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Dow sinks ahead of Fed and Treasury testimony

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About half an hour into the trading day, the S&P 500 has turned green — reversing its earlier losses.

The index is up 0.1%, after opening down 0.3%. Yesterday the S&P, which is the broadest measure of Wall Street, recorded its best day since April 8.

The Nasdaq Composite is also in positive territory, up 0.6%.

But the Dow remains in the red. It’s down 0.2%, or 40 points.

The coronavirus outbreak is starting to have a chilling effect on the American housing market.

Building permits in April fell more than 20% from March, while new housing starts plummeted more than 30%, according to the US Census Bureau.

These gruesome numbers were released shortly after retail giant Home Depot (HD) suspended its 2020 outlook because of the pandemic.

But some economists are expressing faint hope that this could already be the bottom for the housing market — and perhaps the broader economy.

These housing starts data fit in with the rest of the April economic figures, suggesting that April was probably the worst month for economic growth ever. Looking ahead, however, there are some bright spots – albeit starting from a deep hole,” said Nationwide Chief Economist David Berson in a report.

Burson noted it’s slightly encouraging that the pace of new permits fell less sharply than housing starts.

Joel Kan of Mortgage Bankers Association pointed out completions of new homes “did not decline to the same extent, as projects in many parts of the country were allowed to continue.” The MBA forecasts “a rapid rebound in housing activity later in the year as homebuyer traffic returns.”

US stocks are taking a breather following Monday’s enormous rally and opened slightly lower. The Dow and the S&P 500 both recorded their best performance since early April.

Investors are turning their attention to Capitol Hill where Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will testify before the Senate Banking Committee at 10 am ET.

  • The Dow opened 0.3%, or 77 points, lower.
  • The S&P 500 kicked off 0.3% lower.
  • The Nasdaq Composite initially slipped 0.1%, but turned positive within the first minutes of trading.

JPMorgan Chase CEO Jamie Dimon said the coronavirus crisis “must serve as a wake-up call” for government and business to fix America’s inequality problem. 

“It is my fervent hope that we use this crisis as a catalyst to rebuild an economy that creates and sustains opportunity for dramatically more people, especially those who have been left behind for too long,” Dimon wrote in a letter to shareholders on Tuesday. 

Dimon, arguably the most powerful executive on Wall Street, said the past few months have exposed the reality that “far too many people were living on the edge” — even before the pandemic struck. 

The health crisis has hit low-income communities and people of color “the hardest, exacerbating the health and economic inequities that were already unacceptably pronounced before the virus took over,” the JPMorgan (JPM) boss wrote.  

Nearly 40% of Americans making less than $40,000 reported a job loss in March, according to the Federal Reserve. 

Dimon said business and government must “confront the structural obstacles” that have long stood in the way of inclusive growth. 

“An inclusive economy – in which there is widespread access to opportunity – is a stronger, more resilient economy,” Dimon wrote.  

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin are testifying before the Senate Banking Committee this morning, answering questions about the large scale monetary and fiscal stimulus their institutions have deployed to help the US economy through the coronavirus recession.

Powell, who in recent remarks has stressed how people at the lower end of the income spectrum are bearing the brunt of this recession, will once again make that point to the Committee:

“People have put their lives and livelihoods on hold at significant economic and personal cost. All of us are affected, but the burdens are falling most heavily on those least able to carry them,” the central banker’s prepared remarks read, calling the scope and pace of the downturn unprecedented and worse than any recession since World War II.

Last Friday, a Fed survey found that 40% of workers with a household income below $40,000 reported a job loss in March.

He will also stress that the Fed is committed to use the “full range” of its tools to support the economy as part of the public sector response to the crisis.

Powell will walk the Committee through all the tools already deployed since mid-March, including slashing interest rates to near zero and launching various lending programs. But he is also looking ahead to programs that are still waiting in the wings.

The Main Street Lending Program, designed to provide loans to small and medium-sized businesses, is being prepared for launch. Powell stressed in his prepared remarks how important public input was in designing these unprecedented programs.

Home Depot spent $850 million in the first quarter to help out workers in the midst of the coronavirus pandemic. Sadly, what’s good for employees isn’t always great news for Wall Street. Earnings fell as a result of the added expenses.

Home Depot also suspended its 2020 outlook due to Covid-19. The company’s sales did top forecasts, but it’s unclear what demand will be like for the rest of the year — especially since the housing market is expected to cool off.

Shares of Home Depot (HD) were down in premarket trading. Rival Lowe’s (LOW), which reports earnings Wednesday morning, fell a bit too.

Read more on Home Depot’s earnings

People don’t like going to the store during the pandemic. So when they do, they’re buying in bulk.

Walmart (WMT), one of the biggest beneficiaries of that trend, reported sales at stores open at least a year soared 10% last quarter. Online sales spiked 74%.

Although Walmart recorded nearly 6% fewer transactions during the past three months, the average receipt soared 16.5%, the company said.

“As a result of the health crisis and related stay-at-home mandates, customers consolidated store shopping trips with larger average baskets and shifted more purchases to eCommerce,” Walmart said in its earnings report.

Yesterday was all about a triple dose of optimism: A promising vaccine trial, the Fed’s stimulus promise and the reopening of the economy lifted Wall Street’s spirits.

Today, investors aren’t in such a chipper mood. Wall Street woke up to some some potentially disruptive news: President Donald Trump late Monday threatened to permanently pull US funding from the World Health Organization if it does not “commit to major substantive improvements in the next 30 days.”

  • Dow futures fell 140 points
  • S&P 500 futures were down 0.5%
  • Nasdaq futures sank 0.3%

Fed Chairman Jerome Powell and Treasury Secretary Steve Mnuchin will testify before the Senate Banking Committee Tuesday morning. Wall Street investors will cleave to their messages about new stimulus for the US economy.

Amazon is reopening its distribution centers in France after they were shut down more than a month ago due to a dispute with labor unions over the health and safety of workers.

An Amazon spokesperson told CNN Business on Tuesday that all six warehouses in France would “gradually reopen from today.”

A labor union brought a court case complaining Amazon (AMZN) was not doing enough to protect its workers from contracting coronavirus in its warehouses. The court ordered the company to limit itself to selling only “essential” goods.

Instead of complying with the order, Amazon shut down its warehouses in France on April 15 blaming complex logistics, confusion over what constituted an essential good and the possibility of high fines.

After losing an appeal and saying it would take the case to the French Supreme Court, Amazon instead announced on Friday that it had reached an agreement with the labor unions.

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