The Wall Street Journal - 09.03.2020

© 2020 Dow Jones & Company. All Rights Reserved. *** THE WALL STREET JOURNAL.** Monday, March 9, 2020 |B1

adding to their standard list of

demands for improvements in

companies’ environmental, so-

cial and governance, or ESG,

practices.

ESG represents a big oppor-

tunity—and a challenge—for in-

vestors.

Individual investors have

moved billions of dollars into

funds that prioritize issues like

The biggest activist hedge
funds are jumping on the wave
of socially responsible invest-
ing.
Elliott Management Corp.,
known for waging campaigns
for share buybacks and execu-
tive change, suggested in its re-
cent public letter to Evergy Inc.
that the utility reduce its car-
bon footprint.
In its February letter to man-
agement at Prudential PLC,
Third Point LLC highlighted
the excessive carbon footprint
it says is created by having a
London headquarters for the
British insurer’s American and
Asian businesses.
And Jeff Ubben, an activist
investor known for nudging
companies to focus on what
they are best at, has bought
into BP PLC as a vote of confi-
dence in the British oil giant’s
plan to eliminate most of its
carbon emissions.
In the latest trend in share-
holder activism, the firms are

TECHNOLOGY: EUROPE’S OLD MONEY HUNTS FOR STARTUPS B5

LastWeek: S&P 2972.37À0.61% S&PFIN g4.08% S&PIT À0.56% DJTRANS g4.60% WSJ$IDX g1.63% LIBOR3M 0.896 NIKKEI 20749.75g1.86% See more at WSJ.com/Markets

BUSINESS & FINANCE

thinking their calls now. The

emergence of the novel corona-

virus has disrupted everyday

life from China to Italy; sent

Treasury yields tumbling to re-

cord lows; and thrown a

wrench in Wall Street’s at-

tempts to forecast how the rest

of the year will unfold.

“2020 will be the year of the

virus,” said David Kelly, chief

global strategist at J.P. Morgan

Asset Management.

Mr. Kelly added that he had

observed mayhem while shop-

ping at warehouse retail chain

Costco Wholesale Corp. “We’re

not seeing [the epidemic’s] ef-

fects on the economy yet, but

we could. And in fact, we prob-

ably will,” he said.

Making matters worse:

Much of the selling in the past

couple of weeks appears to

have been driven by high-fre-

quency traders and algorithmic

strategies, which have exacer-

bated stock swings just after

the stock market’s open and

before the market’s close, said

Michael Drummey, head of

trading at Mizuho Americas

LLC. “The real buyers are

standing down just to wait and

see what happens,” Mr. Drum-

mey said.

So far, the ensuing rout

hasn’t been as bad as prior

downturns. At its lowest point

this year, the S&P 500 was

down 13% from its mid-Febru-

ary high—still several percent-

age points away from tipping

into what would qualify as a

bear market.

In 2011 and 2018, for exam-

ple, stocks came within a whis-

ker of entering bear-market

territory, which is defined as a

20% drop from the market’s re-

cent high.

The 2011 downdraft oc-

curred amid a downgrade of

the U.S. sovereign-credit rating

and a fight between the admin-

istration and Congress over the

country’s debt limit. In late

2018, stocks cratered as fears

grew about the impact of the

U.S.-China trade war and inter-

est-rate increases by the Fed-

eral Reserve.

Today, investors are grap-

pling with entirely different

problems. They are worried

about the likelihood that global

economic growth cools as a re-

sult of the coronavirus epi-

demic.

And markets are pricing in

an increasingly grim picture.

Shares of companies that rely

on consumers going about

their everyday activities have

tumbled: JPMorgan Chase &

Co. is down 22% for the year;

United Airlines Holdings Inc.

fell 41% and Kohl’s Corp. shed

32%.

Much of investors’ trepida-

tion stems from one indisput-

able fact: No one knows how

bad the epidemic will get.

