Wall Street shakes record unemployment claims.
Boeing soared almost 90% this week. American Airlines jumped almost 50%. Carnival Corporation went up almost as much.
Wall Street is on the rise as investors offer shares in companies that should receive support from the $ 2 trillion coronavirus aid account in Washington.
With the package advancing in the Senate, gains continued on Thursday. The S&P 500 rose 6.2%, even after the government reported an impressive jump in workers' unemployment claims.
As it was all week, the focus of investors was on companies that would likely receive help from the spending plan that passed the Senate on Wednesday night. The House of Representatives and President Trump must approve it.
Boeing rose almost 14% on Thursday because it set aside $ 17 billion specifically for "companies essential to maintaining national security" – language that was seen as intended at least in part for the aircraft manufacturer and the Pentagon's main contractor.
Other companies that were hit hard in the early days of the coronavirus outbreak continued to rise. American and Delta Air Lines were up almost 2%. Carnival rose by 14%.
The gains on Thursday also spread to Europe, with large benchmarks reversing their losses to end the day sharply higher. The FTSE 100 in Britain was up more than 2%.
The three-day rally raised the S&P 500 by more than 17%, its best performance since 1933, according to data from Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Most of those gains came on Tuesday, when stocks rose 9.4%, amid growing hope that the big stimulus package will support an economy hurt by the outbreak and efforts to reduce the spread of the virus.
But the economic crisis is perhaps the most frightening since World War II. On Thursday, a government report showed a record increase in weekly unemployment insurance claims, which jumped from 282,000 in a week to almost 3.3 million.
So far, the record has occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that time, the United States had been in recession for more than a year and the unemployment rate had exceeded 10%.
The figures, released by the Department of Labor on Thursday, are some of the first hard data on the economic number of the coronavirus pandemic, which has closed entire sectors of American life.
G.M. suspends production indefinitely and announces layoffs and cuts in wages.
General Motors said on Thursday that it would suspend production at its North American factories indefinitely, lay off 6,500 salaried employees and cut executive salaries, signaling that the automaker believes the coronavirus will cause serious damage to its business.
"We are actively monitoring the situation and the possible impact of the crisis on consumer demand," G.M. spokesman David Barnas said. "When we can safely resume production, we will go."
G.M. and other automakers have closed their factories in North America in recent days in an effort to stop the virus from spreading. Most expected to restart production next week, but have now reduced those plans.
Ford Motor plans to restart production at several plants in the United States on April 14, and a plant in Mexico on April 6. Fiat Chrysler said that its factories would remain closed until April 14, “depending on the various state requests to stay on site and the availability of each facility to return to production. Toyota Motor said its North American plants will remain closed until at least April 17.
The United Automobile Workers union has been pressuring G.M., Ford and Fiat Chrysler to keep their factories closed.
"The only guideline in a meeting room should be management asking," I would send my family – my son or daughter – to the factory and be 100% sure that they are safe & # 39; " said union president Rory Gamble in a statement.
Car sales fell last week. On Wednesday, Group 1 Automotive, a large dealer chain, said it was laying off 3,000 employees in the United States and cutting the president's salary by 50%.
To cut costs, G.M. said he was suspending work on developing some new models. Senior executives will have a pay cut of 5% or 10% and postpone 20% of their salaries to be paid later. The 6,500 salaried workers on leave will receive 75% of their normal salary.
Ford took similar steps, postponing the salaries of its 300 top executives.
THE HELP PLAN
Here's what you need to know about the Washington spending package.
Chief executives could still receive millions in compensation.
Lawmakers have imposed some restrictions on the remuneration of executives whose companies receive government assistance under the bill, in an effort to address one of the criticisms of bailouts from banks and other companies during the 2008 financial crisis. But the limits don't end with multimillion dollar payments to corporate bosses.
Executives who earned more than $ 3 million in 2019 can receive $ 3 million, plus half of any amount in excess of $ 3 million. As a result, a chief executive who made $ 20 million in 2019 would receive compensation of $ 11.5 million, or $ 3 million, plus half of the $ 17 million a year.
Companies receiving assistance will not be able to increase the remuneration of executives who earned between $ 425,000 and $ 3 million in 2019 until one year after government support ends.
Small businesses will receive help to pay workers, if they can wait.
The package includes more than $ 370 billion in much-needed help for small businesses. The project will allow banks to lend directly to companies, and these loans will be supported by the Small Business Administration.
It may take at least two weeks after the law is signed for the money to start flowing.
Small businesses would not have to pay installments of loans spent on employees, mortgages, rents or utilities. The banks that lend the money would be repaid for these installments by the Department of the Treasury.
Banks are not the focus, but they still receive help.
The role of banks in the bailout law is to provide the necessary capital to companies and taxpayers. "It's about preserving the incentives for banks to lend," said Mike Mayo, who is researching large banks for Wells Fargo.
To ensure that access to money is not hindered by a series of new customer demands or market developments, the Fed encouraged banks to use the so-called discount window, its lending operation to major banks and at least eight major financial institutions. already have it.
Banks may choose not to comply with the new federal accounting standards to estimate future credit losses during the period covered by the law, a rule known as Current Expected Credit Losses.
The project revives a program from the time of the crisis to guarantee all bank debts, a measure that again puts taxpayers at risk if a bank has problems.
The last time unemployment claims set a record, the economic shock was not sudden.
The nearly 3.3 million new unemployment claims registered last week exceeded any previous weekly figure. So far, the record has occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that time, the United States had been in recession for more than a year and the unemployment rate had exceeded 10%.
In that case, the recession was caused not by a health crisis, but by a decision by political leaders and the Federal Reserve that rising inflation it had to be pushed down, despite the cost to workers. The central bank drastically reduced the money supply, while benchmark interest rates were approaching an astonishing 20%.
Industries that were heavily dependent on loans, such as construction and manufacturing, were hard hit. The construction unemployment rate reached 22%; among auto workers, it was 24%.
Today, the circumstances are markedly different. Despite unequal rewards, the economy has achieved the greatest expansion in history. The unemployment rate has been below 4% for more than a year. A Fed concern was raising the persistently low inflation rate to 2%. Interest rates are close to zero.
Efforts to slow the spread of coronavirus have meant that the service industry has withstood the initial impact of layoffs – employees from restaurants, bars, hotels, beauty salons, gyms and more.
Boeing seemed ready to capitalize on the stimulus bill. The struggling aerospace giant, which lobbied for government help, signaled its approval of the project on Wednesday night, although neither the federal government nor the company details exactly what they would receive.
Although Boeing was not mentioned in the text of the bill, the inclusion of $ 17 billion in loans "for companies critical of maintaining national security" is intended, at least in part, for Boeing. In addition to being the largest manufacturing exporter in the United States and one of the two main commercial aircraft manufacturers, Boeing is a major defense and space company, manufacturing systems for the armed forces and NASA.
Boeing may also be eligible to receive funds from the largest $ 454 billion loan pool. What is not clear is exactly how much Boeing can receive or on what terms. On Tuesday, Boeing chief executive David Calhoun suggested he was not interested in the government taking a stake in the company.
THE HELP PLAN
An F.A.Q. in the stimulus account and in your pocket.
How much money will individuals receive – and how will it be distributed? How are unemployment benefits changing? Are show workers included?
The Senate unanimously approved on Wednesday a $ 2 trillion economic stimulus plan that will provide assistance to tens of millions of American families affected by the coronavirus. Its components include payments to individuals, expanded unemployment coverage that includes self-employed workers, loans to small businesses and non-profit organizations, temporary changes to retirement account withdrawal rules and more.
The House of…