Stocks drop again, as investors wait for Trump to act.
Stocks on Wall Street tumbled on Wednesday, as topsy-turvy trading throughout global markets signaled continued investor concern about how governments would deal with the coronavirus fallout.
In Europe, major indexes in London, Frankfurt and Paris fell, giving up early gains that had come after the Bank of England said it would cut interest rates to help British businesses. Shares in Asia also fell.
Investors are vacillating between the threat that the coronavirus poses to the global economy and the hopes that governments will unveil a series of measures to help businesses.
President Trump has signaled he would consider ways to stimulate the economy. Options include cutting payroll taxes and extending the American tax filing deadline past April 15. But so far, the White House has yet to announce any specific measures, and most experts say a payroll tax cut is not an effective way to combat the problems facing the economy.
In recent weeks, economists have sharply cut back their expectations for economic growth in the United States. On Tuesday, economists at Bank of America cut their 2020 forecast for growth of the U.S. gross domestic product to 1.2 percent from 1.6 percent.
The S&P 500 fell more than 3 percent in early trading Wednesday. Stocks tumbled nearly 8 percent on Monday, and rose nearly 5 percent on Tuesday.
Other markets signaled persistent investor jitters. Futures for gold, a traditional haven, edged higher. The yield on the 10-year Treasury bond fell, another indicator of investor nervousness.
Oil prices fell after the Saudi Arabian state oil company said for the second time this week that it would expand production capacity. The announcement signaled no let up in Saudi Arabia’s clash with Russia over oil supplies, which sent crude prices crashing earlier this week.
Mnuchin says first priority is to provide business relief.
Ahead of a House hearing on Wednesday, Treasury Secretary Steven Mnuchin said that the economic response to the virus will occur in multiple parts and that the initial priorities will be to provide fast relief to small and medium sized businesses.
He said that President Trump also wanted to press ahead with a larger stimulus package that would include a payroll tax cut, and that he is optimistic that there will be bipartisan support.
“This is something we’re going to do quickly and we’re going to respond to,” Mr. Mnuchin said, adding that he had been in “round the clock” discussions with Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell and Mr. Trump about a relief package.
“This is not a multiyear issue, this is an issue that certain industries are going to be significantly impacted and the president is very committed to make sure we have the economic response appropriately for this economy,” Mr. Mnuchin said.
He also said that he would be meeting later today with executives from the cruise ship and banking industries.
Top bank leaders to meet with Trump today.
President Trump plans to meet with top officials from the nation’s banks at the White House Wednesday afternoon to discuss the coronavirus outbreak that has roiled markets and threatened economic growth.
Top executives from Goldman Sachs, Bank of America, Wells Fargo, JPMorgan Chase and Citigroup, as well as the leaders of some of their smaller counterparts, will attend, according to bank officials briefed on the plans.
The full agenda is not clear, but the bank executives are preparing to address questions on their views of the recent market volatility, the funding of small businesses and their own economic outlooks, according to the officials.
Bank stocks have been hit hard during the recent market turmoil. But all the volatility has an upside for banks, too: The high volume of trading in recent weeks has created revenue opportunities as traders and salespeople work with clients to continually rebalance their portfolios.
The Bank of England cuts its key lending rate.
The Bank of England made an emergency cut to its key borrowing rate on Wednesday by half a percentage point before the opening of stock trading in London.
The move, which brings the rate down to one-quarter of a percent, was approved unanimously in an emergency meeting of the central bank’s policymaking board, the Bank of England said.
It is intended “to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance,” the bank said.
Wednesday’s move is the Bank of England’s first rate cut since the virus outbreak. The Federal Reserve did the same last week in the midst of a market sell-off.
Christine Lagarde warns of 2008-like crisis if officials don’t act decisively.
Christine Lagarde, the European Central Bank’s new president, is under intense pressure to take action as the virus outbreak threatens the Continent’s economy.
But there’s one big problem. The E.C.B. has been in nearly nonstop crisis mode since 2008, and it has few cards left to play. The bank’s main interest rate, the one it charges commercial banks for short-term loans, is already zero. It can only tinker with a secondary rate that is already negative.
Ms. Lagarde has signaled that she understands the urgency of the situation. She told European Union leaders on a conference call late Tuesday that the situation could become as bad as 2008 if governments do not act decisively enough, according to a person familiar with her remarks. The call was first reported by Bloomberg News.
