US gross domestic product, the largest measure of goods and services produced in the economy, fell at an annual rate of 4.8% in the first quarter of the year, the Commerce Department announced on Wednesday. It was the first decline since 2014 and the worst quarterly contraction since the country experienced a deep recession over a decade ago.
Despite this, most of the quarter occurred before the coronavirus pandemic resulted in widespread layoffs and layoffs. Economists expect figures for the current quarter to show that G.D.P. procurement at an annual rate of 30% or more.
“They’re going to be the worst of our lives,” said Dan North, chief economist at Euler Hermes North America credit insurance company.
Treasury Secretary Steven Mnuchin said this week that the economy should “really bounce back “this summer as states lift orders for home stays and billions of dollars in federal emergency spending hit businesses and households. Most independent economists are much less optimistic.
Estimates released Wednesday are preliminary and based on incomplete data, especially for March. Some economists expect the final numbers, expected later this spring, to show an even larger decline.
Stocks rebounded on Wednesday, boosted by indications that a drug being tested as a possible treatment for Covid-19 may show progress, and as investors placed their hopes on the gradual reopening of the world’s major economies.
The gains came despite data showing that the US economy contracted the most since 2008 in the first quarter of the year. Earnings Reports Volkswagen, Samsung, Airbus, Boeing and other giant companies were also dark.
But investors have been shaking bad news about the economy for weeks as they focus on progress in efforts to contain the coronavirus pandemic. A steady climb has raised the S&P 500 by almost 30% since its March 23 low.
Wednesday’s trading had all the hallmarks of a rally fueled by hopes of a return to normalcy, with actions by airlines and cruise lines – two industries that depend on the end of restrictions and the return of travelers – among the best performing stocks in the S&P 500 Index. Oil producers have also rebounded with soaring crude oil prices.
A surge in the actions of large tech companies, which have an inordinate impact on the broader market, also helped. Alphabet increased by more than 8% the day after the publication of its first quarter results, and Facebook was more than 5% higher.
The S&P 500 gained around 3% and the main benchmarks in Europe were also higher.
The stock market mood has increased after the pharmacist Gilead Sciences said he was “aware of positive data” from a trial of his antiviral drug by the National Institute of Allergies and Infectious Diseases. The drug, remdesivir, is currently being tested for the treatment of Covid-19, the disease caused by the coronavirus.
Gilead did not develop it, and another study released Wednesday found that remdesivir offered no benefit to seriously ill patients in China with Covid-19.
But investors were quick to react to the progressive updates on the various trials underway.
Oil prices surged, gains accelerating after a weekly report on crude oil stocks showed that they increased less than expected. Investors are concerned about an overabundance of crude oil as demand for energy falls, as well as storage capacity in the United States. Crude oil West Texas Intermediate, the US benchmark, rose 30% to more than $ 16 a barrel on Wednesday. Crude oil Brent, the international benchmark, was trading at just over $ 23 a barrel, up about 14%.
Federal Reserve officials conclude meetings on Wednesday after two months of non-stop action to avert the financial calamity of the coronavirus. In the afternoon, President Jerome H. Powell is scheduled to hold a press conference to discuss the outlook for the Fed and perhaps reveal the following.
Fed efforts to protect the economy even exceeded its response to the 2008 financial crisis.
Officials lowered interest rates to the lowest in a few weeks, not a few months. They buy bonds at a record pace, inflating their balance sheet at 6.6 trillion dollars, against less than 4.2 trillion dollars in mid-February. And the Fed’s emergency lending authorities are going further this time: the central bank announced that it would buy municipal debt and lend to large and medium-sized enterprises, measures that it did not take in the days darkest of the last crisis.
Monetary intervention reflects the current economic shock. The coronavirus epidemic has gripped the world quickly and almost completely, halting the gears of modern capitalism – from schools and offices to amusement parks.
For all of the Fed’s activism, its most difficult job comes next. A first glimpse of the Fed’s playbook could come after Wednesday’s meeting. Policy makers may suggest that they will leave interest rates unchanged for months or years, and some economists believe they may offer advice on their bond plans.
One thing seems likely: Mr. Powell will commit to doing everything in his power to help the country through a difficult economic situation.
Lyft plans to lay off 17 percent of its employees, the company said in a regulatory brief, as the struggling transportation company battles a slowdown caused by the coronavirus pandemic.
The company informed staff on Wednesday of the cuts. Five percent of the workers will be on leave and the remaining workers will be reduced. Executive compensation will be reduced by 30%, that of vice-presidents by 20% and that of other workers by 10%.
A Lyft spokesperson declined to comment.
Company co-founders Logan Green and John Zimmer reassured employees in internal conversations that layoffs were not imminent and that the company had enough cash on hand to weather the crisis, said two people familiar with the discussions who spoke on condition of anonymity. .
But on Saturday, in an apparent error, a corporate lawyer sent a calendar invitation to several of the company’s 6,000 employees. The invitation was for a meeting called “Jetty,” and Lyft workers interpreted it as a sign that the company was planning to cut jobs. The invitation, which was viewed by the New York Times, quickly disappeared from employee calendars, but became a hot topic of debate among employees this week.
What Gilead said about the outlook for his drug.
Gilead Sciences said Wednesday he was “aware of the positive data” from a federal study of his investigational coronavirus drug, remdesivir.
