Economic Toll of Virus Deepens, Duration Remains Unknown
NEW YORK (AP) – The Dow over the past five days: up 1,293, down 786, up 1,173, down 967. The Dow tumbled 800 points at the opening bell Friday. The VIX, an index known as Wall Street’s fear barometer, is hovering at levels not seen since banks began to fall during the financial crisis. The uncertainty and potential economic damage from the coronavirus deepened this week. Sectors that cater to almost any public activity … movie theaters, business conference organizers, hotels, airlines, amusement parks, have lost billions in value as stockholders flee to safer ground like U.S. Treasury notes, which now payout close to nothing. Following is a brief look at how things are changing in the economy and the workplace today as the outbreak widens.
HEADWINDS: Germany’s biggest airline, Lufthansa, says it will cut up to 50% of its flights in the next few weeks, depending on how the virus outbreak develops. It said it had seen a drastic drop in reservations, with all regions now affected. Lufthansa, which also owns Swiss airlines and several smaller regional European carriers, operates over 83,000 flights a month. The airline earlier announced plans to cancel all flights to and from Israel for three weeks after Israeli authorities announced tough restrictions on travelers from several countries.
The airline industry is among the hardest hit since the outbreak, forcing carriers to reassess their near-term financial expectations. An industry group said the spreading coronavirus could cost airlines as much as $113 billion in lost revenue. That figure, released Thursday, is four times the number released just two weeks ago by the The International Air Transport Association, which is imploring governments for assistance.
SHIPWRECK: Passengers on a cruise ship off the California coast were instructed to stay in their cabins as they awaited test results Friday that could show whether the coronavirus is circulating among the more than 3,500 people aboard. Test kits were lowered onto the Grand Princess by rope from a military helicopter and they’ve been sent for analysis at a lab with the ship moored at sea just off of San Francisco, where it has been ordered to remain. Princess Cruises said 45 people were selected for testing. The cruise industry has been devastated after a different ship, the Diamond Princess, was quarantined for two weeks off the coast of Yokohama, Japan. Much of the ordeal was witnessed live with those aboard in masks doing interviews. Of the 3,700 aboard, 10 were killed and 700 were sickened.
FUN vs. FEAR: The entertainment industry is suffering extensive damage with parks being shut down and people avoiding public spaces. Shares of movie theater chains like AMC Entertainment Holdings, Cinemark Holdings and Imax Corp. have slumped more than 30% in the last three months. The release of the James Bond film “No Time To Die” has been pushed back from its planned release in April, to November on hopes that the outbreak will have abated.
Amusement parks could get hit by a double whammy with fewer people willing to travel or willing to be a part of large crowds. Walt Disney Co.’s Shanghai Disneyland and Hong Kong Disneyland parks have been closed since late January. The company announced earlier this week that its parks in Japan will be closed until the middle of the month. Shares of other theme park companies, like Six Flags, Cedar Fair and SeaWorld Entertainment have fallen between 30% and 45% in the past month.
Gyms are also getting hit on the anticipation that health buffs will shift to workouts at home. Planet Fitness has fallen 20% this month in heavy trading. Brunswick, which sells fitness gear, is down an equal percentage.
MARKET ROILS: A plunge in global markets that began in the U.S. Thursday gained steam on Friday with rumors that Chinese officials might be overstating the extent to which its industry is getting back on its feet. The Dow tumbled 800 points at the opening bell. The S&P 500 and the Nasdaq are suffering more severe percentage declines. Markets in Germany and France are worse.
BUSINESS NOT AS USUAL: New disruptions in the work place are picking up pace. Gap closed its New York office and is asking employees to work from home until further notice after one of its employees became infected. The San Francisco clothing chain told The Associated Press that the individual was not in the office Thursday and is recovering at home. It could not be learned how the Gap employee contracted COVID-19.
Microsoft has asked its employees who can work from home to do so in the Seattle area. This means there’s less of a need for many of the company’s hourly workers, but Microsoft said it will continue to pay those workers their regular pay during this period.
Microsoft-owned career networking service LinkedIn told San Francisco Bay Area employees work from home if they can. LinkedIn, based in Sunnyvale, California, is also postponing all non-essential business travel and not participating in external events in March and April.
Facebook temporarily closed a Seattle office after a worker was diagnosed with the virus. Amazon this week said one of its employees in Seattle, and two in Milan had contracted the coronavirus. All were quarantined. The company told told its Seattle area employees to work from home if possible.
Walmart restricted cross-border international travel to the most critical business trips, according to an internal memo shared by the company. Trips to its stores and clubs will continue, but the country’s largest employer has restricted travel to conferences, trade shows and other events. It canceled its U.S. Customer Conference in Dallas Dallas next week, opting to hold a virtual conference in its place.
ENERGY: The price of oil fell almost 9% Friday and a barrel could be had for less than $42. OPEC is pushing for supply cuts but rumors out of Vienna where it is meeting are not good. It seems that Russia, which is not a member but often participates in coordinated actions, is unwilling to go along with the latest round of production cuts. The global economy was already slowing and the spread of the virus is certain to be a further drag on energy use.