Wall Street was close to hitting a remarkable milestone on Tuesday, one that defies the human and economic toll of the coronavirus pandemic, the worsening relations between the United States and China, and a stalemate in Washington that is stymieing efforts to support Americans.
The S&P 500 rose only slightly in early trading, but it is just short of its Feb. 19 high of 3386.15, a level reached when many investors saw the coronavirus as a distant threat.
Stocks went into a tailspin soon after reaching that mark as the pandemic quickly spread and efforts to contain it spurred the sharpest economic downturn since the Great Depression.
But markets have clawed their way back, rising 50 percent from their lowest point in late March. It’s a rally fueled by a handful of factors: the Federal Reserve’s pledge to do whatever it takes to back the economy, unprecedented levels of spending by Washington and a rally in the shares of large technology companies.
Those companies — Apple, Amazon, Alphabet, Microsoft and others — have seen demand for their services and products surge as people work and shop from home. Already cash rich, they’re protected from the worst of a downturn. On Tuesday, the big technology stocks were lower, which capped gains in the broader market.
There are other reasons for the rebound: Signs of recovery — even if from historic lows — have fueled speculative buying. Corporate earnings have come in better than many Wall Street analysts expected, and businesses have reported that consumers are returning as they reopen their doors.
This week, shares of travel companies have climbed after the U.S. Transportation Security Administration said that the number of air travelers has picked up. Even though the number of people passing through airports is still about one third of what it was a year earlier, shares of American Airlines, Delta Air Lines and United Airlines gained on Monday and Tuesday.
But the broad gains also overlook a number of threats to the rosy outlook suggested by the record. Policymakers have warned that some of the damage caused by the pandemic, in particular the closure of small businesses and job losses, won’t be undone so quickly.
Big retail chains are closing their doors and filing for bankruptcy on a regular basis, and the pace of hiring has slowed: Employers added 1.8 million jobs last month, well below the 4.8 million jump in payrolls in June.
And after federal unemployment benefits and a moratorium on evictions expired last month, lawmakers have proved unable to reach an agreement on the further spending that many economists say is vital to protecting the economy from an even sharper downturn.
Airline stocks jumped for a second day on Tuesday, after government data showed that travel has picked up in recent days.
Southwest Airlines was one of the best performing stocks in the S&P 500 with a gain about 3 percent. Delta Air Lines and American Airlines were also climbing, adding to Monday’s gains of more than 7 percent.
The gains come after Transportation Security Administration data showed that the agency screened more than 830,000 people at its airport checkpoints on Sunday, about 31 percent of the number screened on the same day last year. By that relative measure, it was the third best travel day of the pandemic, behind only the days leading up to the July 4 holiday.
While a relative high point, the number of passengers screened on Sunday is a figure that highlights the severity of the slump in travel that airlines still face.
But, in part because it shows that the most recent surge in coronavirus cases nationwide hasn’t deterred some travelers, the data was taken as good news. Passenger screenings on Monday continued the trend.
The screening data and stock increases are positive developments for an industry undergoing one of the worst financial crises in its history. Airline share prices are still about half of what they were in February and the number of people flying is unlikely to come even close to 2019 levels for another few years. Last month, United Airlines said it didn’t expect demand to recover any more than 50 percent until a vaccine is widely distributed.
Airlines are also preparing for a day of reckoning on Oct. 1, when a federal moratorium on mass layoffs that was part of a stimulus package is lifted. Tens of thousands of workers are expected to be laid off, though a union-led effort to extend the funding that protected their jobs has won bipartisan support in Congress and the White House.
Even with a vast and costly government furlough program, the British labor market recorded its largest drop in employment since 2009 last quarter. Between April and June, when the country was under tight restrictions to control the spread of the coronavirus, the number of people with a job fell by 220,000 from the preceding quarter, official statistics showed on Tuesday.
The job losses hit those under 25 and over 65 disproportionately, according to the Office for National Statistics.
Though the unemployment rate held at 3.9 percent, that disguises the widespread impact of the pandemic. The jobless rate counts only people who are actively looking for another job, so it does not include those who are furloughed or don’t think they can find a job.
The statistics agency also said there was a record low number of hours worked in the quarter. The number of people who work with no minimum hours per week, on so-called zero-hour contracts, increased 17 percent compared with a year ago, to over a million. And pay fell, the first decline in pay not adjusted for inflation since records began in 2001.
The Office for National Statistics estimated that in June, 7.5 million people were temporarily not working, including furloughed employees.
