missing around $2.5 trillion worth of second-quarter income because of that “throttling back” – roughly half normal output.

“So that is what Congress is trying to bridge. That is the revenue that isn’t there for businesses. That’s the income that isn’t there for households,” Bullard told CNN’s Julia Chatterley.

Unemployment insurance programs will help keep Americans whole during this period, Bullard added. He earlier told Bloomberg that the unemployment rate could jump to as high as 30%.

The point of the various stimulus programs – which would better be called “insurance programs,” said Bullard – is to have the economy completely intact when we emerge from the coronavirus crisis.

The central banker also believes a strong upswing will happen following this crisis.

“If you assume we have to shelter in place during the second quarter, the third quarter would be a transition period […] then the fourth quarter of this year could be the boom quarter and the first quarter of 2021 would be the boom time when everybody is up and running and you’re rocking and rolling again,” Bullard said.

Watch the interview here:

GE is laying off about 2,600 workers at its jet engine business because of coronavirus

General Electric announced plans Monday to lay off about 2,600 employees in its jet engine division as the coronavirus crisis deals a crushing blow to the aerospace industry.

GE Aviation said it will reduce its total US workforce by about 10%.

The division, GE’s largest by revenue, employed about 52,000 people around the world at the end of 2019. GE confirmed that about half of those employees are based in the United States.

GE (GE) signaled that overseas aviation jobs may also be cut.

The aviation industry is getting slammed by the pandemic, which has caused global air travel to ground to a near-halt. Airlines have suspended routes and grounded planes. 

GE Aviation added that there will be a temporary lack of work impacting about half of its US maintenance, repair and overhaul employees for 90 days.

The moves are part of GE’s efforts to save about $500 million to $1 billion in the aviation division, which was once the company’s strongest. GE Aviation had previously instituted a hiring freeze, canceled merit salary increase and slashed non-essential spending.

David Joyce, GE’s vice chairman and CEO of GE Aviation, will forgo half his 2020 salary. GE CEO Larry Culp also announced plans to forgo his full 2020 salary.

Winnebago suspends production

Winnebago is temporarily suspending production of its famous RVs because of the coronavirus pandemic.

For now, the suspension will last until April 12. Winnebago said in a release it will pay its employees for the first two weeks of the shutdown.

“As we take precautionary measures in the best interest of both our employees’ health and our long-term business prospects, we remain confident in the strength of our balance sheet and in our cash position to allow us to provide the appropriate pay and benefits to our employees and weather a period of business interruption from this health crisis,” CEO Michael Happe said. 

Winnebago (WGO) shares fell 6% in early trading. The stock is down 60% for the year.

US stocks open lower

US stocks kicked off in the red on Monday, despite the Federal Reserve’s new significant new stimulus measures aimed at keeping the US economy functioning.

The Fed action had turned stock futures green in premarket trading.