Stock futures rise, extending rebound from coronavirus sell-off

Stock futures climbed slightly higher in overnight trading on Monday, continuing the market’s rebound from its deep rout triggered by the coronavirus pandemic.

Futures on the Dow Jones Industrial Average rose about 70 points. The S&P 500 futures also traded 10 points higher.

The overnight action followed a strong session on Wall Street, with the Dow jumping nearly 700 points led by an 8% pop in Johnson & Johnson after it announced a vaccine candidate for the coronavirus. The S&P 500 rallied 3.4%.

Investors embraced a more realistic government approach to contain the pandemic. President Donald Trump extended the timeline for social distancing guidelines to April 30, which many believe will reduce economic damage in the long run. 

“I think the market has established some type of bottom,” Tom Lee, head of research at Fundstrat Global Advisors, said on CNBC’s Markets in Turmoil Special on Monday. “I don’t know if this is October ’08 here; We still have some wood to chop.”

Stocks have managed to rally on concerning economic data including last week’s record number of jobless claims and Monday’s worse-than-expected manufacturing reading from the Dallas Fed, Lee noted.

“If we are rallying on bad news, I think that’s a sign that we are probably at a bottom,” Lee said.

The market also built on last week’s historic rally, where the Dow and S&P 500 posted their best three-day win streaks since the 1930s. With Monday’s gains, the Dow is now up 20% from its coronavirus sell-off low reached on March 23 while the S&P 500 has risen more than 17% from those levels. 

Still, the consensus on Wall Street calls for more selling before the market can hit a bottom. Historically, Bear markets are often punctuated by sharp bounces on their way down to a trough. 

“Last week’s double-digit gain for markets was a welcome relief rally, though market bottoms are rarely as clean as this one has been,” said Mark Hackett, Nationwide’s chief of investment research. “Markets will need to reflect more traditional interactions before confidence in a bottom can be reached.”

Investors continued to grapple with the worsening outbreak in the U.S. as the confirmed cases rose to more than 153,200, according to data from Johns Hopkins University. The U.S. has also officially become the country most affected. Trump said Sunday he hopes the country will “be well on our way to recovery” by June 1.

“We anticipate that market volatility will resist until liquidity, credit, and health risks have demonstrably passed,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “With major policy stimulus now in place in the U.S., we expect grim health and social news to dominate the next couple of weeks.”

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Growth of government, corporate debt a Faustian bargain

Guggenheim global CIO Scott Minerd will appear on CNBC’s “Fast Money” on Friday evening. The show begins at 5 p.m. Eastern time. 

“In Goethe’s 1831 drama ‘Faust,’ the devil persuades a bankrupt emperor to print and spend vast quantities of paper money as a short-term fix for his country’s fiscal problems. As a consequence, the empire ultimately unravels and descends into chaos. Today, governments that have relied upon quantitative easing (QE) instead of undertaking necessary structural reforms have arguably entered into the grandest Faustian bargain in financial history.” — Scott Minerd, “Global CIO Outlook,” August 21, 2012

With the global economy slipping into recession and many economists estimating second quarter GDP growth in the US will fall by 15% or more, the world is being confronted with the worst downturn since the 1930s.

In the post-Keynesian era, the standard policy solution to a business cycle downturn has been for governments to temporarily offset any decline in demand with increased fiscal stimulus and easy money. This prescription has provided for smaller and less frequent slowdowns. The ultimate consequence is that businesses and households have been carrying larger debt loads and smaller cash reserves, confident that policymakers will restrain the severity of the consequences created by any shock to the economy.

This process of accumulating larger debt balances after each successive downturn is often referred to as the great debt super cycle. Over the past decades, the successful use of Keynesian stabilization policies has increasingly raised the confidence of investors and creditors alike that government can successfully truncate the downside of any recession.

The massive debt accumulation by U.S. households following accommodative monetary policy and easy credit led to the housing bubble. The collapse of this bubble destabilized the global financial system and could only be halted with unorthodox monetary policy and fiscal programs that led to partial or total nationalization of many financial institutions and manufacturers.

In the wake of that crisis, governments themselves have become highly indebted, requiring virtually continuous support from central banks to acquire that debt to maintain low interest rates to support growth. The average ratio of government debt to GDP for G-7 economies reached 117% in 2019, up from 81% in 2007. Any attempt to taper or reverse the accumulation of government debt or other assets is quickly reversed as financial markets become unruly and economies slow.

Now faced with the exogenous shock of the COVID-19 pandemic, policymakers are returning to the same tools employed in the financial crisis a decade ago. They are desperately searching for programs that will fill the demand gap created by massive shutdowns and travel restrictions while simultaneously finding ways to prop up businesses that to a large degree are overly indebted as a result of artificially low interest rates from the past decade.

The ultimate policy goal is to stabilize the economy by salvaging industries that will need to provide employment when the pandemic ends. Given the high level of leverage in these companies, any gaps in cashflow will make it impossible for many companies to service their debt. The total debt of U.S. non-financial businesses has grown by about $6 trillion since 2007, while cash on hand has only grown by $1.7 trillion. A big driver of that debt growth has been buying back stock.

