After suffering their worst day in decades, stocks bounced back on Tuesday as Washington policymakers talked up plans to try to cushion an economy careening toward a deep recession driven by the coronavirus outbreak.
The S&P 500 rose 6 percent, rebounding from a 12 percent collapse on Monday, which was its steepest drop since 1987.
Early trading was unsteady, and stocks briefly fell into negative territory. They then surged after the Federal Reserve said it would use its emergency lending powers to try to keep credit flowing to households and businesses in the United States by buying up commercial paper. Shares in Europe also recovered from early losses to end higher.
The market for commercial paper is part of the normally invisible plumbing of the American financial system, but it had become frozen in recent days. Companies and financial entities borrow billions by issuing commercial paper to fund their operations and manage their daily cash flows.
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On Tuesday evening, the Fed announced yet another program intended to spur lending. The new Primary Dealers Credit Facility is similar to one the central bank unveiled in 2008 to help banks — known as primary dealers — that are conduits between the Fed, Treasury Department and broader financial system.
Still, even if the financial system functions well, a daunting economic challenge continues to face the American economy, as the spread of the coronavirus forces federal, state and local officials to take simultaneous actions that will cut consumer spending. Such spending accounts for roughly 70 percent of American gross domestic product.
On Tuesday, economists from S&P Global Ratings wrote that they expected the United States’ economy to shrink by 1 percent in the first quarter, and 6 percent in the second quarter, putting the country in recession. That 6 percent drop would be the sharpest falloff in economic activity since 2008.
Even as stocks gained, the trading on Tuesday reflected some of these concerns. The best performing parts of the market were traditionally defensive areas, such as the utilities and consumer staples, where investors typically hide out during trying economic times. Oil prices also fell.
“This is the type of news the market wants,” Ilya Feygin, managing director at the institutional brokerage firm WallachBeth, said in an email. “Aid to households and businesses and attacking the virus directly, not monetary gimmicks.”
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Airlines and lawmakers discuss terms of a bailout.
Congressional leaders and airlines on Tuesday started to negotiate a bailout for the industry, which has been hobbled by the coronavirus outbreak, a day after an airline association proposed more than $50 billion in federal grants and loans.
The Trump administration has said that it wants to help airlines, and intends to include aid for them in a broader $850 billion package of economic stimulus measures it is proposing as a response to the outbreak. Separately, Democratic leaders in the House spoke with airline chief executives by phone Tuesday afternoon after hearing from Treasury Secretary Steven Mnuchin, who has been a central point of contact within the administration.
In Tuesday’s call, the airline executives and members of Congress specifically discussed limiting executive bonuses and shares buybacks and protecting employees from layoffs or furloughs. They also discussed protecting collective bargaining and reversing any union concessions when the industry recovers. The airlines indicated that furloughs would be a last resort, according to a person familiar with the call, but unauthorized to discuss it publicly.
Airlines for America, an industry association, asked the federal government on Monday for a $58 billion bailout, equally split between grants and loans and loan guarantees, for passenger and cargo airlines. It is also seeking help in the form of a temporary tax break.
“Carriers are burning through cash as cancellations far outpace new bookings,” Katherine Estep, a spokeswoman for Airlines for America, said in a statement.
In a sign of the stress on the industry, Moody’s on Tuesday downgraded the debt of Southwest Airlines, which borrowed $1 billion last week, and put it on watch for further downgrades. Moody’s said the carrier, the most consistently profitable U.S. airline, “remains vulnerable to the outbreak continuing to spread” and that the outbreak could depress travel demand through “at least June.”
Mnuchin warns that unemployment could approach 20 percent without government help.
The comments came while Mr. Mnuchin was making the White House’s pitch to lawmakers to back a $1 trillion fiscal stimulus package that would include $250 billion of checks being sent to Americans suffering from the fallout of the coronavirus epidemic.
Mr. Mnuchin said that the jobless rate could go up by 5, 10 or 15 percentage points if there is no intervention, according to two people familiar with his comments. The jobless rate currently sits at 3.5 percent.
Monica Crowley, a spokeswoman for Mr. Mnuchin, said that the Treasury secretary’s comments were not a projection and that because Congress was taking additional action, he did not believe the unemployment rate would reach 20 percent.
“During the meeting with Senate Republicans today, Secretary Mnuchin used several mathematical examples for illustrative purposes, but he never implied this would be the case,” Ms. Crowley said in a statement.
Since World War II, the United States has never seen unemployment rise above 11 percent, the level it nearly reached in the recession of the early 1980s. It reached 10 percent, briefly, during the 2008 financial crisis.
The White House is seeking ways to use smartphone location data in its virus response.
The Trump administration has spoken with large technology companies about how their access to geolocation data from smartphones can aid in the response to the coronavirus pandemic.
At a recent meeting, a group of tech companies discussed the use of anonymous, aggregated geolocation data to respond to the spread of the virus with the White House and other administration officials, according to two people with knowledge of the matter. They also discussed how that would intersect with user privacy, the people said.
The Centers for Disease Control asked during the meeting about the prospect of using the data to track demand for hospitals around the country, which are expected to be deluged by patients, one of the people said. The conversations were first reported by The Washington Post.
Facebook has also discussed with the U.S. government the maps it produces to track disasters using satellite and census data, said a company spokesman, Andy Stone. It is also working to provide nonprofit groups — which can work with local, state and federal authorities — with a second set of mapping tools that use smartphone location data that Facebook users can choose to share.
The possible use of geolocation data raises questions about user privacy, especially as policymakers are increasingly asking about the power of major tech companies like Amazon, Facebook and Google.
But analysis of aggregated data would be different from aggressive measures to track individual patients using their phones. In Israel, for example, the government has moved to use cellphone data to retrace the steps of virus patients.
Autoworkers demand that the Big 3 shut down, while European factories are idled.
Pressure mounted Tuesday for General Motors, Ford Motor and Fiat Chrysler to close their factories, while Europe’s auto manufacturing was brought virtually at a standstill after Daimler, Ford Motor and Nissan joined Volkswagen and most other major carmakers in shutting down.
The United Automobile Workers union has called on the three Detroit carmakers to shut down manufacturing plants across the United States for two weeks to prevent the spread of the coronavirus, a request the companies have so far denied.
In an email sent to U.A.W. members on Tuesday, the union’s president, Rory Gamble, said he had requested the shutdown in a meeting on Sunday with the chief executives of General Motors, Ford Motor, and Fiat Chrysler, based on the guidelines from the Centers for Disease Control and Prevention and the World Health Organization.
“Your U.A.W. leadership feels very strongly, and argued very strongly, that this is the most responsible course of action,” Mr. Gamble said in the email.
The automakers have responded by taking actions to protect workers, such as extending down time between shifts to allow for sanitizing of equipment and common areas in the plants.
Jim Cain, a G.M. spokesman, said the company was trying to keep factory workers safe while being mindful of the potential economic impact of a broad shutdown and of the hardship employees could face if they were no longer earning paychecks.
In Europe, Ford said the suspension would take effect Thursday and last “for a number of weeks” depending on the spread of the pandemic, as well as disruptions to supply chains, government restrictions on travel, and declines in sales.
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Catch up: Here’s what else is happening.
Facebook announced a $100 million grant program for small businesses around the world that are affected by the coronavirus outbreak. The company said in a blog post that it would begin accepting applications in the coming weeks.
Macy’s said on Tuesday that it would close all its stores, including Bloomingdale’s, through March 31. The company added that it would provide benefits and compensation to its work force.
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