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Stocks resume declines as outbreak fears linger

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Stocks pared losses and then rose slightly Tuesday, trading choppily after Monday’s rally sent the Dow higher by 690 points, or 3.2%.

With just hours to go until the final session of the first quarter wraps, the Dow was on track for its worst single-quarter decline since the fourth quarter of 1987, and its worst first quarter on record.

Stocks have swung widely over the past several weeks, with Monday’s gains coming after a smattering of positive health-care developments helped blunt some fears surrounding reports of a still-rising coronavirus case count, extended stay-at-home orders, and strained hospital infrastructure in the cities hit hardest by the outbreak. Johnson & Johnson said Monday it planned to begin human tests of its coronavirus vaccine by September, and Abbott Laboratories recently unveiled a five-minute coronavirus test.

Separately, overnight Tuesday, better than expected manufacturing sector data from China suggested the country was beginning to recover some economic damage from the coronavirus outbreak.

Still, both the human impact and business disruptions due to the pandemic have continued to mount around the world. The number of coronavirus cases topped 800,000 globally as of Tuesday, including more than 164,000 in the U.S., according to Johns Hopkins data. In New York, the U.S. epicenter of the outbreak, the number of confirmed cases jumped by nearly 7,000 to 66,497 as of Monday afternoon.

Some lawmakers have already been pushing for more fiscal stimulus just days after passing a $2 trillion economic relief package.

Macy’s, Kohl’s and Gap became some of the latest major public retailers to announce major furloughs as storefronts stay closed. Companies from Domino’s Pizza to Planet Fitness and L’Oreal receently suspended their respective 2020 financial guidance, as uncertainty over the duration and magnitude of impact from the coronavirus outbreak linger.

Amid these developments, many analysts believe further volatility is ahead for equities, with some predicting a choppier “W-shaped,” rather than a “V-shaped,” recovery. Others, including those at JPMorgan Chase, suggested risk assets could start to stabilize from here.

As equities at least temporarily take a breather from a selloff earlier this month, investors turned their attention to oil, which recovered some losses Tuesday after a precipitous decline during the prior session. West Texas intermediate futures dropped to the lowest level since 2002, as the supply threat of Saudi Arabia’s price war with Russia compounded with the demand shock induced by the coronavirus outbreak and ensuing business disruptions.

President Donald Trump held a call with Russian leader Vladimir Putin Monday, during which the leaders “agreed on the importance of stability in global energy markets,” according to Bloomberg, citing a White House statement.

11:02 a.m. ET: Stocks pare earlier losses, Dow and Nasdaq turn slightly positive

Here were the main moves in markets, as of 11:02 a.m. ET:

  • S&P 500 (^GSPC): -4.31 points (-0.16%) to 2,625.76

  • Dow (^DJI): +24.99 points (+0.11%) to 22,352.47

  • Nasdaq (^IXIC): +44.32 (+0.58%) to 7,819.56

  • Crude (CL=F): +$0.77 (+3.83%) to $20.86 a barrel

  • Gold (GC=F): -$24.50 (-1.49%) to $1,618.70 per ounce

  • 10-year Treasury (^TNX): +1.7 bps to yield 0.688%

10:50 a.m. ET: The eventual economic recovery in the U.S. will be ‘U-shaped,’ strategist says

The economic deterioration induced by the COVID-19 outbreak will likely create a “U-shaped” recovery after infection rates peak, or a slower rebound than the speedy “V-shaped” recovery some had initially anticipated, according to Gabriela Santos, JPMorgan global market strategist.

“A ‘V-shape’ I think we should unfortunately discount at this point, because even when infection rates peak for COVID-19 around the world, what the China experience is teaching us is even though the government begins to relax some social distancing guidelines, individuals themselves are still very careful about how exactly they go back to their day to day lives,” she said.

“So demand was quick to shut down, but it’s actually much slower to come back online,” she added. “The better analogy here is a U. There’s a very sharp drop in activity in the first half, there’s a bit of a stall in the second, and then in 2021 is when that strong rebound begins.”

10:17 a.m. ET: Goldman Sachs slashes first- and second-quarter GDP estimates further

Goldman Sachs on Tuesday downwardly revised its estimate for second-quarter economic activity in the U.S., citing even greater impact from the coronavirus outbreak than originally anticipated. However, they also upwardly revised their expectations for the margin of recovery in later quarters this year.

The firm said it sees real gross domestic product falling 9% in the first quarter and dropping 34% in the second quarter on a quarter over quarter, annualized basis. This compared to their previous estimates of a 6% drop and 24% drop in the first and second quarters, respectively, on a quarter over quarter, annualized basis.

