Market Brief, March 16th 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Monday, March 16, 2020
Double Digits. Stocks extended deep losses ahead of the closing bell Monday after President Donald Trump said the U.S. economy “may be” headed for recession and that the Covid-19 outbreak could last for months. All three major market indexes notched double-digit percentage losses. The Dow Jones Industrial Average ended with a loss of around 2,997 points, or 12.9%, near 20,189, according to preliminary figures, while the S&P 500 dropped around 325 points, or 12%, to finish near 2,386. The Nasdaq Composite fell around 970 points, or 12.3%, to end near 6,905, for its largest one-day percentage drop in history.
DJIA 20,188.52 -2,997.10
S&P 500 2,386.13 -324.89
NASDAQ 6,904.59 -970.28
US 10-Year Note 0.75 -0.23
Dollar Index 98.03 -0.72
Crude Oil 28.66 -3.07
Gold 1,503.80 -12.90
Global Dow 2,268.11 -202.54
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
Fed Cuts Rates to Zero as Financial-Crisis Tools Make a Comeback
The Federal Reserve has cut interest rates back to zero and reintroduced the bond-buying program it used to fight the financial crisis a decade ago. It also reduced the cost of its overnight lending facility for U.S. banks and will expand its facilities to lend dollars to other global central banks.

In a statement late Sunday, the Federal Open Market Committee decided to cut interest rates back to the financial crisis-era range of 0% to 0.25%. It also has decided to buy $500 billion of Treasuries and $200 billion of mortgage-backed securities “over coming months.”

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The Fed’s ‘Whatever It Takes’ Approach Isn’t Enough for the Stock Market
The Federal Reserve revived many of its global financial crisis measures on Sunday to curb the damage from economies struggling with the coronavirus, but markets may need even more before finding their footing—especially as China data overnight came in far uglier than expected.

The Federal Reserve cut interest rates to the range during the financial crisis of 0 to 0.25% and brought back its bond-buying program, saying it would purchase $500 billion of Treasuries and $200 billion of mortgage-backed securities over coming months. Fed Chairman Jerome Powell cited the stress in several financial markets last week and impaired liquidity. Despite the aggressive moves, Powell said the Fed didn’t have the means of reaching households or small businesses. For that, fiscal policy was needed.

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Airlines Want $50 Billion in Aid. It’s Crucial for Them, Lessors, and Jet Manufacturers.
U.S. airlines are seeking a $50 billion aid package from the federal government, according to a report Monday by The Wall Street Journal. And it may not come a moment too soon.

Airlines are scrambling to cut operating costs as the coronavirus pandemic sweeps the globe and grounds airline fleets. United Airlines Holdings said Sunday it plans to reduce scheduled flights by 50% in April and May. Delta Air Lines and American Airlines Group have also cut back on routes and scheduled flights. And the carriers have all disclosed that they’re in talks with the government about assistance, according to the Journal.

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Manufacturing in New York Records Biggest Monthly Drop in History
Manufacturing activity across the New York region plunged in March, reflecting the biggest one-month drop in history and showing just how hard the coronavirus is starting to hit the U.S. economy.

The New York Fed’s monthly Empire manufacturing survey showed a drop in activity to -21.5 from 12.9 in February. Economists polled by Bloomberg expected a less sharp decline to 5.1.

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Oil Ends at 4-Year Low, With U.S. Benchmark Below $30
Crude prices settled at a four-year low on Monday, with U.S. prices below $30 a barrel, moving in step with plunging global equities after an emergency Federal Reserve interest rate cut did nothing to stem the panic among investors triggered by the rapidly spreading coronavirus.

West Texas Intermediate crude for April delivery on the New York Mercantile Exchange fell $3.03, or 9.6%, to settle at $28.70 a barrel after trading as low as $28.03. The settlement was the lowest for a front-month contract since February 2016, according to Dow Jones Market Data. May Brent dropped $3.80, or more than 11%, to $30.05 a barrel on ICE Futures Europe—the lowest finish since January 2016.

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Exxon’s Debt Rating Is Cut on Oil and Operating Weakness
Exxon Mobil’s credit has long been considered the gold standard in the oil-and-gas industry. But that may be changing.

On Monday, S&P Global Ratings downgraded the company’s issuer credit rating and unsecured debt rating to AA from AA+.

AA is the third-highest rating that S&P gives out and is still a strong investment-grade seal of approval. But Exxon has been adding debt even as its operations are faltering, with refining and chemicals results struggling in the past few quarters. The company’s debt position is now raising worries, particularly given the likelihood that oil prices will stay low for a long time.

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Moderna Stock Jumps After It Doses First Patient in Coronavirus Vaccine Trial
The biotech firm Moderna said Monday that the first patient had been dosed with its vaccine against the novel coronavirus in the Phase 1 study being conducted by the National Institutes of Health.

Shares of Moderna soared on Monday even as major U.S. stock market indexes suffered double-digit percentage losses. “This study is the first step in the clinical development of an mRNA vaccine against SARS-CoV-2, and we expect it to provide important information about safety and immunogenicity,” Moderna’s chief medical officer, Tal Zaks, said.

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France Fines Apple $1.2 Billion Over Distribution Practices
The French Competition Authority, the Autorité de la Concurrence, has fined Apple 1.1 billion euros ($1.2 billion) over anticompetitive behavior regarding the distribution of its products.

Apple and other large tech companies have been subject to increasing regulatory scrutiny on multiple fronts, including the way Apple distributes mobile applications through the App Store.

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Lockheed Martin Names New CEO
Lockheed Martin Corp. Chief Executive Marillyn Hewson will step down from the role in June to be succeeded by aerospace industry veteran James Taiclet, the world’s largest defense company by sales said Monday.

Mr. Taiclet joins from telecom infrastructure specialist American Tower Corp. but has been on the defense giant’s board since 2018, having worked for a variety of other big aerospace companies.

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Cruise Operator Carnival Is Tapping a $3 Billion Credit Facility
Carnival, the largest U.S. cruise operator, is tapping the vast majority of its $3 billion credit facility agreement “to increase its cash position and preserve financial flexibility in light of the current uncertainty in the global markets result from the COVID-19 outbreak,” the company said in a filing Friday.

It’s the latest sign of the quickly deteriorating fundamentals for the industry due to the fallout from the coronavirus outbreak.

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