U.S. stocks poised to open lower as IMF forecasts worst recession since the 1930s

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Great Depression

Futures edge lower

Wall Street is headed for a lower open Wednesday, after the International Monetary Fund (IMF) warned of the worst global downturn since the Great Depression of the 1930s as a result of the lockdowns imposed by governments in response to the novel coronavirus (COVID-19) pandemic.

“As countries implement the necessary quarantines and social distancing practices to contain the pandemic, the world has been put into a Great Blockade,” said IMF chief economist Gita Gopinath on Tuesday.

The magnitude and speed of the collapse in activity that has followed is unlike anything we have experienced in our lives,” Gopinath added.

The IMF now expects the world economy to contract by 3% this year, followed by a 5.8% rebound next year. According to the fund, the U.S. economy is likely to shrink 5.9% in 2020, before bouncing back by 4.7% next year.

A 7.5% drop is projected in 19 European countries, a 6.5% downturn for the U.K., a 6.2% contraction for Canada, and a 5.2% decline in Japan.

However, the organization is optimistic about China, forecasting a 1.2% growth this year as the country reopens factories and businesses.

By 5:35 a.m. ET, the blue-chip Dow futures were down 380 points, or 1.59% to 23,500. S&P 500 futures fell 48.88 points, or 1.72% to 2,794.12 while the tech-heavy Nasdaq 100 futures dropped 108.62 points, or 1.25% to 8,583.88.

In commodities, U.S. West Texas Intermediate crude futures were down 36 cents a barrel, or 1.79% to $19.75. International Brent crude futures at $28.50 a barrel, down $1.10, or 3.72%.

More earnings eyed

Meanwhile, traders are awaiting a slew of quarterly earnings today to see how corporate America is weathering the coronavirus crisis.

First quarter earnings from Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) are due ahead of the opening bell.

Healthcare giant UnitedHealth (NYSE: UNH) also issues numbers before the market open, while struggling retailer Bed Bath & Beyond (NASDAQ: BBBY) reports after the close.

Airline stocks stage rally as coronavirus relief packages roll in

Airline stocks such as American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), and United Airlines (NASDAQ: UAL) were higher in Wednesday’s premarket trade, following reports the carriers have reached an agreement in principle with the U.S. Treasury Department to cover payroll expenses in a $25 billion bailout deal.

“We welcome the news that a number of major airlines intend to participate in the Payroll Support Program,” Treasury Secretary Steven Mnuchin said on Tuesday.

American Airlines was up 7.53%, Delta Air Lines rose 5.62%, United Airlines shot up 6.15%, JetBlue (NASDAQ: JBLU) jumped 8.23%, while Southwest Airlines (NYSE: LUV) gained 4.95%.

March retail sales data in focus

On the economic data front, traders will be keeping a keen eye on retail sales numbers for March to gauge the economic fallout of the coronavirus crisis.

The data, due to be published by the U.S. Department of Commerce at 8:30 a.m. ET, is expected to show a sharp decline during the month because of the rapid spread of the virus in the United States.

Economists polled by Bloomberg expect headline retail sales to drop 8% m/m, more than double the worst slump seen during the financial crisis of 2008. Excluding autos, sales are expected to fall 5.2%.

 

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