Forecasts are as varied as

one could imagine. Under one

scenario, Goldman Sachs Group

Inc. sees economic growth

PleaseturntopageB2

Few saw it coming when the
stock market bottomed out 11
years ago.
Warren Buffett told CNBC in
March 2009 that the U.S. econ-
omy had “fallen off a cliff.”
State offices were flooded by
people filing for unemployment
benefits and analysts warned
the selling could last longer.
Against all odds, stocks
turned higher the next day.
And they have kept climbing to
records with relatively few pro-
longed interruptions—that is,
up until just a few weeks ago.
If investors started the year
fairly confident that the run
would continue for at least an-
other 12 months, many are re-

BYAKANEOTANI

Cancellation Places

SXSW Future in Doubt

sustainability and diversity, and

the activists are hoping to tap

into that stream of cash.

Meanwhile, the largest insti-

tutional investors, including

BlackRock Inc. and Vanguard

Group , have emphasized their

commitment to these issues.

Earlier this year, BlackRock,

which manages about $7 tril-

lion, said it is divesting itself of

thermal coal producers held in

actively managed portfolios,

adding that it will likely vote

against management and

boards of companies that don’t

disclose how climate change

could hurt their businesses.

Highlighting ESG could help

activists win the support of the

big funds that is crucial to their

success—and ignoring the is-

sues could make their backing

harder to win. BlackRock, Van-

guard and State Street Corp.

collectively hold roughly a fifth

of the S&P 500 through funds

they run for investors, so their

influence is essential in most

activism campaigns.

PleaseturntopageB2

BYCORRIEDRIEBUSCH

Activist Investors Join Push

To Build Up Do-Good Funds

Elliott Management’s Christine

O’Brien highlights its approach

to corporate governance.

KHOLOOD EID FOR THE WALL STREET JOURNAL

INSIDE

BUSINESS NEWS

Once a mainstay,

Tupperware fights

for its future

as a brand. B3

HEARD ON THE

STREET

Entertaining large

crowds becomes a

risky business. B9

Amid a Rout, Bull Market Turns 11 Years Old

1500

3000

2500

0

1000

500

2000

MARCH 9, 2009

(^2007201020152020)
0
–60
–50
–40
–30
–20
BEAR MARKET
CORRECTION
–10
%
0 100 200
TRADING DAYS
300
Bear market
Typically defined
as a decline of
20% or more
Bull market
A gain of 20%
or more
Corrections
Declines of 10% or more
within a bull market
Source: FactSet
1 2
S&P 500, bull and bear markets, with corrections S&P 500, percentage change and duration
of selected declines
3 2
1
In the11-year bull market, the index has gained 339%.
Thecurrent correction
is the seventh in the bull
market that began in March

2009. The index has fallen
      12% in 12 trading days since
      its record close on Feb. 19.

3 4

A 3-inch hook purchased for
56 cents around the end of
World War I could help deter-
mine whether PG&E Corp.
faces criminal charges for
starting the deadliest wildfire
in California history.
Known as a “C-hook,” the
badly worn piece of metal
broke on Nov. 8, 2018, drop-
ping a high-voltage electric
line that sparked the Camp
Fire, destroying the town of
Paradise and killing 85 people.

PG&E has hundreds of thou-

sands of hooks, manufactured

by a number of companies,

holding up power lines in its

70,000 square-mile-territory,

but the utility doesn’t have

good data on how old they are,

and is trying to replace many

of them.

Whether PG&E was negli-

gent in inspecting and replac-

ing these hooks has emerged

as a factor in a continuing Cal-

ifornia investigation that could

determine whether the com-

pany and some of its former

executives face criminal

charges for their role in wild-

fires.

“They’re excellent hooks if

you don’t leave them up in

towers for 100 years,” said

Mike Ramsey, the district at-

torney of California’s Butte

County who is leading the in-

vestigation along with the

state attorney general’s office.

Mr. Ramsey’s office sent

pieces of the broken hook to

the Federal Bureau of Investi-

gation’s laboratory in Quan-

tico, Va., for forensic examina-

tion. He expects to make a

decision soon on whether to

charge PG&E, individuals at

the company, or both.

The issue also has caught

the attention of a federal judge

overseeing PG&E’s criminal

probation from a safety-re-

lated violation stemming from

a 2010 natural-gas explosion.

The judge is demanding that

the company produce more in-

formation on what it knows

about the hooks and when it

learned it.

