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The S&P 500 Has Its Best Quarter in Decades - The New York Times

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What crisis? In the second quarter, which ended yesterday, the S&P 500 rose 20 percent, its biggest quarterly gain since 1998. Put another way, it was the best quarter for stocks this century, which sounds even more grandiose. But market watchers told The Times’s Matt Phillips that the outlook is murkier than usual.

There was an epic reversal of fortune in the second quarter, with the S&P 500 regaining nearly all the ground lost in its 20 percent plunge in the first quarter. (The index is still down about 4 percent on the year.) The last time there was a bigger quarter-to-quarter swing was back in 1932, according to S&P.

Here’s the thing: earnings are awful. Analysts estimate that profits at blue-chip American companies fell 44 percent in the second quarter, per FactSet. And earnings are expected to continue sliding in the second half of the year, ending with a 22 percent drop.

But who’s to say? Analysts are flying blind, since many companies have stopped providing earnings guidance, citing the uncertainties of the pandemic. Nearly 200 companies in the S&P 500 have withdrawn their customary forecasts for the year, according to FactSet, and half as many companies as usual are providing quarterly earnings guidance.

• These forecasts can be gamed, with companies often prepping analysts to expect earnings just below what they eventually deliver. Still, it is a useful anchor, especially in times of turmoil. In their absence, “the numbers are sort of all over the place,” Lori Calvasina, the head of U.S. equity strategy at RBC Capital Markets, told Matt.

What’s next? Companies will start releasing second-quarter earnings reports in a few weeks, and investors will see if things are as bad as estimates suggest. A pickup in recent economic data gives some reason for optimism, while a surge in confirmed infections in some states has sent reopenings into reverse.

• Analysts at Goldman Sachs write that their baseline forecast is for the S&P 500 to gain 5 percent in the second half of the year. In their “vaccine upside” scenario, stocks rise by 14 percent from here — but in the “virus downside” scenario, they drop 30 percent.

• Futures suggest that U.S. stocks will open a bit lower today, kicking off the third quarter in the red.

Credit...Jean-Vincent Reymondon/Agence France-Presse, via Airbus/Afp Via Getty Images

The Senate extended the Paycheck Protection Program by five weeks. The move to revive the federal coronavirus aid initiative, which was set to expire yesterday with $130 billion still in its coffers, must be approved by the House and signed into law by President Trump.

Airbus will slash 15,000 jobs. The plane maker cited a 40 percent drop in commercial aircraft activity in announcing the plan to cut 10 percent of its work force.

Microsoft unveiled an initiative to retrain 25 million people in digital skills. As a first step, the tech giant — using resources from divisions like LinkedIn and GitHub — plans to help people identify new jobs.

Harvey Weinstein and some of his accusers agreed to a $19 million settlement. The tentative deal would give payouts to dozens of women who had accused the disgraced movie mogul of sexual harassment and assault, but must still be approved by federal judges.

The Business Roundtable will announce recommendations for overhauling policing. The group, which represents America’s blue-chip companies, plans to offer its support for steps like greater transparency from police departments on use of force, a nationwide police misconduct registry and standards for conduct that include banning chokeholds.

Credit...Elijah Nouvelage/Reuters

Executives at the social network are scrambling to contain the damage from a growing ad boycott to protest its policies on hate speech and misinformation. More than 300 advertisers have now joined.

What a difference a week makes. Last Tuesday, Mark Zuckerberg held a call for advertisers where he struck a “defiant tone,” according to The Times’s Tiffany Hsu and Mike Isaac. “He discussed the importance of freedom of speech and stressed his company would not bow to pressure on its revenue.” But Facebook is striking a much more conciliatory tone in calls this week, although it has tried to frame the controversy as an industrywide phenomenon.

• “As if all social media companies are equal. They are not,” Kara Swisher, The Times Opinion columnist, writes, noting that she has deactivated her Facebook accounts. Addressing the company, Kara added, “The problem of hate and misinformation flowing on social media is yours to own.”

A “trickle-down effect” from the big-name brands in the boycott is denting Facebook’s finances, analysts say. The company’s top 100 advertisers account for only around 6 percent of its revenue, but the moves by Coca-Cola, Starbucks, Unilever and others could influence millions of smaller advertisers to cut back, too.

• Yesterday, Facebook said it had banned hundreds of accounts, groups and pages linked to the far-right “boogaloo” movement, whose goal is to incite a race war in America.

