THE WALL STREET JOURNAL. ***** Wednesday, April 8, 2020 |B11
MARKETS
Share-priceandindexperformanceTuesdaySource: FactSetAmerican AirlinesJetBlue AirwaysUnited AirlinesRoyal Caribbean CruisesAircarriersCruiselinesCarnivalNorwegian Cruise LineDowJones
IndustrialAverage–0.1%13.3%7.61.913.3%10.710.0pany, which had $4.5 billion in
assets under management at
the end of 2019, sold all equity
and bond positions in recent
weeks, opting instead for only
cash.
He remains skeptical that
the economy can make a fast
recovery once businesses begin
opening up and employees re-
turn to work.
“I’m having difficulty in un-
derstanding how a small busi-
ness that has gone bankrupt is
going to go back into business
because we have reached the
peak of infections,” Mr. Moraif
said.
Authorities have warned
that the coronavirus infections
in the U.S. and U.K. are likely
to worsen in the coming week.
Even in New York, where de-
mand for intensive-care units
has decreased, Mr. Cuomo said
Tuesday that the state re-
ported its highest number of
deaths in a single day. Nearly
12,000 people have died from
the virus across the U.S., and
the number of infected Ameri-
cans hovers below 400,000, ac-
cording to data from Johns
Hopkins University.
Even more, economic indi-
cators have shown that a deep
recession may be looming.
The Mortgage Bankers As-
sociation said Tuesday that
mortgage forbearance requests
surged in the second half of
March as millions of Ameri-
cans sought unemployment
benefits after the pandemic
shuttered businesses.
Travel and leisure stockswere again among the bright
spots in markets Tuesday.
American Airlines Grouprose
7.6%,JetBlue Airwaysjumped
13%, and United Airlines
added 1.9%.
Among cruise lines,Royal
Caribbean Cruisesgained 13%,
Carnivaljumped more 11% and
Norwegian Cruise Line Hold-
ingsrose 10%. All six stocks re-
main down more than 50% for
the year.
Meanwhile, in London,
EasyJetclimbed 15% after the
carrier tapped a U.K. govern-
ment-aid program for short-
term credit. The company’s
ability to access the funding
suggests that it could with-
stand the economic downturn,
provided that the spread of the
coronavirus continues to slow,
according to Michael Hewson,chief market analyst at broker-
age CMC Markets.
“Markets are pricing in a re-
turn to normality for airlines
sooner rather than later,” Mr.
Hewson said.
Global leaders and corpo-
rate executives have warned
this week that a U.S. recession
could be deep and severe.
Former Federal Reserve
Chairman Janet Yellen said
Monday in an interview on
CNBC that she expects the U.S.
economy to decline at least
30% in the second quarter. She
also said she was “afraid we
will see bankruptcies” and that
“companies may end up with
debt burdens that make them
unwilling to restore investment
spending or rehire workers.”
Still, some appetite for risk
among investors prompted in-vestors to sell the safest gov-
ernment bonds. The yield on
the 10-year U.S. Treasury note
rose to 0.735% from 0.675%
Monday. Yields rise as bond
prices fall.
Meanwhile, oil prices fell af-
ter starting the day higher.
Brent crude, the global gauge
of oil prices, slid 3.6% to $31.87
a barrel, as demand for oil has
fallen during the pandemic and
Russia and Saudi Arabia con-
tinue a price war.
Beyond the U.S., the pan-
continental Stoxx Europe 600
ended the day higher, rising
1.9%.
In Asia, Japan’s Nikkei 225,
Hong Kong’s Hang Seng Index
and China’s Shanghai Compos-
ite each rose more than 2%. In-
dia’s benchmark rose 9%. At
midday Wednesday in Tokyo,
the Nikkei was up 0.5%, the
Hang Seng was down 0.8% and
the Shanghai benchmark was
down 0.5%.
“People are trying to iden-
tify risks and opportunities
now,” said Bruce Pang, head of
macro and strategy research at
China Renaissance Securities.
“China’s case shows when
new infections peaked out, the
market would bottom out,’’ he
added, noting that the trend is
what some global investors
may now expect.
In the currency markets, the
WSJ Dollar Index, which mea-
sures the currency against a
basket of 16 others, fell 0.76, or
0.8%, to 94.18. The dollar fell
against the euro, British pound
and Japanese yen.Stocks ran out of steam in a
volatile trading session that
saw the Dow Jones Industrial
Average give up an early gain
of more than 900 points.
Major indexes appearedpoised to build on Monday’s
mammoth gains but wobbled
in the final hour of the trading
sessionand slid into the red as
the closing bell rang. Stocks
fromInteltoUnitedHealthto
Morgan Stanleyended lower
after rallying earlier in the day.
Much of the optimism was
tied to small signs of success
in the global fight against the
coronavirus pandemic. Stocks
were buoyed by an announce-
ment from New York Gov. An-
drew Cuomo, who said the
state—the hardest hit in the
U.S. by the virus—has pro-
jected that it is
reaching a pla-
teau of daily
hospitaliza-
tions. And globally, countries
including Spain have seen the
daily toll of new infections and
deaths slow.
