Wall Street enters the second half of 2020 on uncertain footing.
Stocks inched higher on Wednesday as investors started a new quarter on a cautious note, balancing tentative signs of economic resilience and a steady climb in coronavirus cases in the United States.
The S&P 500 rose slightly, while European markets were modestly lower, following a mixed day in Asia.
Markets on Tuesday completed a topsy-turvy first half of 2020. Over the course of six months, stocks on Wall Street experienced their biggest quarter-to-quarter swing in more than 80 years, propelled by the global pandemic and economic shutdowns, followed by extra big helpings of fiscal stimulus by central banks.
In the three months that just ended, the S&P 500 rose 20 percent, the best calendar quarter for the broad market index since 1998.
What’s ahead is anyone’s call. In the United States, the world’s largest economy, more than 48,000 coronavirus cases were announced on Tuesday, the most of any day of the pandemic. Dr. Anthony S. Fauci, the United States’ top infectious disease expert, said that virus’s march across states in the South and the West “puts the entire country at risk.”
Lawmakers continue to look for ways to respond to the crisis, and the Senate on Tuesday agreed to extend the application period for a relief program for small businesses, granting five additional weeks for the remaining money left in the program to be spent. The program still has about $130 billion available.
Also improving sentiment on Wednesday was news that a Covid-19 vaccine developed by Pfizer and German biotech firm BioNTech and was found to be well tolerated in early-stage human trials. Shares of Pfizer rose nearly 5 percent.
Germany on Wednesday reported a small increase in unemployment, but the overall figure — 6.2 percent in May — suggested that efforts to keep people on payrolls through government support schemes, a strategy used in several European countries, may be dampening the chance of widespread joblessness.
There’s so much uncertainty about the coronavirus crisis that roughly 40 percent of the S&P 500, about 200 companies, have withdrawn their customary forecasts about how their businesses will perform in the months ahead, according to data from S&P Capital IQ.
The companies’ silence has unnerved analysts, who have already cut their expectations for profit growth substantially. They’re now expecting that second-quarter profits will fall more than 40 percent, according to numbers compiled by the data provider FactSet.
That’s an ugly forecast, but investors face a crucial question: Is it ugly enough?
“The numbers are sort of all over the place,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said of analysts’ predictions. — Matt Phillips
General Motors and Fiat Chrysler said sales of new vehicles fell by more than a third in the second quarter. But the companies added that demand has improved since April and May, when stay-at-home orders kept people away from dealerships.
“After falling into a deep recession in March, the U.S. economy has begun to recover as it reopens,” G.M.’s chief economist, Elaine Buckberg, said in a statement. “Auto sales are benefiting from historically low interest rates that make now an attractive time to buy a vehicle for many customers.”
G.M. said it expected sales to continue to rebound now that the company’s plants were operating normally. But “the path forward may not be linear, as rising infections in many states may lead to steps backward in the reopening process,” Ms. Buckberg added.
G.M. sold 492,489 cars and light trucks in the quarter, 34 percent fewer than the same period a year ago. Fiat Chrysler sold 367,086, which represented a drop of 39 percent.
Toyota, which reports sales on a monthly basis, said June sales fell 27 percent, to 148,280 vehicles. — Neal E. Boudette
The Treasury Department plans to bail out a trucking company.
The U.S. government plans to take a nearly 30 percent stake in YRC Worldwide in exchange for a $700 million loan to prop up the struggling trucking company.
The loan is the first that the Treasury Department is making from its $17 billion fund that was created to help companies critical to American national security weather the coronavirus pandemic. The money, which was appropriated as part of the $2.2 trillion stimulus package that passed in March, was originally created with Boeing in mind but the company has thus far avoided taking a government loan.
YRC provides military transportation and hauling services to the Department of Defense.
“We are pleased for Treasury to make this loan pursuant to the CARES Act,” Treasury Secretary Steven Mnuchin said in a statement. “This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers.”
The Treasury said that the loan, which will mature in 2024, would protect 30,000 jobs. In exchange for the loan, the Treasury will get 29.6 percent of YRC’s common stock. The company will also commit to maintain employment levels and limit executive pay. YRC’s shares soared 70 percent following the announcement.
Lockdowns across the country have caused shipping volumes to collapse this year, and YRC had to resort to furloughs, layoffs and other cutbacks.
The company said in a statement that the loan would allow it to pay for deferred employee health care and pension costs and to support capital investment.
— Alan Rappeport
United Airlines adds scores of flights to its August schedule.
United Airlines said on Wednesday that it planned to operate about three times as many flights in August as it did in June, increasing its traffic to the equivalent of about 40 percent of its August 2019 schedule.
Even as much of the West and South see a surge in new coronavirus cases, the airline said that it was responding to growing demand for domestic and international flights. In particular, United said it would increase service to vacation destinations such as Aspen, Colo., Bozeman, Mon., and Jackson Hole, Wyo. United will also restart service to Tahiti and add flights to Hawaii, the Caribbean and Mexico.
United’s move comes as some policymakers have criticized airlines for allowing their planes to fill up with vacationers and other travelers at a time when new coronavirus cases are regularly reaching new daily highs. The director of the Centers for Disease Control and Prevention, Dr. Robert Redfield, expressed “substantial disappointment” in American Airlines at a Senate hearing on Tuesday for allowing its flights to be fully booked.
The airlines have said they are taking extensive precautions to limit the spread of virus to passengers and employees.
Still, some of United’s plans appear to be at odds with the approach government officials are taking. For example, United said it would add flights in August to Brussels, Frankfurt, London, Munich, Paris and Zurich. Yet the European Union said this week that it would bar travelers from the United States, along with a number of other countries that have not brought the pandemic under control, when it allows international air travel to resume on Wednesday.