Lending these companies more money will only compound the long run problem resulting from over-leverage and make the companies even more vulnerable to failure in the long run.

We are experiencing the end game of the great debt super cycle. As the private sector has become increasingly over-levered, the baton is being passed to the public sector where resources are so strained that the printing press has become the last resort. At 4.6% of GDP, the U.S. federal budget deficit in FY 2019 was larger than anything we’ve seen outside of a recession or war.

The truth is that the only policy solution short of socialism is to accomplish a great transfer of wealth from investors to debtors. In the normal course, companies reorganize and creditors haircut debts on a case by case basis. This process, however, is time consuming and expensive. Given the systemic nature of the current crisis, the sheer volume of reorganizations would swamp the financial and legal systems and large defaults would be followed by asset liquidations that would depress the value of collateral backing other loans and likely set off a downward spiral.

Another answer is negative interest rates, where creditors accept a slow erosion of value. The hurdle to successfully implement this solution expeditiously seems completely unrealistic. To reach levels of negative interest rates that would effect a solution would require a rapid shift to a cashless global society and an overhaul of regulation around pension funds and the insurance industry, not to mention the logistical challenges of immediately implementing the systems throughout the financial industry.

Of course, there remains a tried and true method to achieve this policy: debasement. The process of inflating prices would result in shifting wealth from investors to creditors. Many believe inflation is dead and such a policy would not work. The question of how to succeed in raising the price level is more a degree of commitment than ability.

By quickly turning up the printing presses, global central banks would need to provide reserves at a faster rate than the collapse in the velocity of money. This is a delicate exercise and one that would be difficult to execute successfully.

The risks on both sides is not moving quickly enough and overdoing it. If there is too little money made available, the prices of assets used as collateral backing loans will spiral downward. If there is too much, inflation will spiral out of control.

Almost eight years ago, I wrote of the Faustian bargain in which policy makers had engaged to solve the financial crisis. The awful consequence of these policies is that the bill may now be coming due.

New Trump mileage standards to gut Obama climate effort

President Donald Trump is poised to roll back ambitious Obama-era vehicle mileage standards and raise the ceiling on damaging fossil fuel emissions for years to come, gutting one of the United States’ biggest efforts against climate change.

The Trump administration is expected to release a final rule Tuesday on mileage standards through 2026. The change — making good on the rollback after two years of Trump threatening and fighting states and a faction of automakers that opposed the move — waters down a tough Obama mileage standard that would have encouraged automakers to ramp up production of electric vehicles and more fuel-efficient gas and diesel vehicles.

“When finalized, the rule will benefit our economy, will improve the U.S. fleet’s fuel economy, will make vehicles more affordable, and will save lives by increasing the safety of new vehicles,” EPA spokeswoman Corry Schiermeyer said Monday, ahead of the expected release.

Opponents contend the change — gutting his predecessor’s legacy effort against climate-changing fossil fuel emissions — appears driven by Trump’s push to undo regulatory initiatives of former President Barack Obama, and say even the administration has had difficulty pointing to the kind of specific, demonstrable benefits to drivers, public health and safety or the economy that normally accompany standards changes.

The Trump administration says the looser mileage standards will allow consumers to keep buying the less fuel-efficient SUVs that U.S. drivers have favored for years. Opponents say it will kill several hundred more Americans a year through dirtier air, compared to the Obama standards.

Even “given the catastrophe they’re in with the coronavirus, they’re pursuing a policy that’s going to hurt public health and kill people,” said Chet France, a former 39-year veteran of the Environmental Protection Agency, where he served as a senior official over emissions and mileage standards.

“This is first time that an administration has pursued a policy that will net negative benefit for society and reduce fuel savings,” France said.

Delaware Sen. Tom Carper, the senior Democrat on the Senate Environmental and Public Works Committee, called it “the height of irresponsibility for this administration to finalize a rollback that will lead to dirtier air while our country is working around the clock to respond to a respiratory pandemic whose effects may be exacerbated by air pollution.

“We should be enacting forward-looking environmental policy, not tying our country’s future to the dirty vehicles of the past,” Carper said.

In Phoenix, Arizona, meanwhile, resident Columba Sainz expressed disappointment at the prospect of losing the Obama-era rule, which she had hoped would allow her preschool-age children to break away from TV indoors and play outside more. Sainz reluctantly limited her daughter to a half-hour at the park daily, after the girl developed asthma, at age 3, at their home a few minutes from a freeway.

“I cried so many times,” Sainz said. “How do you tell your daughter she can’t be outside because of air pollution?”

Trump’s Cabinet heads have continued a push to roll back public health and environment regulations despite the coronavirus outbreak riveting the world’s attention. The administration — like others before it — is facing procedural rules that will make changes adopted before the last six months of Trump’s current term tougher to throw out, even if the White House changes occupants.

The National Highway Traffic Safety Administration, which has been the main agency drawing up the new rules, did not immediately respond to a request for comment Monday.

The standards have split the auto industry with Ford, BMW, Honda and Volkswagen siding with California and agreeing to higher standards. Most other automakers contend the Obama-era standards were enacted hastily and will be impossible to meet because consumers have shifted dramatically away from efficient cars to SUVs and trucks.