Neither Gilead nor officials from the National Institute of Allergy and Infectious Disease, the federal research sponsor, provided further details. A spokesperson for the institute has confirmed plans to make an announcement next Wednesday.
The federal study included 400 patients who were hospitalized with Covid-19, the disease caused by the coronavirus, and randomly assigned to take remdesivir or a placebo. The results were scored on a scale from recovery to death.
Dr. Anthony S. Fauci, the lead epidemiologist in the federal government, praised the first results of the trials on Wednesday, raising hopes that it could help stem the growing death toll.
Meeting with journalists at the White House, Dr. Fauci described the study as very optimistic, although he warned that it still needed to be properly reviewed by peers.
Dr. Fauci said the trial suggested the drug could shorten the recovery time by about a third. “Although a 31% improvement doesn’t seem like a 100% knockout, it’s a very important proof of concept, because what it has proven is that a drug can block this virus “Said Dr. Fauci. “It’s very optimistic. “
Boeing said $ 16.9 billion in revenue in the first quarter of the year, down 26% from last year, the aviation industry stopped during the coronavirus pandemic. The company said on Wednesday that it plans to cut its workforce by about 10 percent, a reduction it hopes to achieve voluntarily, through buyouts and early retirement offers.
“I know this news is a blow in an already difficult period. I regret the impact it will have on many of you. I sincerely hope there is another way, “said David L. Calhoun, Managing Director of Boeing, in a note to the staff.
At the start of the year, Boeing and its subsidiaries employed more than 143,000 people.
Airlines delaying purchases, deliveries and maintenance, Boeing slowing production rates, including for the struggling 737 Max, and working to improve access to capital. He forecasts even larger cuts of 15% in commercial aircraft and services, which are the most exposed to the industry’s downturn.
“The pandemic is also a severe blow to our business – affecting demand from airline customers, continuity of production and stability of the supply chain,” said Calhoun.
Boeing does not expect air travel to return to pre-pandemic levels for at least two to three years and said it would likely take several more years for the long-term growth trend recovers.
Here are the other big companies that reported profits today.
The deluge of This week’s first quarter reports give investors a detailed look at how the onset of the coronavirus crisis has affected businesses. Of course, the results for the second quarter of this year may well be even more dismal.
General Electric said global sales fell 8% to $ 20.5 billion in the first quarter of the year on Wednesday. The coronavirus pandemic particularly affected the aviation division, which fell 13%. But the company’s healthcare sector, which doubled its production of ventilators and increased its manufacturing of other medical equipment used in the diagnosis and treatment of Covid-19, saw its revenues increase by 7%, to $ 5.3 billion.
The restaurant giant Yum Brands Comparable store sales of its brands fell 7% in the first quarter on Wednesday. Sales to K.F.C. shrunk by 8 percent, while Pizza Hut sales fell 11%. But sales to Taco bell – which provided driving service throughout the pandemic – increased by 1%.
Airbus, the European aviation giant, announced Wednesday a net loss of 481 million euros (about 522 million dollars) in the first quarter of 2020, reversal of a profit of 40 million euros in the same period there is one year old. The company said it delivered 122 commercial aircraft compared to 162 in the first quarter of 2019.
Volkswagen, the world’s largest automaker, said vehicle sales had fallen 25% in the first three months of the year, a vivid indication of the havoc wreaked by the coronavirus in the automotive industry. The Wolfsburg, Germany-based company said it sold 1.9 million vehicles in the first quarter, up from 2.6 million in the first quarter of 2019. Earnings also plummeted, falling more than 80% to 517 million euros, or $ 562 million.
Should agreements be made in the event of a pandemic?
Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez intensified Washington’s response to corporate mergers during the pandemic. The two Democrats introduced a bill on Tuesday that would temporarily block most mergers and acquisitions, a proposal similar to that made last week by Representative David Cicilline, the Democrat who heads the House’s antitrust panel.
It is unlikely to go to the Republican-controlled Senate, but it is part of a growing campaign to limit mergers during the coronavirus crisis, particularly acquisitions of small businesses by larger competitors, and most transactions involving private equity firms or hedge funds.
Catching up: here’s what’s going on.
Fiesta Restaurant Group, the parent company of Pollo Tropical and Taco cabana, said it was paying off a $ 15 million paycheck protection program loan. Several other large companies, including AutoNation, Shake Shack and the owner of Ruth’s Chris Steak House, also revealed that they are returning money they received from the small business loan program.
A group of several hundred Walmart workers are planning a walkout on Wednesday to protest what they say is unsafe working conditions at the retailer’s stores. Organized by the union group United for Respect, the “Call Out” aims to highlight how, according to some employees, the retailer failed to impose social distancing in many of its stores. Walmart said it provides personal protective equipment, such as masks, to all of its employees and limits store hours to control crowds.
The reports were provided by Taylor Lorenz, Ben Casselman, Jaclyn Peiser, Stanley Reed, Jack Ewing, Ben Dooley, Keith Bradsher, Jeanna Smialek, David Yaffe-Bellany, Jason Karaian, Kate Conger, Mike Isaac, Neal E. Boudette, Michael Corkery, Sapna Maheshwari, Gregory Schmidt, Mohammed Hadi, Katie Robertson, Carlos Tejada, Mike Ives and Kevin Granville.