| Thursday's Headlines 1. US markets rise as oil prices spike on proposed agreement 2. US weekly jobless claims top 6.6 million 3. Oil prices climb 24% on production cut agreement 4. Historical unemployment spikes Markets Closed
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Markets Today U.S. markets went on a wild ride today, swinging some 400 points before eventually closing up more than 2%. Oil prices spiked 24% on news that Russia and Saudi Arabia may agree on production cuts to stabilize prices (more below). That sent shares of oil companies spurting higher, but they have still been devastated by the pandemic and the freeze it has put on the global economy.
A record 6.6 million Americans filed for unemployment last week, bringing the two-week total close to 10 million. The U.S. Treasury Dept. says stimulus checks will go out to qualifying Americans after April 13th. Small business loans and relief can be applied for starting tomorrow.
Companies have been cutting their dividends as fast as they have been cutting their payrolls as they try to shore up cash to weather this downturn. While investors may have thought this recession would only last into the second quarter, many market watchers and economists say growth could still be severely impacted through the third quarter.
That will make the climb out of it even more precarious. Headlines:
 Oil Prices Spike on Proposed Agreement Oil prices surged 24% today, the biggest spike in history, following news that the U.S. has potentially brokered an agreement between Saudi Arabia and Russia on production cuts needed to stabilize prices. Even with today's move, prices are down 58% this year, and oil stocks, as seen through the ETF XOP in the chart above, are down some 64% this year.
President Trump told CNBC that he spoke with Saudi Arabia's Crown Prince who spoke with Russian President Putin, and they may have agreed to a 10 million barrel production reduction.   chart courtesy EIA.gov
Keep in mind that about 100 million barrels of oil are produced globally every day, and the U.S. accounts for about 20% of that, according to the EIA. The U.S. also consumes about 20% of global oil every day.
While a production cut may help the supply side of the equation, the demand part is where the rubber meets the road. Airplane passenger capacity in the U.S. is between 5–15% as travel has all but evaporated. Trucking shipments fell 40% in March, and cities around the world are basically not moving. The chart below from CityMapper shows just how little people are moving around the world's major cities through various modes of transportation.
chart courtesy CityMapper  Historical Unemployment Spikes In just the last two weeks, more than 10 million Americans have filed for unemployment, according to the Labor Dept. That wipes out nearly all the job gains made since the 2008–09 crisis. Many of those will come back once this health crisis abates, but industries have been changed permanently by this pandemic.
Tomorrow, we'll get the U.S. nonfarm payrolls report for March in the morning. Economists expect a loss of at least 100,000 jobs for March, but it could be much worse, and it won't capture the historic layoffs from the past two weeks since the survey was conducted the week of March 13th. The next few months will reveal the extent of the damage to the labor market as the Federal Reserve says some 43 million Americans may lose their jobs in this crisis. That's an incredibly big number and it reflects the size of the American workforce, which stood at 143 million people in February.
But America has seen unemployment shocks before and bounced back. In 1945, for example, nearly 2 million Americans lost their jobs when World War II ended. Hiring came back the following year, and then more than 800,000 people lost their jobs during the Steel Strike of 1956. We haven't had a global pandemic shut down the economy in over a century, so this time it will be different... we just don't know how.
chart courtesy Bianco Research 
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(chart courtesy YCHARTS)  Shares of mining company Newmont rose by almost 3% today and climbed 1.5% in March, outperforming the broader market. Kellogg's stock price is up by nearly 2% amid the food manufacturing company announcing new "Jumbo Snax" versions of its popular breakfast cereals.  Shares of Carnival are down by 33% after the cruise line announced a $1.25 billion secondary offering resulting in a massive sell-off. United's stock price fell by nearly 19% today as airline stocks continue to suffer due to the ongoing pandemic. Word of the Day A dividend is the distribution of a portion of the company's earnings, decided and managed by the company's board of directors, and paid to a class of its shareholders.
Dividends must be approved by the shareholders through their voting rights. Although cash dividends are the most common, dividends can also be issued as shares of stock or other property. Along with companies, various mutual funds and exchange-traded funds (ETF) also pay dividends.  image courtesy: loc.gov
Today in History April 2nd, 1799: The New York State legislature approves the corporate charter for the Manhattan Co., a corporation founded by Alexander Hamilton and Aaron Burr that plans to build dams, divert streams, and lay pipes that would help supply New York City with fresh water. It quickly morphs into the Bank of the Manhattan Co., ancestor of Chase Manhattan Corp.
Bray Hammond, Banks and Politics in America: from the Revolution to the Civil War (Princeton Univ. Press, 1991 ed.), pp. 149–155.
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Thursday, April 2, 2020
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