There was a small increase in job vacancies among small businesses in July, but this positive sign could be dwarfed by a surge in layoffs as the furlough program is wound down. One-third of British businesses said they expected to cut jobs by the end of September, according to a survey by the Chartered Institute of Personnel and Development and the Adecco Group. Debenhams, a chain of more than 100 department stores, said on Tuesday that it was cutting 2,500 jobs.
State officials on Monday said they didn’t know how President Trump’s plan to provide a $400 supplement to unemployment payments would work. Mr. Trump’s action called for most recipients to get an extra $300 a week from federal disaster funds, leaving the states to supply $100.
Funds to cover the state’s portion “simply does not exist,” said Gov. Gavin Newsom of California, a Democrat.
Gov. Tate Reeves of Mississippi, a Republican, said he had not decided whether to take part in the program because of concerns over the cost. “This is not as easy of an answer as some might think,” he said.
Companies had a similar reaction to the idea of deferring payroll taxes until the end of the year. Many companies and employees might be hesitant to opt into what the president called a tax holiday because it is not clear whether Congress will eventually forgive the deferred taxes, or if the full sum will be due at a later date.
“We’re awaiting guidance from the U.S. Treasury Department on the payroll tax deferral, and we’ll make decisions on implementation once that’s been provided,” said Randy Hargrove, a spokesman for Walmart, the country’s largest private employer, with 1.5 million workers.
One option some employers might consider is to continue withholding the tax and repay workers later if it is eventually forgiven. That option would, of course, defeat the purpose of stimulating the economy now when it could use the help.
With the historic economic turmoil caused by the coronavirus comes the potential for even worse inequality. Major companies have created a new effort, accelerated by the pandemic, to work with universities, the city and other groups to create new curriculums and apprenticeships over the next decade, reports David Gelles:
A coalition of 28 major companies including Mastercard, Marriott and Verizon has pledged to hire 100,000 low-income and Black, Latino and Asian workers in New York City over the next 10 years, part of a broader push by corporate America to expand economic opportunities to marginalized communities.
The companies are funding the creation of a nonprofit organization, the New York Jobs C.E.O. Council, which they say will work with universities, the city government and other nonprofit groups to prepare a new generation of New Yorkers for high-paying jobs at some of the country’s biggest companies.
Details are scant, but the initiative has attracted the support of many of the most powerful chief executives in the country, including Jeff Bezos of Amazon, Laurence D. Fink of BlackRock, Satya Nadella of Microsoft and Sundar Pichai of Google.
Those involved with the new group say it will work to develop programs intended to prepare low-income and minority students for jobs at the companies.
“It might be that they help us create curriculum,” said Félix V. Matos Rodríguez, chancellor of the City University of New York. “It might be that they help us create apprenticeships.”
SoftBank on Tuesday announced that it had swung back into the black, posting a $12 billion net profit for the three-month period that ended in June. Just four months ago, the company had announced one of the largest annual losses of any firm in the history of corporate Japan. But asset sales and a hot stock market helped fuel a rebound for the beleaguered Japanese conglomerate, which runs the world’s largest tech fund.
Hertz Global Holdings reported on Monday that its global revenue plummeted 67 percent in the second quarter from the year before, a decline that contributed to an $847 million loss and the car rental company’s decision in May to file for bankruptcy. The company said business improved ahead of the Fourth of July holiday, but a rise in coronavirus cases across the South and West has since slowed demand again.
WarnerMedia began a significant round of layoffs on Monday that will see its ranks decline by 600 people, according to two people with knowledge of the layoffs who were not authorized to speak publicly. The majority of the job losses were at Warner Bros. Entertainment. More layoffs are expected, the people said. The company has a global work force of 7,000. WarnerMedia’s new chief executive, Jason Kilar, is realigning WarnerMedia to put more emphasis on its new streaming service, HBO Max, which pulled in 4.1 million subscribers in its first month.
Simon Property Group, the biggest mall operator in the United States, said on Monday that 91 percent of tenants across its U.S. properties were open and operating as of Aug. 7, but noted that it was still working to collect rent payments. The company said that it collected about 51 percent of contractual rent from U.S. retailers in April and May combined, 69 percent in June and 73 percent in July, including “some level of rent deferrals.” Simon has been rumored to be a potential bidder for J.C. Penney, which filed for bankruptcy in May, and to be negotiating with Amazon to transform some empty department store space into Amazon distribution hubs. It declined to “respond to market rumors or speculation” when asked about the deals on an earnings call.