The pandemic’s effect on boardroom confidence put the deal industry in a deep freeze in the first half of the year, data from Refinitiv shows.

Nearly $1.2 trillion worth of deals have been announced so far this year, down 42 percent from the same time a year ago. It was the slowest first half for M.&A. since 2013. (The drop in the number of deals was less drastic: down 18 percent year-on-year.)

• The drop in activity was even more noticeable for larger transactions: The overall value of deals worth more than $5 billion was down 53 percent year-on-year.

• That’s despite some notable transactions being announced in the first half, including Aon’s $30 billion acquisition of Willis Towers Watson and Just Eat’s $7.3 billion takeover of Grubhub.

Ever-hopeful deal makers say that companies are adjusting to the new reality, and will be eager to strike deals again. “Many of our clients are starting to think big and outside of the box, asking themselves what has changed and how do I adjust my strategic priorities to reflect the pandemic we have all been living through,” Dusty Philip, Goldman Sachs’ co-head of M.&A., told Reuters.

• That said, several companies are trying to undo deals agreed on before the pandemic. Among them were Simon Property’s effort to end its takeover of Taubman and Sycamore backing out of a deal for control of Victoria’s Secret.

The Coronavirus Outbreak

  • Frequently Asked Questions and Advice

    Updated June 30, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

Critics, including lawmakers, are worried about a merger wave. In a Times Op-Ed, Tim Wu writes that companies using the coronavirus to buy weakened rivals “might yield a superficially impressive economic recovery — a rebounding stock market, big dividends for shareholders — while destroying what remains of the middle class in this country.”

• Mr. Wu proposes ways to help distressed companies without resorting to deal-making, including the government prohibiting coronavirus aid cash from being used for M.&A. and encouraging workers to buy control of their employers.

Credit...Pool photo by Tasos Katopodis

Face coverings have become an unexpected flash point in the U.S., and a matter of dispute even among the leaders of the nation’s economic recovery efforts.

The Treasury secretary and Fed chairman took different approaches to masks at a Congressional hearing yesterday. Though both men wore coverings as they arrived at the House, Treasury’s Steven Mnuchin took his off while speaking; the Fed’s Jay Powell didn’t.

• Perhaps correlating with their feelings on face coverings, Mr. Mnuchin is an optimist who expects the economy to rebound later this year, while Mr. Powell is more concerned about the fragility of the recovery.

Americans are still fighting over masks — sometimes literally — even as Vice President Mike Pence now says that wearing them is “just a good idea” as coronavirus cases in the U.S. continue to set new daily records. Dr. Anthony Fauci, America’s top infectious disease expert, said yesterday that the U.S. could see daily infections could soar to 100,000 if more drastic measures aren’t taken.

Goldman Sachs has calculated the economic effect of wearing masks to slow the spread of the virus. Economists at the bank figured that a national mask mandate, which could substitute for a second round of lockdowns, would avoid a 5 percent drop in America’s G.D.P. “Our analysis suggests that the economic benefit from a face mask mandate and increased face mask usage could be sizable,” the economists wrote in a recent note.

Deals

• The food-delivery company Postmates is reportedly deciding whether to sell itself to Uber, stage an I.P.O. or merge with a special purpose acquisition company that would let it begin trading in the stock markets. (CNBC)

• Have the federal government’s enormous coronavirus aid programs helped stave off a wave of corporate bankruptcies? (WSJ)

Politics and policy

• A New York State judge temporarily blocked publication of a tell-all book by President Trump’s niece Mary, to determine whether she was violating a confidentiality agreement. (NYT)

• The business community has largely embraced a new security law tightening Beijing’s control of Hong Kong — thanks in part to a huge inflow of Chinese money into the territory. (NYT)

Tech

• Shares in Wirecard, the German payments processor that has faced accusations of accounting fraud, have risen fourfold this week even though it has filed for insolvency. (Bloomberg)

• Reddit’s C.E.O., Steve Huffman, opens up on why the social network banned a prominent community of Trump supporters: “A community that’s not willing to work with us has no place on Reddit.” (NYT)

Best of the rest

• “We Socialize Bailouts. We Should Socialize Successes, Too.” (NYT Opinion)

• Robin Hood, the Wall Street-backed antipoverty foundation, has started a new fund focused on financing nonprofits run by people of color. (CNBC)

• “Did Kim Kardashian just become a billionaire? It’s complicated.” (Business Insider)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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The S&P 500 Has Its Best Quarter in Decades - The New York Times
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