California and about a dozen other states say they will continue resisting the Trump mileage standards in court.
Last year, 72% of the new vehicles purchased by U.S. consumers were trucks or SUVS. It was 51% when the current standards went into effect in 2012.

The Obama administration mandated 5% annual increases in fuel economy. Leaked versions of the Trump administration’s latest proposal show a 1.5% annual increase, backing off from its initial proposal simply to stop mandating increases in fuel efficiency after 2020.

The transportation sector is the nation’s largest source of climate-changing emissions.

John Bozzella, CEO of the Alliance for Automotive Innovation, a trade group representing automakers, said the industry still wants middle ground between the two standards, and it supports year-over-year mileage increases. But he says the Obama-era standards are outdated due to the drastic shift to trucks and SUVs.

The Trump administration standards are likely to cause havoc in the auto industry because due to expected legal challenges, automakers won’t know which standards they will have to obey.

“It will be extraordinarily disruptive,” said Richard J. Pierce Jr., a law professor at George Washington University who specializes in government regulations.

States and environmental groups will challenge the Trump rules, and a U.S. District Court likely will issue a temporary order shelving them until it decides whether they are legal. The temporary order likely will be challenged with the Supreme Court, which in recent cases has voted 5-4 that a District judge can’t issue such a nationwide order, Pierce said. But the nation’s highest court could also keep the order in effect if it determines the groups challenging the Trump standards are likely to win.

“We’re talking quite a long time, one to three years anyway, before we can expect to get a final decision on the merits,” Pierce said.

Larry Fink says economy will recover from coronavirus

Larry Fink

Olivia Michael | CNBC

Larry Fink, CEO of the world’s biggest asset manager BlackRock, told shareholders that the economy will recover from the coronavirus pandemic, and when it does, there will be “tremendous opportunities” to be had. 

“In my 44 years in finance, I have never experienced anything like this,” FInk said in an annual letter to shareholders, citing the mounting cost of the virus to human life, markets and businesses small and large. 

“As dramatic as this has been, I do believe that the economy will recover steadily, in part because this
situation lacks some of the obstacles to recovery of a typical financial crisis,” Fink said. “Central banks are moving quickly to address problems in credit markets, and governments are now acting aggressively to enact fiscal stimulus.”

“At BlackRock, we take a long-term view of markets, and we take a long-term view in the way we run our
company,” he said. “The world will get through this crisis. The economy will recover. And for those investors who
keep their eyes not on the shaky ground at our feet, but on the horizon ahead, there are tremendous
opportunities to be had in today’s markets.

Please check for updates.

Dow up 500, J&J vaccine hope, Worst quarter ever?

Stocks opened higher on Monday, attempting to build off of last week’s historic rally, where the Dow Jones Industrial Average and S&P 500 post their best 3-day win streaks since the 1930s. Sentiment was helped after President Donald Trump said national social distancing guidelines have been extended to April 30 and by optimism around a coronavirus treatment. 

This is a live blog. Check back for updates.

2:37 pm: Oil drops to 18-year low as global demand evaporates

U.S. oil dropped to an 18-year low on Monday as demand continues to evaporate and as Saudi Arabia and other OPEC+ nations prepare to ramp up production. With much of the world in lockdown as the coronavirus pandemic rages on, demand for oil has fallen off a cliff. People aren’t traveling and business has slowed, reducing the need for jet fuel and gasoline.
U.S. West Texas Intermediate crude futures fell 6.6%, or $1.42, to settle at $20.09, its lowest level since February 2002. Earlier in the session, the contract shed more than 9% to trade at a session low of $19.27. International benchmark Brent crude fell 9.2% to trade at $22.63 per barrel, a price last seen in 2002.
Despite WTI’s 55% slide this month, some analysts think there could be even more downside ahead. Raymond James analyst John Freeman said on Monday that a “nightmarish scenario” has been created and crude could “test the $10/bbl threshold.” — Stevens

1:34 pm: ‘Too late’ to stop further price weakness for oil, McNally says

Discussions between the United States and Russia about oil production are the best way to approach the global price war, Rapidan Energy president Bob McNally said on “The Exchange,” but the talks are too late to keep prices from falling further and global storage being filled. Futures contracts for the U.S. benchmark West Texas International briefly traded below $20 per barrel on Monday. “It’s too late to avoid mammoth stock builds and further price weakness, in my view. We’re really debating here how and when we come out of this,” McNally said. — Pound

1:17 pm: Volatility Index falls below 60

The Cboe Volatility Index fell nearly seven points to trade at 58.82 on Monday. The index, which measures the future volatility of the S&P 500 implied by options trades, has not closed below 60 since March 13. The index, which goes back to 1990, notched an all-time closing high of 82.69 on March 16. — Pound

11:38 am: Stocks accelerate gains

Stocks added to their gains in midday trading, with the Dow Jones Industrial Average rising more than 500 points. The S&P 500 and Nasdaq rose 2.3% and 2.67%, respectively. — Fitzgerald 

11:26 am: Worst quarter ever?

The S&P 500 and Dow Jones Industrial Average are on pace for their worst first quarter ever.

