Shut it all down

MARKETS

• European markets: Stocks had their worst one-day drop in history yesterday, despite an emergency stimulus package unveiled by the European Central Bank.
• U.S. markets: You know things are bad when you kinda get used to seeing the S&P down staggering amounts. The Dow suffered its worst one-day drop since the crash in 1987, and Wall Street's circuit breaker kicked in for the second time this week to give markets a breather. The S&P joined the Dow in a bear market. This is a historic wipeout.

ECONOMY

The Boy Who Cried Debt

As factories around the world shutter, entire populations get quarantined, and consumers lock their wallets tighter than their front doors, thousands of companies are facing deep earnings cuts.

Which brings up a huge problem. Last year, outstanding debt held by non-finance corporations hit a record $13.5 trillion, according to an OECD report. A growing portion of that is held in riskier bonds, and experts worry an economic crisis spurred by coronavirus could send corporations on cost-cutting sprees or to default.

How we got here

Corporations issue bonds to raise money. And high-quality corporate bonds are considered relatively safe investments.

• What counts as high-quality? Rating agencies like S&P, Fitch, and Moody’s rank bonds by a company’s creditworthiness, from investment-grade to junk.

In the years after the financial crisis, corporations loaded up on debt. Today, an estimated one-in-six U.S. companies don’t have the cash flow to cover interest payments, a Morgan Stanley analyst told the FT.

And there’s more junk than ever: In the last decade, about one-fifth of new bonds issued were below investment-grade.

When junk hits the fan

Because of the coronavirus, investors are shedding riskier assets like a Great Pyrenees heading into spring. This week’s oil price war accelerated the sell-off in the energy industry, which accounts for the largest share of the U.S. junk bond market.

• Energy companies have about $88 billion in bonds due this year, and analysts expect defaults to surpass 2016 levels.

Rating agencies are watching particularly vulnerable industries like auto, airlines, and hospitality. S&P put Nashville's Ryman Hospitality Properties on a credit rating watch after massive cancellations threatened to whack revenue by $40 million.

Big picture: Last year, the IMF warned a crisis half as severe as the 2008 recession could put 40% of corporate debt at risk. If the pandemic makes it harder for companies to make interest payments, they might need to lean on cost-cutting measures like layoffs or pulling investments.

EVENTS

Shut It All Down

You're going to have to find another excuse besides "I'm too busy." Delays/cancellations/suspensions of some of the biggest events and venues in the U.S. came fast and furious yesterday.

Sports

NCAA March Madness: Canceled

MLB: Opening of season delayed for at least two weeks

Major League Soccer: On hold for 30 days

NHL: Suspended

NBA: Suspended

PGA Tour: Tournaments will be played, but without fans

Boston Marathon: Postponed to autumn

NASCAR: Holding races in Atlanta and Miami without fans

Culture

Broadway: Closed until April 13

E3 (huge videogame expo): Canceled

Many iconic NYC cultural institutions, including the Met and Carnegie Hall: Closed

Movies

Fast and Furious 9: Postponed to April 2021

A Quiet Place II: Delayed indefinitely

Bottom line: You already know what we're gonna say. The impact of these cancellations isn't just FOMO—the lost spending will be crushing.

ECONOMY

The Fed Hits the Pedal

Fed Chair Jerome Powell’s had a big March trying to support the financial markets in these times of crisis. Last Tuesday, he took the roadster out of the garage by cutting interest rates. On Monday, he pulled out of the driveway—raising limits on repurchasing operations—before turning onto the highway Wednesday (jacking lending up to $500+ billion from under $200 billion).

Yesterday, he gunned it up the on-ramp. The New York Fed will infuse $1.5 trillion into financial markets in an effort to calm the typhoon-esque waters.

• It’ll do that via three separate $500 billion repo (repurchasing agreement) offerings. The first began yesterday; the second will last for three months; and the third will stay for just one. The injection could broaden the Fed’s portfolio by over 35%.

Zoom out: The markets barely noticed Powell’s rate cut last week. Now, the Fed is using longer-term asset purchases to stabilize markets, a move it last made to shoulder them through the 2008 financial crisis.

+ Want more markets? Yesterday, we released an emergency podcast episode of Business Casual with markets expert Downtown Josh Brown. You won't find a better breakdown of all the turmoil anywhere else. Give it a listen.

TRAVEL

Princess Cruises on Royal Retreat

Yesterday, Princess Cruises suspended all operations for two months, sending owner Carnival Corp. shares into a sharp starboard tack—down 31.2%.

The details: The suspension will affect the cruise line's 18 ships until May 10. Current Princess trips slated to end before March 17 will complete their journeys, but those planned to end later will be cut short.

Zoom out: The coronavirus pandemic reaches all corners of the biz world, especially the travel sector. But Carnival is uniquely ensnared.

• In January, its Diamond Princess ship held what was then one of the largest clusters of confirmed cases outside China, with over 700 people infected. Several people died after disembarking.
• Then last week, authorities confirmed at least 21 COVID-19 cases on its Grand Princess vessel. The ship is now at the Port of Oakland, where passengers and crew are being routed to quarantine facilities.

Bottom line: The industry is facing an existential threat. Both the State Dept. and the CDC advised Americans to avoid cruises.

QUIZ

Quiz-19

Currently rewatching The Sopranos hard at work. It’s the Brew’s Weekly News Quiz, coming at you live from a couch in Brooklyn.

1. History: Can you match the U.S. government bailout to the industry it bailed out?

Bailout amount: $15 billion; $17 billion; $700 billion
Industry: Automakers following the '08 crisis; banks during the '08 crisis; airlines after 9/11
2. On Tuesday, NY Rep. Gregory Meeks said, "For the life of me, I don't know why you took this job." Who was he talking to?

3. Originally a marketing agency, MSCHF is home to 10 employees who "pretty much do whatever they want," per the NYT. Which of the following viral stunts have they not created?

a. A desktop app that swipes right on Tinder every time you click your mouse
b. "Times Newer Roman," a font that's slightly bigger than Times New Roman
c. "All the Memes," a website that shows "stolen" memes from popular comedy influencers
d. A mystery box that sold for $100 but could contain up to $7,000 in value inside. The catch: If you mailed the box back within 100 days, you’d automatically make $1,000.

4. Complete the definition: Stock markets need to drop ___% from a recent peak to enter a bear market.

5. Where did Adidas test the foam particles that comprise its Boost shoes’ midsoles last weekend?

Answers: 1. $15 billion to airlines after 9/11; $700 billion to banks during the 2008 financial crisis; $17 billion to automakers following the ‘08 crisis 2. Wells Fargo CEO Charles Scharf 3. MSCHF did not make a site called “All the Memes” 4. 20% 5. Outer space

CUTENESS

Deep Breath In 3...2...1...

Don’t forget to take a minute for yourself today. Now go wash your hands.

WHAT ELSE IS BREWING

• Airline stocks continued to take a beating following temporary restrictions President Trump placed on some travel from Europe.
• Starbucks is prepared to limit seating and only keep drive thrus open to maintain social distancing, CEO Kevin Johnson said.
• Auto sales in China fell 82% year-over-year in February.
• Airbnb bookings are nosediving in major cities around the world, the WSJ reports. Meanwhile, Airbnb nearly doubled its losses in Q4.
• JPMorgan CEO Jamie Dimon has been discharged from the hospital following heart surgery. “He’s doing very well,” per a company memo.

FRIDAY PUZZLE

What do the following words have in common?

Assess
Banana
Dresser
Grammar
Potato
Revive
Uneven
Voodoo

FRIDAY PUZZLE ANSWER