Renewed fears of fresh coronavirus outbreaks around the world sent U.S. stock futures tumbling on Monday, following global markets lower.
Futures markets were predicting sharp losses on Wall Street at the start of trading, and oil prices were lower. Stocks in London, Frankfurt and Paris were 1 to 2 percent lower, after markets fell in the Asia-Pacific region.
The pullback in stocks is not unexpected. A gain of as much as 45 percent for the S&P 500 from March lows had left stock prices somewhat disconnected from reality. On Thursday, the S&P 500 plunged by about 6 percent, its sharpest drop since mid-March, before recovering the next day.
Sentiment in financial markets has been shifting, as investors seem to acknowledge the risks to the economy from pandemic-related shutdowns earlier this year and the prospect of a second-wave of coronavirus infections.
On Monday, investors were reacting in part to bad news out of China, where some monthly economic indicators were weaker than expected, and where officials are battling a new spate of coronavirus cases in Beijing. In the United States, Arizona, Texas and Florida have also reported higher infection numbers, and Gov. Andrew M. Cuomo of New York said that the state might have to reinstate lockdown conditions.
In Europe, governments continued to loosen economic restrictions on Monday, with nonessential retailers in Britain now allowed to open their doors and travel restrictions easing among several European Union countries.
Here’s the business news to watch this week.
🗣 Jay Powell, the Fed chairman, discusses the central bank’s latest economic report to committees at the Senate (Tuesday) and House (Wednesday). His downbeat outlook spooked markets last week, and he will most likely hint that lawmakers should be as aggressive as the Fed in propping up the U.S. economy.
🏦 In other central banking news, the Bank of Japan isn’t expected to unveil any new stimulus measures at its policymaking meeting on Tuesday, while the Bank of England will probably announce on Thursday a boost to its bond-buying program.
📈 On Tuesday, data for U.S. retail sales and industrial production are expected to show increases in May, following steep declines in April.
📅 Friday is Juneteenth, the annual holiday celebrating the end of slavery in the U.S. It has gained new resonance during the protests against racial discrimination and police brutality. Several companies, including Nike and Twitter, have made it an official company holiday.
💵 We’re headed into a quiet stretch for company earnings, with this week’s noteworthy reports coming from Oracle on Tuesday and Kroger on Thursday.
BP told shareholders on Monday that the company expected to write off $13 billion to $17.5 billion of the value of its oil and gas holdings when it reports second-quarter earnings on Aug. 4.
The write downs — a reflection that oil and gas fields have fallen in value — come as Bernard Looney, who became chief executive in February, pursues a rapid makeover of the London-based oil giant.
A reorganization led by Mr. Looney is expected to result in a reduction of 10,000 jobs, or nearly 15 percent of the company’s work force. He also wants to change the way BP does business in order to meet a commitment to become carbon neutral by 2050.
The company said that the write downs of up to 12 percent of the previous book value were partly a result of a reduction in its long-term forecasts of the price of oil by about 30 percent, to $55 a barrel. It is also similarly downgrading its long-term price for natural gas.
The company said it assumed that the pandemic would have “an enduring impact” on the global economy and accelerate a shift to lower-carbon energy consumption as countries seek to rebuild their economies.
The write downs will come both from existing oil and gas fields and from those in places like the Gulf of Mexico and Canada where the company has undeveloped holdings that it may decide not to exploit in the current circumstances.
As China tries to rebound, its movie theaters remain closed.
China appeared to have nearly eradicated the coronavirus within its borders last month, but that was not enough to get people in the country spending again — and with a new outbreak in Beijing over the past several days, a full economic recovery could be even further away.
Restaurants, bars and shopping malls were open across China last month except for in a small area near the border with North Korea and Russia, which had a coronavirus outbreak in May. But retail sales nonetheless fell 2.8 percent nationwide in May compared with a year ago.
That result, which was worse than most economists expected, is likely to prompt renewed discussion over a politically difficult question: whether to reopen the country’s cinemas, which are practically the only large category of retail spending that remains completely closed.
The closure of cinemas has been a big blow to shopping malls at a time when buying is increasingly moving online.
Malls in China and around the world rely heavily on cinemas to draw people out of their homes, with the hope that they will stay after the movies to dine or shop. Unlike the malls, car dealerships had a fairly good month in May, with sales up 1.9 percent from an already strong month last year.
But Xi Jinping, the country’s leader, said at the end of March that cinemas were not needed, and no one has dared to challenge his decision publicly since then. “If anyone wants to watch a movie, just watch it online,” Mr. Xi said during a visit on March 31 to Zhejiang Province.
Exports were also weak in May. Beijing said last week that they had fallen 3.3 percent.