  • S&P 500 is down over 21% this quarter, on pace for its worst quarter since the fourth quarter of 2008 when the S&P lost 22.56% and its worst first quarter ever
  • Dow Jones Industrial Average is down over 24% on pace for its worst quarter since the fourth quarter of 1987 when the Dow lost 25.32% and its worst first quarter ever
  • Russell 2,000 small caps on pace for worst quarter ever
  • Dow Transports are down 30.3% this quarter on pace for their worst ever (back through CNBC’s history to 1978) — Francolla, Fitzgerald 

11:05 am: Boeing craters 11%, drags down the Dow

Shares of airplane maker Boeing fell more than 11% on Monday, the biggest drag on the Dow Jones Industrial Average, which attempted a rally. Boeing’s stock has lost nearly half of its value this month alone, as the coronavirus has dented the travel and aerospace industry. Despite President Donald Trump saying the government would support Boeing, a top U.S. defense contractor and one of the two biggest airplane makers in the world, the stock has continued to crater on fears of a continued shutdown of the aviation industry. Last week, Boeing stock gained 70% on hopes of a government bailout, but Monday’s sell-off demonstrates the rebound may be overdone.  — Fitzgerald 

10:42 am: Cramer warns short-sellers against doubting scientists

CNBC’s Jim Cramer argued that stock market short-sellers are unwisely doubting the ability of scientists to slow the spread of COVID-19. “This is a day where you say, if I’m short I’m betting against science, not betting against the lackadaisical attitude of many people in the country, ” Cramer said on “Squawk on the Street.” —Stankiewicz

10:35 am: Citrix shares hit record as company benefits from working-from-home trend

Shares of Citrix Systems rose 1.2% on Monday to an all-time high since its IPO in 1995. Citrix offers virtual-desktop technology that makes it possible for employees to access corporate programs when they’re offsite. The company has seen a surge in demand as the coronavirus pandemic forced more and more people to work from home. The stock has soared 28% in 2020, while the broad market suffered a historic sell-off. — Li

10:33 am: February pending home sales jump over 9% annually, ahead of major coronavirus impact

Homebuyer demand was strengthening markedly just before COVID-19 began its spread across the U.S. Pending home sales, which measure signed contracts on existing homes, rose a stronger-than-expected 2.4% in February compared with January. Sales were up a steep 9.4% annually, according to the National Association of Realtors. That is the highest pace in exactly three years. —Olick 

10:13 am: Analysts upgrade defensive stocks, including Procter & Gamble and Northrop Grumman, as coronavirus shutdown is extended

  • Jefferies upgraded Procter & Gamble and Kimberly-Clark to buy from hold.
  • Bernstein upgraded Northrop Grumman to outperform from market perform.
  • BMO upgraded Alphabet to outperform from market perform.
  • Wells Fargo upgraded Nike, Canada Goose, Ulta and TJX Companies to overweight from equal weight.
  • Raymond James upgraded Amgen to outperform from market perform.
  • RBC downgraded Marriott to sector perform from outperform.
  • Goldman Sachs upgraded Sherwin Williams to buy from neutral and added it to the firm’s conviction buy list.
  • Gordon Haskett downgraded 3M to underperform from hold.
  • Berenberg upgraded Hostess Brands to buy from hold.
  • Stifel upgraded Mondelez to buy from hold. —Bloom

10:11 am: El-Erian says ‘we’re not in an all clear’ yet

Economist Mohamed El-Erian told CNBC on Monday that investors should not buy the indexes yet, but said that selective buying of individual stocks could work. “If you feel it’s the all clear, go out and buy the index,” the chief economic advisor at Allianz said on “Squawk Box.” But he said, “We’re not in an all clear.” El-Erian, former CEO of investment giant Pimco, said he feels that the time of “selling everything” passed a few weeks ago. — Stankiewicz

9:59 am: Bank stocks slip in early trading

9:39 am: Consumer confidence stabilizes over the weekend, says Morning Consult

9:30 am: Stocks open higher, extending last week’s strength

After a volatile overnight trading session in the futures market, stocks opened higher on Monday. The Dow rose 203 points for a 0.9% gain, while the S&P 500 and Nasdaq Composite gained 1.3% and 1.4%, respectively. Stocks are extending last week’s strength after President Trump said on Sunday that the social distancing guidelines will remain in place until April 30, which could help curb the long-term economic damages from the coronavirus. – Stevens

9:22 am: Johnson & Johnson says human testing of its coronavirus vaccine to begin by September

Johnson & Johnson said human testing of its experimental vaccine for the coronavirus would begin by September and that it could be available for emergency use authorization in early 2021.

