Market swings and wave of cancellations
WASHINGTON — Seven weeks after the first case of COVID-19 was confirmed in the U.S., the outbreak is now classified as a pandemic and it’s doing widespread damage to critical economic sectors of the global economy.
Airlines are cutting capacity, people are working from home, major public events that raise millions of dollars for local communities have been canceled, including the St. Patrick’s Day parades in Pittsburgh, Boston and Chicago, and the New York Auto Show.
VOLATILE IS THE NEW NORMAL
Wild swings in U.S. markets are becoming the new normal. Gyrations of 1,000 points or more on the Dow is occurring almost daily. In the first three days of this week, the Dow has fallen 2,000, risen 1,700, and plunged again Wednesday, with the Dow falling more than 1,300 points by the afternoon. Goldman Sachs says the longest bull market in history will end soon. Sachs lowered its 2020 corporate earnings forecast for S&P 500 companies for the second time in less than two weeks Wednesday.
Most of Europe rebounded and the Bank of England cut its key interest rate by half a percentage point to 0.25 percent and offered financial liquidity measures in response to the outbreak of the COVID-19 virus. Asian markets slid.
OIL WARS
Saudi Arabia intensified its fight with Russia over the production cuts it wanted in a bid to halt tumbling oil prices. Benchmark U.S. crude is down almost 50 percent this year and its most severe decline since the economic crisis is happening this week. On Wednesday, Saudi’s state-owned Aramco said it will increase production capacity to 13 million barrels per day, up from 12 million per day. It hopes to make it more painful for oil-producing countries to continue without production cuts. Saudi Arabia has been producing around 9.8 million barrels per day, carrying the bulk of cuts that were agreed upon by OPEC members and other major oil producers like Russia. Crude prices fell 3 percent Wednesday, nearing $33 per barrel.
NO-SHOWS
On Wednesday, the annual New York Auto Show, scheduled for next month, joined that list. Organizers officially postponed the event until August due to the spread of coronavirus in the region.
Earlier this month the Geneva International Motor Show was abruptly canceled due to the virus. Also on Wednesday, organizers of the influential E3 tech show cancelled the event. It is a huge platform for tech companies including Microsoft. The Group of Seven nations, consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, has switched its upcoming ministerial meeting from a gathering in Pittsburgh, to a teleconference.
DISLODGED
The hotel industry is under duress. Business travel, vacations and other events are being cancelled daily, and so are room reservations. Hilton is pulling its forecast for the first quarter and the year citing uncertainty as the coronavirus spreads. Hyatt, Marriott and Hilton hotels plunged between 6 percent and 9 percent Wednesday.
DERAILED
The pandemic has scrambled supply chains, darkened factories in China, and reduced orders with the anticipation of a slowing global economy. Railroads are reporting a steep decline in the number of containers of imported goods they are carrying. The Association of American Railroads said Wednesday that the number of intermodal containers that U.S. railroads hauled last week fell 14.1 percent compared with last year. The railroad trade group said it is difficult to determine how much of the drop in shipments of containers of goods is related to the virus outbreak, but it is clear that is playing a role. “With the number of ships arriving at West Coast ports from Asia down sharply due to the coronavirus, it stands to reason that railroads are beginning to feel an impact too,” said John Gray with the AAR.
