• Market Crumbs

The Fed > Jobless Data

The U.S. Department of Labor released weekly jobless claims yesterday, and as expected, further detailed how badly the jobs market has been affected by COVID-19.

6.6 million Americans filed for unemployment last week, bringing the total over the last three weeks to more than 16 million. With more than 16 million Americans having filed for unemployment over the last three weeks, the U.S. has lost about 10% of its workforce during the period.

The number of job losses over the last three weeks is nearly twice as many as the total number of jobs lost during the financial crisis. Furthermore, the job losses amount to nearly 70% of the jobs created from February 2010 to February of this year.

While the unemployment news would typically be taken negatively by the stock market, the Federal Reserve announced a $2.3 trillion stimulus plan to assist businesses and local governments at nearly the exact moment jobless claims were released, sending markets higher.

The program, aimed at helping "Main Street," will provide loans to businesses with up to 10,000 employees and less than $2.5 billion in revenues. Principal and interest on the loans will be deferred for one year.

"Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus," Fed Chairman Jerome Powell said. "The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible."

In what is best described as "free markets are dead," the Fed will begin purchasing junk bonds and high-yield ETFs. This comes just a few weeks after announcing they will purchase investment grade corporate bonds.

Ironically, the move also comes a few weeks after the Fed announced it hired BlackRockthe world's largest asset manager and one of the largest ETF providers, to help with the purchase of commercial mortgage-backed securities.

With markets up nearly 30% since last month's lows while millions of Americans are quickly losing their jobs, the recent moves by the Fed bolster the popular view that they aren't really doing anything that benefits "Main Street."

While stocks are seemingly the only thing left for the Fed to announce they'll purchase, it will be interesting to see if they keep BlackRock to do so or decide to go with a different broker such as Fidelity or maybe even Robinhood to do so.

Leftover Crumbs

  • IMF is worried. International Monetary Fund Managing Director Kristalina Georgieva believes the outbreak of COVID-19 could cause global growth to be "sharply negative" in 2020, causing the worst recession since the Great Depression. "Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020," Georgieva said. "Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year."

  • Disney+ hits 50 million. Disney+ has surpassed 50 million paid subscribers in five months. Disney said 8 million subscribers came from India, where the service was just made available last week. "We’re truly humbled that Disney+ is resonating with millions around the globe, and believe this bodes well for our continued expansion throughout Western Europe and into Japan and all of Latin America later this year," said Disney's chairman of Direct-to-Consumer & International segment Kevin Mayer.

  • The first Wall Street CEO. Morgan Stanley CEO James Gorman has recovered from COVID-19, becoming the first CEO on Wall Street to contract the virus, according to a company spokesperson. Gorman remained in charge through the illness and has been working from home. "Given the fact that Mr. Gorman’s symptoms were not severe and that he continued to function as Chairman and CEO while working from home throughout the illness (as are more than 90% of our employees), it was determined that his illness was not material," said the spokesperson.

  • Furloughs hit Dick's. Dick's Sporting Goods is the latest in the long list of companies to announce a substantial furlough. Dick's will furlough most of its 40,000 employees, keeping a "small number" to fulfill orders. "It is our goal that when this crisis subsides, we will welcome back our teammates, open our doors and get back to the business we love of serving athletes and our communities," Dick's said.

  • Panera gets into the grocery business. Panera has launched Panera Grocery to sell in-demand items such as bread, milk and fresh produce. The service will be available on the company's website or app, while orders can be delivered or picked up in store. "With this new service we can help deliver good food and fresh ingredients from our pantry to yours, helping provide better access to essential items that are increasingly harder to come by," Panera CEO Niren Chaudhary said.