J&J also said it has committed more than $1 billion of investment along with U.S. agency Biomedical Advanced Research and Development Authority, which is part of the Department of Health and Human Services, to co-fund vaccine research. — Feuer

8:52 am: RBC remains ‘skeptical’ about ‘durability’ of last week’s rebound

The Dow and S&P 500 are coming off their best weeks since 1938 and 2009, respectively, but RBC said the rally may not last. “We remain skeptical about the durability of last week’s rebound,” head of U.S. equity strategy Lori Calvasina said in a note to clients Monday. The firm said the S&P 500 could reach 2,730 – 7% above where it closed Friday – before turning lower again. – Stevens

8:45 am: General Motors rises more than 3.5% in early trading

GM shares rose 4.2% in premarket trading as of 8:45 a.m. ET, signaling a partial bounce in the automaker’s fortunes after a slide of nearly 43% over the last six months. The pop in General Motors equity comes less than 24 hours after President Donald Trump praised the company on Sunday after the company announced it’s begun making badly needed ventilators. “General Motors is doing a fantastic job. I don’t think we need to worry about General Motors,” he said Sunday.

Trump had lambasted GM before Sunday for dragging its feet in negotiations and had accused the company of “wasting time.” The president on Friday invoked the Defense Production Act to force the company to begin making the equipment. – Franck

8:34 am: U.S. oil drops more than 6%, briefly breaks below $20

Oil is coming off its fifth straight week of declines, and prices dropped again on Monday as demand continues to evaporate. U.S. West Texas Intermediate crude dropped 6.5% to trade at $20.12 per barrel, after earlier trading as low as $19.92 per barrel. International benchmark Brent crude shed 9% to trade at $22.82, after previously hitting a more than 17-year low of $22.58. Oil demand has fallen as the coronavirus outbreak has halted travel and slowed business activity worldwide. On Sunday President Donald Trump said he was extending the country’s social distancing guidelines through April 30, sparking new fears about the impact on crude. CNBC’s Jim Cramer said Sunday night in a tweet that if WTI trades below the $20 mark it will trigger “big algo selling.” – Stevens

8:27 am: Congress rumored to be working on fourth stimulus package

Even with last week’s record-breaking economic package signed, congressional lawmakers of both parties are already sketching another emergency spending bill to prevent a depression. Though debate isn’t expected to begin on a fourth package until April at the earliest, U.S. legislators remain concerned about stressed state-government budgets and ensuring the benefits of the third bill are sustained for those furloughed or who have lost their jobs. President Donald Trump signed a $2 trillion coronavirus relief bill on Friday that includes one-time payments to individuals, reinforced unemployment insurance and additional health-care funding. — Franck

8:24 am: Don’t expect a ‘V’ recovery as economy recovers from coronavirus, Boockvar says

Society will change in ways it hasn’t since the Sept. 11 terror attacks, meaning that the recovery may not take a “V” shape, according to Peter Boockvar, chief investment officer at Bleakley Advisory Group . The world ahead will focus on disease prevention where “restaurants will likely have less tables. Maybe for a time airlines won’t sell middle row seats and we’ll just have window and aisle. Those without the antibodies will be walking around with masks, we won’t be shaking hands, [Purell] will be everywhere, there will be spacing on lines, ZOOM becomes the preferred choice of meeting venue, etc…” Boockvar said in a note. He added that he thinks growth will be “gradual” as companies are more interested in building cash balances than spending on personnel and where “we can say goodbye to many stock buyback plans.” Stocks also could be slower to recover as investors are less willing to pay up for earnings and the Fed’s efforts are less effective. – Cox

8:04 am: Stocks exposed to COVID-19 slump in premarket trading

Companies with outsized exposure to the novel coronavirus, and its spread, slumped again in premarket trading Monday after the number of U.S. cases jumped again over the weekend. Cruise line companies Carnival and Norwegian dropped 10% and 9% respectively. American, Southwest and United Airlines fell 6%, 4.4% and 8.1%. Expedia and car-rental company Hertz dropped 0.6% and 0.5%. — Franck

8:02 am: Alphabet rises on BMO upgrade

Shares of Google-parent company Alphabet rose more than 1% in premarket trading on Monday after BMO upgraded the stock to “outperform” from “market perform.” “We expect our mega-caps to be popular upon rebound, and we think there are important relative fundamental differences that nudge GOOGL into Outperform territory,” BMO analyst Daniel Salmon said in a note on Monday. The bank said it favors Alphabet over Facebook for the company’s higher exposure to larger enterprises, as well as its YouTube subscription business which is benefiting from consumers staying at home. BMO kept its 12-month price target of $1,400 on Alphabet, representing a 26% gain from Friday’s close of $1,110. – Li

7:51 am: Abbott surges after approval of five-minute test

Shares of Abbott rose 10% in premarket trading after the company received an emergency use authorization for its new coronavirus test. The test is designed to deliver positive test results within 5 minutes and negative results within 13 minutes. The company said it plans to ship the tests to some health care providers this week. — Pound

7:48 am: The US economy at a standstill, satellite imagery shows

The coronavirus pandemic has brought U.S. business and consumer activity to a halt, with every sector feeling the effects of most of the country’s workforce staying home. With few official measures available to gauge the scope of the economic damage, satellite imagery and alternative data show the widespread effects of the current nationwide isolation recommendations. The U.S. situation is stark: Airplanes are parked on unused runways, the busiest highways are empty during rush hour, resorts have become ghost towns, ports are seeing sharp drops in shipping activity and more. – Sheetz

7:46 am: Goldman says the market won’t bottom until these three things happen

For investors wondering if last week’s big bounce signaled a bottom, Goldman Sachs warned that more selling is ahead and three things need to occur before the market hits a turning point. “A three-part checklist for a sustained rally: (1)Slowing viral spread; (2) Evidence that fiscal and monetary policy stimulus is working; and (3) A bottoming in investor positioning and flows,” said David Kostin, Goldman’s chief U.S. equity strategist.