U.S. District Judge William

Alsup has asked PG&E dozens

of questions about its hooks

and inspection practices, and

expressed concern that the

company still wasn’t doing

enough to catch problems.

“You always fall back on:

‘We do inspections, we do in-

spections.’ But the inspections

aren’t working,” he told the

company in court.

A PG&E lawyer told Judge

Alsup that since the Camp

Fire, the company has replaced

thousands of hooks, some of

which had significant wear.

The company said an untold

number of worn hooks remain

in use.

PleaseturntopageB4

BYRUSSELLGOLD
ANDKATHERINEBLUNT

Broken Hook Is Key to PG&E Case

U.S. air-safety regulators

are poised to order electrical

wires relocated inside Boeing

Co. 737 MAX jets in the latest

complication and potential

delay for their return to com-

mercial service, according to

people briefed on the deliber-

ations.

The preliminary decision,

which hasn’t been reported

before, covers all of the

nearly 800 MAX airliners pro-

duced so far. The decision

could be affected by further

internal discussions and addi-

tional data the plane maker

may submit to the regulator.

But in the past few weeks,

these people said, Federal

Aviation Administration man-

agers and engineers have con-

cluded that the potentially

hazardous layout violates

wiring-safety standards in-

tended to prevent dangerous

short-circuits.

Under extreme circum-

stances, wiring failures could

cause flight-control systems

to sharply point down an air-

craft’s nose in a similar way

to the automated maneuvers

that brought down two MAX

jets and claimed 346 lives.

The Chicago plane maker,

according to people briefed

on the details, has argued

that the current wiring design

meets FAA and international

safety standards. Boeing also

has told the FAA that because

the risks are so remote—and

such a relatively small num-

ber of similar short-circuits

have occurred during the ex-

tensive history of the MAX’s

predecessor model—no wiring

redesign is necessary.

The emerging agency view,

however, is based on long-

standing regulations put in

place following electrical fires

and fuel-tank explosions on

commercial jets over decades.

FAA chief Steve Dickson

hasn’t yet made an official

determination. His top safety

and certification officials,

though, have received a

stream of recommendations

from agency technical experts

to require changes in wiring

locations, according to these

people. That advice has come

despite laboratory tests, re-

ports from outside consul-

tants and other material Boe-

ing assembled in a seemingly

unsuccessful bid to persuade

the FAA to reverse course.

The FAA’s move caps sev-

eral months of behind-the-

scenes maneuvering between

Boeing and the FAA that al-

ready has delayed crucial

PleaseturntopageB4

BYANDYPASZTOR

ANDANDREWTANGEL

Boeing

Faces Snag

Over MAX

Wiring

AUSTIN, Texas—The chief

executive of South by South-

west said organizers are un-

sure how they will keep the

festival going after the city

canceled it because of the

coronavirus, which he said

could cost them millions of

dollars.

Austin officials on Friday

pulled the plug on the tech,

music and movie event, citing

the threat of the coronavirus

outbreak.

The move dealt a devastat-

ing blow to the finances of the

festival, whose insurance

doesn’t cover disease-related

cancellations, South by South-

west co-founder and Chief Ex-

ecutive Roland Swenson said

in an interview Sunday.

Mr. Swenson stressed that

organizers have every inten-

tion of continuing South by

Southwest, or SXSW, which

has taken place every year

since its founding in 1987. But

he said organizers were trying

to assess how much funding it

would lose as a result of the

cancellation and were con-

cerned it could run in the tens

of millions of dollars.

“I am most worried about

my people and what this

means for their future, and I

don’t know what that is yet,”

Mr. Swenson said. “We are

planning to carry on and do

another event in 2021, but

how we’re going to do that I’m

not entirely sure.”

South by Southwest has

grown from a local music fes-

tival into a major global event,

bringing hundreds of thou-

sands of people from around

the world to Austin and pump-

ing some $355 million into its

economy, festival organizers

estimate.

The cancellation of this

year’s event, set to start

March 13, has left organizers

scrambling to reload and send

back semitrucks of supplies,

take down banners and sign-

age and halt travel plans for

speakers and attendees world-

wide.

“A lot of us are still in de-

nial, as we try to stop this

PleaseturntopageB5

BYELIZABETHFINDELL