- U.S. markets: Well, that was certainly the craziest trading day the Brew has ever covered. And by crazy we mean terrible. Freaked out over a price war for crude oil, Wall Street had its worst day since December 2008.
- More numbers: Over 3,500 stocks traded on the NYSE hit 52-week lows. And the S&P has now lost over $5 trillion in value since a record high in February.
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The Stock Market on Monday:
Yesterday, a stock market safeguard was triggered after trading began like an I-95 pileup the day before Thanksgiving. Just as things seemed like they were falling apart, the circuit breaker activation was an important reminder that the financial system's plumbing can handle the punches.
What's a circuit breaker?
You might be thinking of the control panel you track down after making toast and drying your hair at the same time. The financial one works the same way.
A few minutes into trading Monday, the S&P dropped 7%, triggering the Level 1 circuit breaker and pausing trading for 15 minutes. Had the S&P declined 13%, trading would've paused another 15 minutes. 20%, and everyone would have gone home for the day.
- Circuit breakers were put in place after 1987's Black Monday, when the Dow fell 22.6%.
- The rules were revamped in 2013 after failing to prevent 2010's "flash crash." Yesterday was the first time the new ones activated.
Related: What happens if NYC shuts down the floors? In 2012, markets closed because of Superstorm Sandy. The NYSE planned to go electronic but ended up woefully underprepared, so Wall Street scrapped the plans and just closed it. Since then, they've been running tests to go fully electronic jic.
Nothing seemed out of the ordinary yesterday to NYSE President Stacey Cunningham: "I'm seeing markets act normally. They react to uncertainty...they become more volatile." Feeling calm?
Maybe this'll do the trick: The government hasn't yet enacted crisis measures like it did during the financial crisis. Regulators are more alert (take the Fed's emergency rate cut and $50 billion infusion to its overnight lending). Banks are in relatively good shape. And Girl Scout cookie sales are business as usual.
Looking ahead...President Trump said he'll meet with lawmakers today about "very substantial relief," including a possible payroll tax cut.
The Oil Price War (What Is It Good for?)
Yesterday, President Trump tweeted this:
He's referring to oil prices collapsing the most since the Gulf War on Monday, following Saudi Arabia's declaration of a price war. In a dramatic bid for market share, the kingdom said it would sell its crude oil at bargain basement prices.
So how will the price war play out?
For consumers: Yes, lower oil prices mean lower prices at the pump. The U.S. national average is currently around $2.38/gallon, but some analysts think it could drop below $2.
Energy industry: Obviously, not good. U.S. shale producers are already cash-strapped, and securing financing to pay down debt just got a lot more difficult. Low oil prices could also deal a blow to oil-producing states, like Texas and North Dakota, that rely on high prices to sustain the industry.
ExxonMobil stock dropped the most in 11 years.
Bottom line: The parallel shocks to demand (coronavirus) and supply (Saudi announcement) are unprecedented. "The situation we are witnessing today seems to have no equal in oil market history," said the executive director of the International Energy Agency.
The Triple Crown of Doping Schemes
Federal prosecutors charged 27 horse racing professionals yesterday over a scheme to secretly administer performance-enhancing drugs to racehorses under their care.
Not only did those charged deceive the betting public, according to prosecutors, but they knowingly endangered the horses' lives with dangerous substances.
- "What actually happened to the horses amounted to nothing less than abuse," said a federal official.
The headline name from the indictments was Jason Servis, the trainer of Maximum Security. That horse was the first to cross the finish line at the 2019 Kentucky Derby (it was DQ'd for interference), and since then the colt has won four of five big races, including $10 million at the Saudi Cup.
Zoom out: Professional horse racing is a $100 billion industry, so it's not surprising to see folks bending the rules to get a leg up. That, coupled with lax drug regulation in the U.S., has led to a surge in deaths at the racetrack, the NYT reports.
Amazon Likes to Walk It Out
Amazon has begun shopping its cashierless checkout tech to other retailers. Called "Just Walk Out," the technology lets you just walk out of a store without paying, or more importantly talking to, anyone.
How Just Walk Out works:
- You swipe your credit card at a turnstile to enter.
- The technology that powers self-driving cars ("computer vision," "sensor fusion") keeps track of what you take off the shelf and put in your shopping cart.
- Then, you walk out and your credit card is charged.
Amazon already uses this tech at 25 Amazon Go convenience stores and a full-sized, cashierless grocery store it opened in Seattle last month.
This is classic Bezos. First, you build a tool that's useful for your own operations, like a cloud computing platform. Then, make that tool so powerful everyone else wants a piece.
That concerns some labor rights groups. "This so-called cashierless technology is nothing but a Trojan horse that will let Amazon control and monopolize competing retailers," said the president of the United Food and Commercial Workers International Union.
Theaters in the Age of Coronavirus
Melpomene was onto something with that mask. Attendance at NYC's Broadway shows has not only held steady at 250,000 weekly visitors, but actually increased last week just as coronavirus push alerts were learning to harmonize.
Turns out a global epidemic doesn't even get you 10% off Hamilton. The average ticket price is down $6 annually to $105.35, or the price of one sanitizing hand wipe at your local Amazon Go.
And the movies?
The North American box office is doing as well as imaginable considering Disney's Onward and Ben Affleck's The Way Back are the latest releases. The pair brought in $48.5 million last weekend.
But if you don't live in the land of bottomless jumbo popcorn, it's shakier. After record 2019 revenues, the international box office is feeling feverish, especially China and Japan, the second and third largest film markets. Some analysts expect at least a $5 billion loss from box office declines and disrupted production schedules.
How to Do the Right Thing...and Make Money
You know that feeling when you change the toilet paper roll? Or say "it'll come out in the wash" instead of Venmo requesting your friends?
Being a B Corp feels like all of that at once. B Corp companies strive to "balance purpose and profit"-like Bombas, the digitally native sock company with a cult following and a give-back model.
This week on Morning Brew's Business Casual podcast, Bombas CEO Dave Heath explains why missions to "do good" can coexist with "do profit." Plus, you'll hear why…
- Authenticity is more convincing than viral marketing
- Starbucks ought to write the book on product-market fit
- Venture capital sets any non-tech investment up for failure
About that last one...Heath poses some of the hottest takes Business Casual has seen.
WHAT ELSE IS BREWING
- Aon will buy Willis Towers Watson for almost $30 billion. The deal between the insurance brokers would be the largest in industry history.
- Twitter reached a deal with activist hedge fund Elliott Management that will keep Jack Dorsey as CEO.
- Robinhood suffered another technical glitch yesterday.
- Stitch Fix stock fell almost 40% after hours. The clothing subscription company cut its sales and profit forecasts for the year.
- Led Zeppelin won a major ruling in a copyright dispute over the opening riff in "Stairway to Heaven."
NO FLY ZONE
Yesterday, Italy expanded its coronavirus quarantine measures to the entire country, a move that will inflict more economic pain on the country's famed tourist sites.
Which leads us to today's quiz: Three of the 10 most booked attractions on TripAdvisor in 2019 were in Italy, including No. 1. Can you name them?
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NO FLY ZONE ANSWER
3. Vatican Museums
10. Piazza San Marco in Venice
The rest are: Paris's Louvre Museum, the Statue of Liberty, the Eiffel Tower, Basilica of the Sagrada Familia in Barcelona, French Quarter in New Orleans, Anne Frank House in Amsterdam, Skydeck Chicago in the Willis Tower