Goldman said sharp bounces like last week’s are common during bear markets. During the financial crisis, the S&P 500 experienced six bounces of 9% or more between September and December 2008, with some rallies as large as 19%. However, the actual market bottom did not occur until March 2009, Kostin said. – Li

7:43 am: Distancing guidelines extended through April

President Donald Trump announced Sunday that the social distancing guidelines from the Centers for Disease Control and Prevention have been extended until April 30. Trump said his previous statements about the country lifting the Guidelines on Easter, which is April 12, were an “aspiration.” White House health advisor Anthony Fauci said Sunday that the country could see between 100,000 and 200,000 deaths from the pandemic. — Pound

7:24 am: Dow tries to extend gains after best week since 1938

U.S. stock index futures were little changed ahead of Monday’s open as markets look to extend last week’s strength. While stocks moved lower on Friday, the major averages still managed to post gains for the week — and then some. It was the Dow Jones Industrial Average’s best week since 1938, while the S&P 500 and Nasdaq Composite registered their largest weekly jump since 2009.

Investors cheered the $2 trillion stimulus package aimed at combating the coronavirus-induced economic slowdown, as well as actions from the Federal Reserve, which include an open-ended asset-purchase program.

But volatility remains the name of the game. Some Street strategists say the bottom is in, while others believe stocks are in for more pain ahead as the worldwide economic impacts of the pandemic continue to reverberate. The United States now has the greatest number of coronavirus cases worldwide, and on Sunday night President Donald Trump said he was extending the national social distancing guidelines to April 30. He had previously said he hoped the economy would “open” back up by Easter Sunday on April 12.

On Monday, the Dow was set to open 25 points lower, while stock futures pointed to small gains for the S&P 500 and Nasdaq. Futures were volatile once again in overnight trading. – Stevens

CNBC’s Michael Sheetz, Thomas Franck, Jeffrey Cox, Kevin Stankiewicz, Maggie Fitzgerald and William Feuer contributed reporting.

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Gov. Cuomo welcomes USNS Comfort to NYC

Gov. Andrew Cuomo on Monday welcomed the arrival of a Navy hospital ship that will relieve New York hospitals dealing with a rapidly expanding load of coronavirus patients.

The USNS Comfort will provide roughly 1,000 hospital beds, and 1,200 personnel to New York, Cuomo said on Twitter. It will be used to treat patients who don’t have COVID-19 to free up other hospital rooms for coronavirus patients, the governor has previously said.

President Donald Trump ordered the dispatch earlier this month of the USNS Comfort to New York and her twin, the USNS Mercy, to Los Angeles to assist with the outbreak there.

The USNS Mercy arrived in Los Angeles last Friday.

The vessels, which were transformed from hulking oil tankers, are nearly three football fields long and 10 stories high, making them the largest hospital ships in the world.

Cuomo has repeatedly warned that the coronavirus epidemic in New York threatens to overwhelm the health-care system.

Last week, he said the state estimates it will need 140,000 hospital beds by early to mid-April. The state normally has about 53,000 beds, he said. 

Temporary additions to the state’s hospital system, such as the use of the Comfort, are aimed at boosting the state’s capacity to treat patients.

New York is the hardest-hit part of the country so far, accounting for almost half of the more than 143,000 COVID-19 cases in the U.S. The virus has infected more than 60,600 people in New York, according to Johns Hopkins University, and killed at least 2,571 people across the U.S. 

As of Sunday night, local health officials confirmed more than 33,400 COVID-19 cases in New York City alone, comprising almost a quarter of all cases in the U.S.

The state has taken a number of steps to increase hospital capacity in the face of the pandemic.

Last week, the Federal Emergency Management Agency and the New York National Guard converted the Jacob K. Javits Center, which normally hosts events such as New York Comic Con, into four temporary hospitals.

The Army Corp of Engineers has been called in to identify other sites around the city and state that could be converted to help increase the state’s hospital capacity. 

On Sunday, New York City Mayor Bill de Blasio announced the construction of an emergency field hospital in Central Park. That project is due to be completed by Tuesday. 

“We need to triple our hospital bed capacity in New York City by May,” de Blasio said in front of the Comfort on Monday. “It’s a daunting task, but we got a big, big boost with the arrival of the Comfort. This is like adding a whole ‘nother hospital to New York City.”

Both the Comfort and the Mercy have side ports to take on patients at sea as well as helicopter decks for air transport. The ships are so massive, each would be tantamount to the fourth-biggest hospital in the United States.

Each vessel is equipped with 12 operating rooms, a blood bank, a medical laboratory, a pharmacy, an optometry lab and a CT scanner.

Each has 15 patient wards, 80 ICU beds and 10 elevators to transfer patients between decks. 

— CNBC’s Amanda Macias contributed to this report.

Johnson & Johnson, Eldorado Resorts, Regeneron

A Johnson & Johnson building is shown in Irvine, California.