At the same time, the economists upgraded their expectations for the recovery in the second half of this year. They see a 19% quarter over quarter annualized GDP gain in the third quarter, or better than the 12% jump previously anticipated.

“These forecast changes reflect the net effect of two directionally offsetting changes. On the one hand, the anecdotal evidence and the sky-high jobless claims numbers show an even bigger output and (especially) labor market collapse than we had anticipated,” the economists said. “This not only means deeper negatives in the very near term but also raises the specter of more adverse second-round effects on income and spending a bit further down the road.”

“On the other hand, both monetary and fiscal policy are easing dramatically further, which will tend to contain these second-round effects and add to growth down the road,” they added. “The Phase 3 fiscal package was much bigger than we had expected, we now anticipate a Phase 4 package focused on state fiscal aid, and the Fed is likely to use the $454bn addition to the Treasury’s Exchange Stabilization Fund aggressively to sustain the flow of credit to private-sector and municipal borrowers.”

10:00 a.m. ET: Consumer confidence declines in March ‘in line with a severe contraction,’ Confidence Board says

Consumer confidence fell but by a smaller margin than anticipated, the Conference Board said Tuesday.

The headline consumer confidence index fell to 120.0 in March, better than the 110.0 expected, according to Bloomberg consensus data. February’s index was upwardly revised to 132.6 from 130.7 previously reported.

Subindices tracking consumers’ assessments of current and future business conditions also declined in March.

“Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement. “The Present Situation Index remained relatively strong, reflective of an economy that was on solid footing, and prior to the recent surge in unemployment claims.”

“However, the intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs,” Franco added. “March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.”

9:31 a.m. ET: Stocks open lower

Stocks opened lower, taking a pause from rising after Monday’s rally.

Early losses in the S&P 500 were led by declines in the Utilities and Financial sectors. Energy was the only positive sector, as crude oil prices recovered some of Monday’s steep losses.

Here were the main moves in markets as of 9:31 a.m. ET:

  • S&P 500 (^GSPC): -16.97 points (-0.65%) to 2,609.68

  • Dow (^DJI): -147.43 points (-0.66%) to 22,180.05

  • Nasdaq (^IXIC): -36.5 (-0.44%) to 7,735.66

  • Crude (CL=F): +$0.92 (+4.58%) to $21.01 a barrel

  • Gold (GC=F): -$14.90 (-0.92%) to $1,607.10 per ounce

  • 10-year Treasury (^TNX): +2.5 bps to yield 0.696%

8:32 a.m. ET: Futures reverse, sending Dow 200+ points lower

Stock futures’ gains proved ephemeral Tuesday morning as contracts on each of the S&P 500, Dow and Nasdaq took a turn a dropped at least 1%, with an hour to go until the opening bell.

Here were the main moves in the three major indices, as of 8:33 a.m. ET:

  • S&P 500 futures (ES=F): down 1.41%, or 36.75 points to 2,574.5

  • Dow futures (YM=F): down 1.31% or 290 points to 22,877.00

  • Nasdaq futures (NQ=F): down 1.07% or 84.25 points to 7,770.5

7:11 a.m. ET Monday: Stock futures hold steady

Stock futures were little changed Tuesday morning, taking a pause after Monday’s rally. Crude oil prices recovered some losses after a rout sent the commodity down to its lowest level since 2002.

Here were the main moves in markets, as of 7:11 a.m. ET:

  • S&P 500 futures (ES=F): down 0.08%, or 2 points to 2,609.25

  • Dow futures (YM=F): up 0.01% or 2 points to 22,169

  • Nasdaq futures (NQ=F): up 0.25% or 19.5 points to 7,874.25

  • Crude (CL=F): +$1.55 (+7.72%) to $21.64 a barrel

  • Gold (GC=F): -$29.40 (-1.79%) to $1,613.80 per ounce

  • 10-year Treasury (^TNX): +1.9 bps to yield 0.69%

6:02 p.m. ET Monday: Stock futures open little changed

Here were the main moves in markets, as of 6:11 p.m. ET:

  • S&P 500 futures (ES=F): down 0.02%, or 0.5 points to 2,610.75

  • Dow futures (YM=F): down 0.03% or 6 points to 21,161.00

  • Nasdaq futures (NQ=F): down 0.12% or 9.75 points to 7,845.00

The empty trading floor is seen after the closing of the New York Stock Exchange (NYSE). (Photo by Kena Betancur/Getty Images)

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Hong Kong Stocks See Relief Gains; Dollar Slips: Markets Wrap

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(Bloomberg) — Stocks in Asia nudged higher, with Hong Kong jumping at the open after U.S. President Donald Trump on Friday stopped short of specifying tough sanctions over China’s new national security law for Hong Kong.