Industrial production was up 4.4 percent last month compared with a year ago, also slightly below expectations. Factory output has consistently run well ahead of retail sales this spring, raising worries that unsold inventories may pile up and set off another round of production cutbacks.
‘Tenet’ is pushed back, delaying Hollywood’s return to the theaters.
Warner Bros. on Friday pushed back the release of “Tenet,” a $200 million-plus movie from Christopher Nolan that was supposed to arrive in theaters on July 17 and jump-start the pandemic-stricken movie business. Instead, “Tenet” will be released on July 31.
The move means that theaters will largely sit fallow for an extra week. Disney’s extravagant “Mulan,” directed by Niki Caro, will now signal the return of megawatt Hollywood movies when it comes out on July 24 — unless Disney also decides that market conditions are too harsh. A Disney spokesman had no immediate comment.
After being closed for months by the pandemic, movie theaters around the world are reopening, albeit with limited attendance and heightened safety requirements.
AMC Theaters, the world’s largest cineplex operator, said on Tuesday that “almost all” of its locations in the United States and Britain would reopen next month. Over all, theaters in 90 percent of overseas markets are due to be running again by mid-July, according to the National Association of Theater Owners, a trade organization for movie exhibitors in 98 countries.
It is unclear whether people will feel safe from the coronavirus, the spread of which rose to a worldwide high on Sunday, as measured by new cases.
As the United States has started to reopen public life, new virus hot spots have emerged. Texas, Florida and California all recently reported their highest daily tallies of new virus cases. And mass protests against police violence and racism have raised the specter of a coronavirus surge in the coming weeks.
People who might typically bet on sports are playing a sizable role in the market’s recent surge, some Wall Street analysts say — a shift that has helped largely erased its losses for the year.
Millions of small-time investors have opened trading accounts in recent months, a flood of new buyers unlike anything the market had experienced in years, just as lockdown orders halted entire sectors of the economy and sent unemployment soaring.
It is unclear exactly how many of the new arrivals are sports bettors, but many are behaving like aggressive gamblers. There has been a jump in small bets in the stock options market, where wagers on the direction of share prices can produce thrilling scores and gut-wrenching losses. And transactions that make little economic sense — like buying up the nearly valueless shares of bankrupt companies — are off the charts.
Even with modest investments, these newcomers can move the market, because stock prices are set by just a sliver of shareholders.
On most days, the overwhelming majority do nothing, while the buyers and sellers establish the prices. So even a small influx of hyperactive speculators can have a significant effect.
“Investors are increasingly asking us about the participation of individual investors in the shares and options market,” analysts from Goldman Sachs wrote in a note published late last month. “Our data suggests that individual investors are indeed a significant proportion of daily volume.”
The federal government’s multibillion-dollar aid program to help small businesses hurt by the pandemic prompted outrage after billions went to public companies while mom-and-pop businesses were sidelined.
Now, another group of recipients is being scrutinized for taking the money: independent wealth management firms, some of which manage billions of dollars on behalf of affluent Americans. Their fees, which are typically 1 percent, can bring in tens of million annually regardless of market fluctuations.
The initial $349 billion allocated in April for the Paycheck Protection Program went quickly, prompting Congress to approve an additional $310 billion. But some business owners found the guidelines for accepting the money confusing or too restrictive.
Now, a divide is growing between advisory firms that took the money and those that declined because of ethical concerns. The issue is more than a tempest in a teapot. Some firms could lose millions in fees if their clients start pulling their wealth out.
“We didn’t think it was very credible that these firms actually needed the money,” said Gary Ribe, the chief investment officer of Accretive Wealth Partners, which manages $130 million and did not apply a loan from the Paycheck Protection Program. “Getting it out of an abundance of caution — that didn’t seem credible, either.”
Catch up: Here’s what else is happening.
SAS, the Scandinavian airline, said on Monday that it would need an additional 12.5 billion Swedish krona, or $1.3 billion, to continue operating. The airline said that part of that sum was expected to come from the Swedish authorities, who will submit to Parliament a proposal to invest 5 billion krona. The Swedish and Danish governments last month agreed to back a loan facility valued at 3.3 billion krona for the ailing airline.
A bankruptcy court judge on Friday allowed Hertz to sell up to $1 billion in new stock, granting the car rental agency’s request as investors improbably bought up shares in recent days. The company’s stock price ended the day at $2.83 per share, up from a low of 40 cents after it filed for bankruptcy protection last month.
Reporting was contributed by Matt Phillips, Mohammed Hadi, Keith Bradsher, Stanley Reed, Jason Karaian, Carlos Tejada, Brooks Barnes, Nicole Sperling, Paul Sullivan, Niraj Chokshi and Kevin Granville.