Mike Blake | Reuters

Check out the companies making headlines midday Monday:

Johnson & Johnson — Johnson & Johnson shares jumped more than 7% after the company announced it has a coronavirus vaccine candidate, noting that human testing on the medication will begin in September.

Eldorado Resorts, Caesars Entertainment — Eldorado Resorts and Caesars Entertainment tumbled 15% and 9%, respectively, extending a deep rout in casino stocks as the coronavirus pandemic forced these facilities to shut doors. Last year, Eldorado announced it has agreed to buy Caesars for about $8.5 billion in cash and stock, but regulators are delaying the merger due to the disruptions caused by the coronavirus outbreak. Shares of Eldorado and Caesars have lost 78% and 54% this year, respectively.

Regeneron — Regeneron shares rose more than 4% after the biotech company, along with Sanofi, announced it is expanding a clinical trial for a potential coronavirus treatment using a rheumatoid arthritis drug.

LaZBoy — The furniture company announced that it was suspending production and slashing jobs due to the coronavirus crisis, and its stock fell 3.2% Monday. LaZBoy is furloughing 70% of its workforce, and it also eliminated its dividend for June and terminated its stock buyback program. The company will also pause processing and shipping of new online orders.

Tegna — Shares of the media company plummeted more than 23% after the company announced that the coronavirus crisis led two potential acquirers to end discussions. Apollo Global Management had reportedly offered $20 per share for the company. The stock was trading just above $10 share on Monday.

Amgen — An analyst at Raymond James upgraded Amgen to outperform from market perform, sending the stock up 3.7%. “We think that management already provided conservative guidance for 2020 during the 4Q19 earnings call, and general disruption as a result of the COVID-19 pandemic would not be outsized relative to Amgen’s peer group,” the analyst said.

Marriott International — The hotel company slid more than 1% after RBC Capital Markets downgraded the stock from outperform to sector perform. The firm also slashed its price target to $97 from $148, citing the ongoing impact of the coronavirus. The new target is about 26% above where the stock currently trades.

Apple — Apple rose more than 2% even after Reuters reported the technology giant could see an 18% year-over-year drop in iPhone orders during the current quarter, according to a senior official at one of Apple’s major contract assemblers. Apple’s factories in China, however, are back up and running after the coronavirus shutdown.

American, United Airlines — American Airlines and United Airlines dropped 9.4% and 5.4%, respectively, as the coronavirus damage to the industry outpaced relief actions from the government. The $2 trillion stimulus bill that President Donald Trump signed Friday included $25 billion in grants for passenger airlines and $4 billion for cargo airlines and $3 billion for airline contractors, about half of what the industry originally requested. Shares of American and United have tumbled 55% and 65% this year.

Zoom Video — Shares of the video conferencing platform gained 3%, building on their massive gains as more people rely on video calls amid the coronavirus pandemic. Monday’s gains bring the stock’s rally this quarter to 130%. In that time, the S&P 500 is down nearly 20%.

Mondelez — Mondelez rose more than 4% following an upgrade to buy from hold at Stifel Nicolaus. “We find the pullback in the shares quite intriguing for a best-in-class Consumer Staples business that has experienced an acceleration in growth,” the firm said in a note to clients Sunday. Stifel maintained its $57 target on the stock.

Boeing — Shares of airplane maker Boeing fell more than 11%, the biggest drag on the Dow Jones Industrial Average. Boeing’s stock gained 70% last week but Monday’s move shows the rebound may have been overdone and pain in the airline industry is persisting from the coronavirus crisis.

—CNBC’s Michael Bloom, Yun Li, Maggie Fitzgerald and Jesse Pound contributed to this report.

Macy’s will furlough most employees beginning this week

Macy’s said the majority of its employees will be furloughed beginning this week as it copes with significant sales losses during the coronavirus pandemic.

The retailer declined to say how many employees will be affected by the furloughs. It said it’s lost most of its sales, even as it remains open online, and that’s why cost cuts are necessary.

In a statement on Monday, Macy’s listed the many steps it’s already taken to try to shore up its finances. It has suspended its dividend, drawn down a line of credit, frozen hiring and spending and canceled some orders, among others.

“While these actions have helped, it is not enough,” the company said in a statement. “Across Macy’s, Bloomingdale’s, and Bluemercury brands, we will be moving to the absolute minimum workforce needed to maintain basic operations.”

The company said it is evaluating all other financing options. 

Macy’s is one of dozens of retailers that have been forced to close stores to slow the spread of the coronavirus in the U.S. Like Macy’s, many have continued to sell online. Without brick-and-mortar locations, though, they have lost the engine that still fuels most customer purchases.

As of the latest reported quarter, Macy’s was operating 551 Macy’s department stores, 34 Bloomingdale’s locations, 19 Bloomingdale’s outlets and 171 Bluemercury shops, according to its website. The company had roughly 130,000 employees, excluding seasonal staff, as of Feb. 2.

All of Macy’s stores have been closed since March 18. The company has not decided when they’ll be safe to reopen.

Macy’s said it will have fewer furloughs on the digital side of its business, such as in its distribution centers and call centers. It said furloughed employees enrolled in health benefits will continue to receive coverage, with the company paying 100% of the premium.