The dollar retreated. Hong Kong’s Hang Seng saw early gains of over 3%, while Tokyo, Seoul, Sydney and Shanghai saw more modest moves. U.S. stock futures erased earlier declines as investors weighed the violent protests in some American cities that have stoked concerns about a reacceleration in infection rates and a damper on the economic recovery. Crude oil fell.

The escalation in tensions between the U.S. and China last month had threatened to derail a recovery in global equities. While the U.S. president’s speech Friday was heated in rhetoric, it lacked specifics around measures that would directly affect Beijing.

“President Trump’s response on Friday was pretty muted and far less disruptive than markets had feared,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney.

The U.S. president also promised sanctions against Chinese and Hong Kong officials “directly or indirectly involved” in eroding Hong Kong’s autonomy but didn’t identify individuals. The administration hasn’t yet decided under what authority it would implement that action, according to a person familiar with the matter.

“The impact is likely to be limited and more symbolic while the financial sector is unlikely to be affected,” Sean Darby, Jefferies’ global equity strategist in Hong Kong, wrote in a research note. “We are not too surprised by the move and don’t expect the Hong Kong financial markets to be either.”

Here are some key events coming up:

Australia’s central bank is expected to keep its main policy programs unchanged on Tuesday. So too is the case for Canada, which has options to add stimulus but will probably stand pat on Wednesday to allow more time to evaluate the progress of policy action.In Europe, the ECB is expected to top up its rescue program with an additional 500 billion euros of asset purchases. Anything less than an expansion at Thursday’s meeting would be a big shock, Bloomberg Economics said.The U.S. labor market report on Friday will probably show American unemployment soared to 19.6% in May, the highest since the 1930s.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index rose 0.1% as of 10:50 a.m. in Tokyo. The index climbed 0.5% on Friday.Japan’s Topix index rose 0.5%.Hong Kong’s Hang Seng advanced 3.4%.South Korea’s Kospi index rose 1.3%.Australia’s S&P/ASX 200 Index gained 0.7%.Euro Stoxx 50 futures advanced 1.3%.

Currencies

The yen rose 0.1% to 107.68 per dollar.The euro bought $1.1135, up 0.3%.The offshore yuan rose 0.1% to 7.1263 per dollar.The Australian dollar climbed 0.9% to 67.27 U.S. cents.

Bonds

The yield on 10-year Treasuries rose one basis point to 0.66%.Australia’s 10-year yield was at 0.90%, up about one basis point.

Commodities

West Texas Intermediate crude fell 0.6% to $35.27 a barrel.Gold rose 0.4% to $1,737.21.

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The Villages’ policy on face masks presents a financial risk

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Scott Fenstermaker

Villages-news.com has reported on the new Recreation Department policy of not requiring masks for situations in recreation centers where social distancing is not feasible. In fact, the new policy has just turned the task of checking Villager ID’s into a potential suicide mission for employees.

Furthermore, if the staff, themselves, don’t wear masks, a sick, maskless ID checker could infect hundreds, and indirectly, thousands of Villagers. While this potential death and suffering has been discussed, at length, on this site, what has not appeared here is a discussion of the financial risk of the new policy.

In addition to the death and suffering that the new policy will likely cause, the new policy could jeopardize the financial solvency of our amenity system. Sick employees (or their survivors) will be filing worker compensation claims. Even more costly, sick Villagers (or their survivors) will be filing lawsuits against the amenity system for negligently not following the recommendation of both the CDC and virtually every other expert in the field.

I won’t get into the merit of such lawsuits (which will depend on the facts), the intricacies of the ownership and administration of the amenity system, or the effectiveness of masks. But do not think for a moment that such worker compensation claims and lawsuits will have no chance of succeeding. For people interested in learning more, here is a link to one of many articles that have appeared on the general subject: https://www.nytimes.com/2020/04/28/business/businesses-coronavirus-liability.html For more, Google: “COVID-19 business liability”.

Scott Fenstermaker is a resident of the Village of Winifred.

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Pandemic-related restaurant closures take an emotional and financial toll

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Michael Raviele agonized for hours over how to break the news to his loyal customers before finally announcing at 4:30 a.m. on May 15 that he was closing Il Gatto Nero, the Italian restaurant his father first opened some six decades prior.