Angela Merkel, the German chancellor, acknowledged during a news conference Wednesday that Ms. Lagarde had warned of the virus’s consequences. Ms. Merkel said she took Ms. Lagarde’s view of the situation “very seriously.”
Outbreak could erase $820 billion in business travel spending.
The coronavirus stands to wipe out more than $820 billion in spending on global business travel, about half of it concentrated in China, where companies have all but eliminated employee trips, according to the Global Business Travel Association.
The estimate on Tuesday of the outbreak’s toll is significantly higher than a previous forecast of $560 billion issued by the group just two weeks ago.
“Business travel is slowing at an alarming rate,” Scott Solombrino, the group’s executive director, said in a statement. “The impact to the business travel industry — and to the broader economy — cannot be underestimated.”
Aramco plans to raise oil output further, putting more pressure on prices.
In what appears to be more jousting with Russia, Saudi Aramco, the national oil company of Saudi Arabia, said Wednesday that it had been directed by the country’s ministry of energy to increase its oil output capacity to 13 million barrels a day from the current 12 million barrels a day.
After Saudi Arabia and Russia failed to agree on new production cuts at a meeting in Vienna on Friday, the Saudis have been making highly visible preparations for a price war with Russia and other producers.
Over the weekend, Aramco offered its customers deep discounts on crude, and on Tuesday the company said that it would sell 12.3 million barrels a day in April, well over the 9.7 million barrels a day it has been producing.
The opening shots of what could be a prolonged battle have hit the oil market hard. Brent crude, the international benchmark, has plunged about 20 percent this week.
On Wednesday, oil was down about 3 percent to $36.08 a barrel after Aramco’s announcement.
No studio audience for “Jeopardy” and “Wheel of Fortune.”
“Jeopardy” and “Wheel of Fortune” will now tape without a studio audience for the foreseeable future, according to two people familiar with the plans. The average audience for those shows skews older and tends to travel to Los Angeles from locations all over the country, prompting the temporary ban, those people said.
Alex Trebek, the “Jeopardy” host, has pancreatic cancer, putting him potentially at even greater risk to the virus, one of the people said.
ABC’s “Live With Kelly and Ryan” was the latest talk show to temporarily ban its studio audience. “It feels like we’re auditioning,” said the co-host Ryan Seacrest on Wednesday morning to a mostly empty studio, which is in Manhattan.
Warner Bros., which produces shows like “The Ellen DeGeneres Show” and “Conan,” is not yet canceling studio audiences for its programs. But the studio said on Tuesday that it would begin screening prospective audience members.
CBS and NBC, which also produce a number of talk shows, including “The Late Show With Stephen Colbert” and “The Tonight Show Starring Jimmy Fallon,” declined to comment.
Is the outbreak an act of God? Lawyers study the issue.
The coronavirus has public health officials talking about things like social distancing and self-quarantining to reduce the spread of the virus. And now it has corporate lawyers closely examining commercial contracts.
Big law firms have been churning out client notes advising business executives to start paying attention to force majeure clauses in contracts with vendors, subcontractors and insurers. Such clauses are common in contracts to protect parties in the event of a so-called act of God — earthquakes, hurricanes or floods — that prevent one side from completing its end of a deal, or disrupts a company’s business for an extended period.
But these clauses often do not include provisions for things like epidemics or pandemics. So will a force majeure clause provide legal protection to a company that cannot perform a contractual task because it had to effectively shut down because of the coronavirus?
Well, lawyers said, it often depends on the specific facts of each situation. Judges have tended to enforce such provisions narrowly and want to see evidence that a company did everything possible to keep up its end of the bargain. Courts are reluctant to interpret a force majeure clause as a “get out of jail free” card for a company that simply fails to perform.
Here’s what else is happening.
Fiat Chrysler warned Wednesday that it might have to close some of its factories in Italy because of the coronavirus epidemic, which has hit the country especially hard. Any closures would be for health reasons, not because of problems getting parts or raw materials needed to keep assembly lines running, a Fiat spokesman said.
Reporting was contributed by Alexandra Stevenson, Ben Dooley, Niraj Chokshi, Kevin Granville, Carlos Tejada, Matthew Goldstein, Jack Ewing and John Koblin.