“We expect to bring colleagues back on a staggered basis as business resumes,” it said.

— CNBC’s Lauren Thomas contributed to this story.

This is a developing story and will be updated.

Yum Brands CEO to forgo 2020 salary to fund general manager bonuses

David Gibbs

Stefanie Smith | CNBC

Yum Brands said Monday that CEO David Gibbs will forgo the rest of his base salary in 2020 to fund one-time $1,000 bonuses to the company’s nearly 1,200 restaurant general managers across KFC, Pizza Hut, Taco Bell and The Habit Burger Grill. 

His salary will also help fund the Yum Brands Foundation Global Employee Medical Relief Fund, according to a regulatory filing. The fund will provide financial hardship grants to those directly impacted by the coronavirus pandemic, including company and franchise restaurant employees. Yum plans to also accept donations to the fund.

Gibbs stood to make $900,000 from his salary this year, excluding any performance-based bonuses.

Chief executives across the restaurant industry have been forgoing their salaries or accepting slashed pay as the pandemic hits sales and leads to layoffs. Among them: Darden Restaurants CEO Gene Lee, who is not taking a salary and The Cheesecake Factory CEO David Overton, who is taking a 20% pay cut.

Correction: An earlier version misidentified Yum Brand’s CEO. The CEO is David Gibbs.

5 things to know before the stock market opens March 30, 2020

1. Futures turn positive after Dow’s best week in 82 years

U.S. stock futures turned positive and were pointing to a gain for the Dow Jones Industrial Average at Monday’s open after President Donald Trump extended national social-distancing guidelines to April 30. The Dow, which closed 4% lower Friday, soared 12.8% for the week, logging its best weekly gain since 1938 and raising questions about whether blue chips had bottomed. However, heading into Monday’s session, the Dow was still nearly 27% off last month’s record highs. The yield on the 10-year Treasury remained below 1% early Monday. U.S. oil prices sank below $20 per barrel, near 18-year lows hit earlier this month.

Mortgage bankers warned on Sunday that Federal Reserve mortgage purchases are unbalancing the home-lending market. In addition to the Fed’s extraordinary no limit fixed-income purchases, Wall Street analysts and economists said it would not be out of the question to see the central bank take a passive interest in the performance of the stock market for the first time ever.

2. Trump extends social distancing to end of April

US President Donald Trump speaks during a Coronavirus Task Force press briefing in the Rose Garden of the White House in Washington, DC, on March 29, 2020.

Jim Watson | AFP | Getty Images

Preparing the nation for a death toll that could exceed 100,000 from the coronavirus, Trump on Sunday walked back his previous remarks about wanting to reopen the country for business by Easter. Now he hopes for June. In continuing social distancing until the end of next month, the president said, “Nothing would be worse than declaring victory before the victory has been won.” Earlier on Sunday, White House health advisor Dr. Anthony Fauci said the country could see up to 200,000 deaths and millions of infections. However, he also cautioned that those numbers are based on outbreak modeling and nothing is certain.

3. Coronavirus death toll in US tops 2,500

Workers set up a field hospital in front of Mount Sinai West Hospital inside Central Park on March 29, 2020 in New York City.

Kena Betancur | AFP | Getty Images

The U.S., which has the most known coronavirus infections in the world, saw confirmed cases jump to over 143,000 with 2,513 deaths, according to Johns Hopkins University data. New York has about 40% of those cases and fatalities. A field hospital has been set up inside New York’s Central Park to treat coronavirus patients. Abbott Laboratories, which received FDA emergency use authorization on Friday for a test that can detect coronavirus in five minutes, was praised by Trump. “Abbott has stated that they will begin delivering 50,000 tests each day, starting this week,” the president said. Johnson & Johnson said Monday that human testing of its experimental coronavirus vaccine would begin by September, but it could take until early 2021 to be available for emergency use authorization.

4. Spain surpasses China in coronavirus cases

Global coronavirus cases increased to over 730,000 with 34,685 deaths and more than 149,000 recoveries. Italy, No. 2 to the U.S. in cases with about 97,700, has the worst death toll. Italy’s 10,779 fatalities are more than three times as many as China’s 3,308. Rounding out the top three, Spain just surpassed China in infections, with over 85,000 cases and more than double China’s death toll at 6,803. China, where the pandemic started in December, has the world’s fourth most known infections, nearing 82,200 cases. Germany is No. 5 in worldwide cases at about 62,400, including 541 deaths.

5. Amazon workers to strike at a New York fulfillment center

Amazon warehouse workers in New York City’s Staten Island plan to strike Monday to call attention to what they claim is the lack of protections for employees. Chris Smalls, a management assistant and an organizer of the strike, told CNBC that workers at the fulfillment center known as JFK8, have grown increasingly concerned about coming into work after an employee tested positive for the coronavirus last week. Amazon told CNBC the company was supporting the individual in quarantine and asked anyone who was in contact with the worker to stay home with pay for two weeks. JFK8 remains open. “We are following all guidelines from local health officials and are taking extreme measures to ensure the safety of employees at our site,” the company added.