“I did that road for 18 years — up and down, every single day,” said the man with a tattoo of the restaurant’s logo on his arm. “I worked there every single day.”

Restaurants across Canada — from local institutions to newer spots hustling to establish themselves — have closed permanently in recent weeks as the COVID-19 pandemic ravaged an industry already plagued by razor-thin margins. Their owners face not only the emotional loss of their business, but also often large debt, little savings and an uncertain future.

Il Gatto Nero started as an Italian social club featuring pool tables and espresso more than 60 years ago. Raviele joined the business in the early 90s and slowly added to the club’s repertoire with a pizza oven, sandwiches and other tweaks.

The club moved to Toronto’s College Street about 18 years ago. At the new location, they saw a lot of success — like when Italy won the FIFA World Cup in 2006 — as well as some down times — like the 2008 recession — that prompted Raviele and his father to dip into personal savings to keep the restaurant afloat. Raviele invested more money into the business in 2014 for a renovation and expanded to a second location, a small cafe in Etobicoke, in October 2019.

When COVID-19 hit and government ordered dining rooms to close, Raviele attempted to shift to take away, but eventually stopped. Bills piled up from utility companies.

“I obviously incurred some debt and debt that wasn’t there,” he said.

But uncertainty over the future of dining was the final nail in Il Gatto Nero’s coffin.

Raviele speculated he might be required to remove the restaurant’s 10 bar seats and slash his 65-seat capacity in half to comply with pending physical distancing rules, which would cripple his business.

“I don’t see a future for my business or for my family,” he said. “The model for opening any restaurant is based on feeding capacity versus space, and how many people can you do over the course of a night… I mean, if you have one bad weekend, it could be disastrous for many small business.”

He plans to focus on the small espresso bar, add a pizza oven and hustle to keep that business going, which he said he invested his second life into.

“I’m angry because I wanted to do something good and now the possibility of losing both is always there.”

Mohammed Bin Yahya, co-founder and chief executive at Plentea, found the coronavirus to be “just like the knock out punch” for his Toronto tea bar.

Before the pandemic, the company was struggling to pay some $5,000 in rent. When they shifted to takeaway to abide by health regulations amid the pandemic, foot traffic dropped dramatically.

The tea shop, which Bin Yahya opened in 2015 with dreams of growing to multiple locations, will close at the end of the month.

“The numbers. Straight up, the numbers don’t lie,” he said.

The company had to pay penalties when closing some of their accounts with cleaning companies, internet and phone providers, and others, he said.

“We are in debt,” he said, estimating they’ll owe some $40,000 in the end.

For now, he’s trying to minimize his expenses, and said he may have to find a side job and move in with family to help pay back the loans.

But he’s keeping the dream alive. Plentea will continue selling tea online, he said, and — for now — he’ll keep the equipment in storage with the hopes of opening again.

With nearly four decades in the food industry, 77-year-old Frances Wood’s retirement plan relied heavily on the Cajun-and-Creole food restaurant she co-owns, Southern Accent in Toronto. 

After 34 years in one location, Wood dipped into her nest egg to help cover a move to a new spot about three years ago. It took some time to build up a new customer base and Wood noticed in recent years, lucky restaurants made 10 per cent in profit.

Still, at the start of this year, she started seeing “the light at the end of the tunnel” in making the new location work.

She debated selling the restaurant after her five-year lease ended. But with about one-and-a-half years to go, COVID-19 hit.

Southern Accent also attempted take-away and delivery, but found with high delivery app fees, it was losing money each day it stayed open.

Wood and her co-owner decided to close permanently in April and have about $60,000 in loans and bills to pay back between them.

In what Wood called “a miracle,” their landlord released them from their roughly $10,000 monthly lease early, Wood said.

“I don’t know what we would have done. We would have to go personally bankrupt, I guess” had that not happened, she said.

The next phase of the septuagenarian’s life “doesn’t look very good.” Wood didn’t draw a salary for the past several years, but the restaurant did pay some of her expenses. She collects Old Age Security, the Canada Pension Plan and has some personal savings, but that hardly covers her monthly expenses.

“My livelihood, what I was expecting to have at the end of 37 years in the restaurant business was some money from the restaurant when I sold it to help with my senior years.”

She planned to sell the name and recipes, and help set the buyer up for success. She even kept the restaurant’s 1940s bar in case a buyer emerges. It’s tucked away in the garage.

Still, she considers herself lucky all things considered.

“I think, ‘Okay, I’m lucky. I have my health.’”

This report by The Canadian Press was first published May 31, 2020.

Aleksandra Sagan, The Canadian Press



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