All told, United’s August schedule represents about 48 percent of the domestic flight schedule the airline operated during the same month last year and 25 percent of last year’s international flights. The company’s July schedule was just 30 percent of last year’s domestic schedule and 16 percent of the international schedule. — Niraj Chokshi
Wearing masks may have a major economic impact.
Face coverings have become a flash point in the United States, a matter of dispute between policymakers and source of conflict — actual, physical conflict — in public.
Economists at Goldman Sachs calculated the economic effect of wearing masks to slow the spread of the coronavirus. In a recent research note, they posit that a national mask mandate could substitute for a second round of lockdowns, even if compliance is patchy.
Greater mask usage would reduce the growth rate of confirmed infections in the hardest-hit states by two-thirds, they estimate. Achieving this via stay-at-home orders and other restrictions would reduce G.D.P. by around 5 percent, implying a “sizable” benefit to announcing mandatory mask-wearing rules instead, they write. “Our analysis suggests that the economy could benefit significantly from such moves, especially when compared with the alternative of a return to broader lockdowns.” — Jason Karaian
The Senate votes to extend program to help small businesses.
Less than four hours before the Paycheck Protection Program was scheduled to close with $130 billion still available for loans to small businesses seeking to maintain their payrolls, the Senate approved extending the application period and allowing small businesses to receive aid until Aug. 8.
The legislation now heads to the House, and will require President Trump’s signature for the program to continue. “The resources are there,” said Senator Benjamin L. Cardin, Democrat of Maryland and one of the architects of the program. “The need is there. We just need to change the date.”
The unexpected approval of the extension, which required agreement from all 100 senators, came as lawmakers began to debate the contours of another coronavirus relief package. With multiple parts of the $2.2 trillion stimulus law set to expire at the end of July and new outbreaks forcing many states to slow efforts to reopen their economies, lawmakers widely recognize that another measure will be necessary. — Emily Cochrane
The pandemic’s effect on boardroom confidence put mergers and acquisitions in a deep freeze in the first half of the year, notes the DealBook newsletter.
At the halfway point of the year, nearly $1.2 trillion worth of deals have been announced, down 42 percent from the same time a year ago. It was the slowest first half for M.&A. since 2013, according to Refinitiv.
The drop in activity was even more noticeable for larger transactions: The overall value of deals worth more than $5 billion was down 53 percent year-on-year. That’s despite some notable transactions being announced in the first half, including Aon’s $30 billion acquisition of Willis Towers Watson and Just Eat’s $7.3 billion takeover of Grubhub.
If anything, deal makers are just as busy trying to undo acquisitions agreed on before the pandemic. Among them are the mall operator Simon Property’s effort to end its takeover of rival Taubman Centers and the private equity group Sycamore Partners successfully backing out of a deal to buy control of Victoria’s Secret. — Michael J. de la Merced
A major Pizza Hut franchisee files for bankruptcy.
NPC International, the largest franchisee of Pizza Hut in the United States, filed for Chapter 11 bankruptcy on Wednesday, citing financial pressures caused by coronavirus-related shutdowns and increased competition in the restaurant industry.
The company, which operates more than 1,225 Pizza Hut and 385 Wendy’s stores across the country, had been plagued for years by financial challenges including rising labor and food costs, a $1 billion debt burden, and slumping sales for Pizza Hut amid intense competition from rival chains like Domino’s Pizza and Papa John’s.
NPC, which employs nearly 40,000 people in 27 states, is seeking Chapter 11 to cut debt and sell some of its restaurants, according to the company’s bankruptcy filing. NPC said its restaurants would continue to operate during the bankruptcy process.
The coronavirus pandemic has taken a toll on many restaurants. CEC Entertainment, which owns the Chuck E. Cheese and Peter Piper Pizza chains, filed for bankruptcy last week. — Gillian Friedman
Germany’s federal employment office reported on Wednesday that an additional 40,000 workers lost their jobs in May from the month before, for an overall unemployment rate of 6.2 percent.
The relatively low figure — the U.S. unemployment rate is 13.3 percent — despite the economic lockdown to curb the pandemic reflects the widely used program that temporarily helps pay workers’ wages to prevent layoffs or reduced hours. Since the shutdown in March, more than 12 million German workers have received wages through the program.
In response to the pandemic, Chancellor Angela Merkel’s government has spent more than 130 billion euros in stimulus money. One effort starts Wednesday: a reduction on a value-added sales tax of up to 3 percent, intended to bolster consumer spending.
By law, VAT must be added by merchants and service providers in the advertised price, meaning that the new VAT rules have lowered sticker prices on everything from food to new cars. When she announced the program last month, Ms. Merkel insisted that the program would not be extended past six months. — Christopher F. Schuetze
Catch up: Here’s what else is happening.
The Mexican airline Group Aeromexico, which has been hurt by a sharp drop in travel during the coronavirus pandemic, filed for bankruptcy protection on Wednesday in New York. Delta Air Lines owns about 51 percent of Aeromexico’s outstanding shares, according to the company’s bankruptcy filing. Aeromexico reported a loss of 2.5 billion pesos ($110 million) in the first quarter and its liabilities totaled $5.1 billion at the end of March, up from $4.2 billion at the end of December.
Aerospace giant Airbus announced Tuesday it would cut 15,000 jobs, or about 10 percent of its global work force, citing a 40 percent slump in commercial aircraft business activity and an “unprecedented crisis” facing the airline industry. It will be the largest downsizing in the history of the company.
Reporting was contributed by Niraj Chokshi, Vikas Bajaj, Matt Phillips, Neal E. Boudette, Gillian Friedman, Jason Karaian, Liz Alderman, Christopher F. Schuetze, Emily Cochrane, Michael J. de la Merced and Gregory Schmidt.