Stocks rise as relief bill gets closer
NEW YORK — Stocks marched higher for a third straight day Friday as a massive coronavirus relief bill gets closer to passing Congress and Wall Street took some historically bad unemployment figures in stride.
The S&P 500 rose 6.2%, bringing its three-day rally to 17.6%. The Dow industrials have risen an even steeper 21.3% since Monday.
Analysts said the market shot higher Thursday because Wall Street knew the bad news on unemployment was coming, with 3.3 million new claims filed. The gains earlier this week came as Capitol Hill and the Federal Reserve promised an astonishing amount of aid for the economy and markets, hoping to support them as the outbreak causes more businesses to shut down by the day.
“There is no sugar coating these numbers — they are bad,” said Jamie Cox, managing partner for Harris Financial Group. “Markets have had several days to digest what everyone knew was coming; therefore, the market response to these numbers may differ than what people might expect.”
Administration mulls stake in airlines
The Trump administration is raising the possibility of the government getting ownership stakes in U.S. airlines in exchange for $25 billion in direct grants to help the carriers survive a downturn caused by the coronavirus pandemic, according to people familiar with the matter.
Details were unclear on Thursday, but one approach being considered by Treasury Secretary Steven Mnuchin is to give the government warrants — options to buy shares in airlines that accept grant money, the people said.
The issue is wrapped up in discussions between the Trump administration and Republicans and Democrats in Congress over a $2 trillion plan designed to soften the economic blow of the COVID-19 outbreak.
Automakers eye reopening of factories
DETROIT — Ford, Fiat Chrysler, Honda and Toyota took steps Thursday to restart North American factories that have been closed to protect workers from the coronavirus.
The plants would reopen in early or mid-April, restoring the largest source of cash for automakers that generally book revenue when they ship vehicles to dealerships.
Ford said it wants to reopen five North American assembly plants, starting with one in Mexico April 6 and continuing with four in the U.S. on April 14. The move was immediately met with skepticism by the United Auto Workers union, which represents 56,000 Ford factory workers.
Honda wants to reopen U.S. and Canadian factories on April 7, a week later than originally planned, while Toyota plans to restart North American plants on April 20. Fiat Chrysler intends to reopen U.S. and Canadian factories April 14 depending on state restrictions and plant readiness. General Motors says it hasn’t decided yet when factories would restart.
U.S. economy grows at 2.1% in 4th quarter
WASHINGTON — The economy grew by a moderate 2.1% in the fourth quarter of last year, but many economists believe that will be the last positive growth seen for some time as the country endures a sharp contraction due to the coronavirus.
The Commerce Department said Thursday in its third and final look at the fourth quarter that growth was unchanged from its previous estimate but that the components were slightly altered with consumer spending slightly stronger but government spending and business investment a bit lower.
Many economists believe GDP will turn negative in the current January-March quarter, based on the sudden stop to economic activity that is now occurring. Some see a drop of around 6% with much bigger declines in the second quarter.
“The final Q4 GDP report is nothing more than a nostalgic look in the rear-view mirror that confirmed the economy headed into a deep coronavirus-induced recession with softer momentum,” said Gregory Daco, chief economist at Oxford Economics.
Fed will provide unlimited lending
WASHINGTON — Jerome Powell says the Federal Reserve would provide essentially unlimited lending to support the economy as long as it is damaged by the viral outbreak.
The Fed chair said the bank’s efforts are focused on helping the economy recover quickly once the threat from the virus has passed.
The Fed has taken numerous steps this month to bolster lending and the economy. It has cut its benchmark interest rate to nearly zero, embarked on an unlimited bond-buying program to pump cash into the financial system, and set up several emergency programs intended to ensure that banks can keep lending to companies and city and state governments.
Powell said the Fed’s ability to lend is somewhat constrained by the amount of capital provide by the Treasury to offset any credit losses. He said the Fed can lend $10 for every $1 of cash that the Treasury provides.
The economic rescue bill approved by the Senate early Thursday includes $425 billion that the Treasury could use to backstop the Fed.