Still, by the end of the day,
investors appeared unable to
put their faith in projections
that coronavirus hot spots had
turned a corner.
“This is slowly degrading
like the Titanic,” said Ken Mo-
raif, founder of Retirement
Planners of America. “The peo-
ple who are buying right now
don’t believe how bad this re-
ally is.”
The Dow industrials shed
26.13 points, or 0.1%, to finish
the day at 22653.86. The blue
chips rose as much as 4.1% ear-
lier in the session as they at-
tempted to build on Monday’s
7.7% gain. The S&P 500 lost
4.27 points, or 0.2%, to
2659.41.
Both indexes suffered their
steepest intraday reversals in
more than a decade: For the
Dow, Tuesday’s was the largest
blown gain since Oct. 14, 2008,
when the index climbed as
much as 5.7% before closing
down 0.8%
Both indexes are still down
about 20% from their mid-Feb-
ruary highs.
For weeks, investors have
parsed economic and health
data to determine how se-
verely the coronavirus pan-
demic will dent the economy.
Mr. Moraif said his com-Dow Deflates After 900-Point Gain
TUESDAY’S
MARKETSByCaitlin McCabe,
Anna Hirtenstein
andXie YuAirline stocks were again among the bright spots. American Airlines rose 7.6%, JetBlue jumped 13% and United added 1.9%.JOSHUA ROBERTS/REUTERSThe S&P 500 has climbed
6.9% this week and is on the
cusp of exiting from a bear
market by traditional defini-
tions, close to jumping 20%
from its March 23 low.
Through Tuesday, the S&P
500 was up 19% from that na-
dir.
Although that would be one
of the shortest bear markets
on record for the gauge, many
analysts are calling the recent
run a rally within a bear mar-
ket.
A quick exit would be a his-
torical anomaly.
Many economists are gird-
ing for a recession as the pan-
demic has shut down busi-
nesses around the world and
left many jobless.
Bear markets that are ac-
companied by a recession tend
to be more prolonged and last
about 11 months, according to
Bank of America analysts.
The U.S. stock market has
never reached its bottom in
less than six months after fall-
ing more than 30% and facing
a recession.
“Historical analogs suggest
the [S&P 500] could rally to
close to 3000, but still roll
over and touch new lows be-
fore staging a full-fledged re-
covery,” wrote Bank of Amer-
ica analysts in a research
note. “We think it’s instead
more likely that we haven’t
seen the bottom in equities
yet.”
Other recent rallies point to
a similar outcome.
The bank analyzed 26
three-day rallies in U.S. stocks
that topped 10%. Of those, 20
were followed by a fall to a
fresh low in the stock market.
The volatility market also
shows investors are pricing in
a quick decline in stock
swings, despite a looming re-
cession that will likely be
worse than the 2008 financial
crisis, according to the ana-
lysts.
The Cboe Volatility Index,
or VIX, peaked March 16 and
has recently fallen.
The options-based gauge
tends to rise when markets
are falling and investors are
reaching for insurancelike
contracts to hedge their port-
folios.
BYGUNJANBANERJI
Quick
Bear
Markets
Are Rare
AUCTION RESULTS
Here are the results of Tuesday's Treasury auction.
All bids are awarded at a single price at the market-
clearing yield. Rates are determined by the difference
between that price and the face value.
NINE-YEAR, 10-MONTH NOTES
Applications $60,928,517,900
Accepted bids $25,082,286,900
" noncompetitively $1,714,100
" foreign noncompetitively $0
Auction price (rate) 106.783664
(0.782%)
Interest rate 1.500%
Bids at clearing yield accepted 39.03%
Cusip number 912828Z94
The notes, dated April 15, 2020, mature on Feb. 15,
2030.
Saudi Arabia slashed its
prices and made moves to
boost production.
Traders and analysts are
waiting to see whether OPEC
and other oil-producing na-
tions can come up with a coor-
dinated response to mitigate
the recent blow to prices.
Measures to curb the spread
of the virus have battered de-
mand, while the price war has
worsened a global glut of oil.The world is running out of
storage, and analysts say such
prices are unsustainable for
producers.
Energy companies have
been hard-hit, withWhiting
Petroleum Corp. filing for
bankruptcy protection and
producers such asChevron
Corp. andDiamondback En-
ergyInc. pledging to lower
spending.
Continental ResourcesInc.is suspending its quarterly
dividend to conserve cash. The
company also plans to cut
back output around 30% in
April and May.
Meanwhile, traders expect
crude prices to remain volatile
until there is more clarity on
potential supply cuts.
“Every day to the next is a
complete unknown,” said Jon-
athan Wagner, senior energy
broker at Ion Energy Group.Oil prices continued to slide
Tuesday, erasing gains from
earlier in the day as traders
looked toward Thursday’s
meeting of the Organization of
the Petroleum Exporting
Countries and its allies.
U.S. crude futures fell 9.4%
to $23.63 a barrel, while
Brent, the global gauge of
prices, fell 3.6% to $31.87 a
barrel.
Crude prices plunged to
their lowest levels since 2002
last week
before surg-
ing Thurs-
day and Friday after President
Trump said Russia and Saudi
Arabia were close to reaching
a deal to cut oil production.
Prices then fell Monday af-
ter a virtual summit for OPEC
and other oil-producing coun-
tries, originally planned for
Monday, was postponed to
Thursday.
U.S. crude futures are down
61% so far this year, while
Brent is down 52%.
Investors are hoping the
meeting will signal an end to
the current oil-price war be-
tween Russia and Saudi Ara-
bia, which began when a deal
between OPEC and its allies
to cut output fell apart last
month. After Russia rejected
a Saudi-backed plan by OPEC
to cut crude output in re-
sponse to dwindling demand
due to the coronavirus crisis,
BYSARAHTOY
Crude Drops Ahead of OPEC Meeting on Price War
COMMODITIES
A summit of oil-producing nations is set for Thursday amid the market’s downturn. A refinery in Russia,ANDREY RUDAKOV/BLOOMBERG NEWSU.S. Oil Output
Expected to DropWASHINGTON—U.S. produc-
tion of crude oil will fall 13% by
year’s end, according to a gov-
ernment forecast Tuesday—
numbers the White House
hopes to use to persuade Saudi
Arabia and Russia to end their
price war, a senior administra-
tion official said.
Saudi Arabia, in a dispute
with Russia, has worsened a
global oil glut by ramping up
production as demand has
dropped because of the corona-
virus pandemic. Both countries
have said privately they are
open to reducing production
only if the U.S. also agrees to
mandate cutbacks.
Trump administration offi-
cials have shunned any at-
tempts at coordinating or even
passively sanctioning output
cuts from U.S. producers, con-
sidering it an intervention into
private enterprise. But they are
now trying to thread a diplo-
matic needle, potentially giving
foreign rivals the signal they
want, even without government
mandates.
The White House plans to
use the new production fore-
cast to show the market is
working and that U.S. oil pro-
ducers are ramping down, the
senior administration officialsaid.
“It does demonstrate that
the U.S. market is stabilizing
and moving to a smaller num-
ber,” the official said. “Whether
that’s satisfactory to the Rus-
sians and the Saudis is going to
be up to them to decide.”
The new forecast is from
the U.S. Energy Information Ad-
ministration, which said the U.S.
will produce 11 million barrels a
day over the fourth quarter,
down from just below 13 million
barrels a day during the first
quarter of 2020.
The U.S. is the world’s big-
gest oil producer, followed by
Saudi Arabia and Russia. Those
two countries are the leaders of
a 23-nation alliance known as
OPEC+ that had been managing
world oil supply. The alliance
broke up a month ago when
Saudi Arabia and Russia
changed course and decided to
flood the market with cheap
crude to take customers from
each other and dent the hold of
U.S. shale oil.
The EIA forecast comes
ahead of crucial meetings and
decisions. The Organization of
the Petroleum Exporting Coun-
tries and Russia-led allies are
holding a virtual gathering
Thursday to negotiate a truce
and debate curbs of 10 million
barrels a day. The Saudis are
also scheduled to set new selling
prices, a key market indicator.
—Timothy PukoWASHINGTON—Public com-
panies should disclose to
shareholders whether they
plan to tap coronavirus-related
bailout funds from the govern-
ment, the nation’s top securi-
ties regulator said Tuesday.
Speaking on CNBC, Securi-
ties and Exchange CommissionChairman Jay Clayton said in-
vestors are “thirsting for in-
formation” about how the
pandemic has affected compa-
nies’ earnings power and their
need for capital. The roughly
$2 trillion aid package passed
by Congress last month in-
cludes tens of billions of dol-
lars for airlines and cargo car-
riers, $17 billion for businessesdeemed critical to national se-
curity and almost $350 billion
for small businesses that need
financial aid to stay alive.
The need for bailout money
or other sources of cash is
“sensitive information,” Mr.
Clayton said. “I encourage
companies to get out there
[and] disclose where they
stand” to limit speculationabout the companies’ plans.
“Companies should be tell-
ing the market where they
stand from a capital needs
perspective,” Mr. Clayton said
later in a statement to The
Wall Street Journal. “That’s
fundamental. Those companies
seeking capital, whether from
private sector investors or the
government, should practicegood hygiene.”
Mr. Clayton said on CNBC
that information is flowing
across Wall Street about drugs
that could help combat
Covid-19, the disease caused
by coronavirus. Investors can
be expected to seek out infor-
mation about which drugs are
the most promising, he said.BYDAVEMICHAELSSEC Says Companies Should Disclose Need for Bailout Funds