Hello. I’m James Willhite, with Tuesday’s markets update as stocks look to build on yesterday’s rise—but remain on track for their worst quarterly finish since 2008.
Futures are up, and crude prices are rebounding a day after sinking to an 18-year low. Economic figures rolling in are finally beginning to reflect the period since the coronavirus hit the U.S., and today’s include data on manufacturing and consumer confidence. China’s economy is showing signs of renewed vigor after having been the first nation to suffer the brunt of the crisis. But investors elsewhere will have to wait a bit longer to fully gauge the impacts of policy interventions around the world.
Meanwhile, our Kirk Maltais explains why the sleepy market for orange-juice futures has been jolted awake.
Markets in a Minute
Grocery-Store Rush Boosts Orange-Juice Futures
By Kirk Maltais, markets reporter
Consumers’ rush to buy groceries is fueling a rally in orange-juice prices, making the usually sedate asset the best-performing commodity in the first quarter of 2020.
The price of frozen orange-juice-concentrate futures trading on the Intercontinental Exchange has surged 23% to more than $1.19 a pound since March 19—a run resulting from demand on grocery-store inventories by consumers looking to stock up on goods in preparation for coronavirus-related quarantines. That is their highest level since June, when traders were anticipating a strong hurricane season bearing down on states including Florida, where U.S. citrus production is centered.
The surge puts orange juice’s quarterly gain just below U.S. Treasury bonds but easily tops the next-best-performing commodity, gold, which is up 6.9% year to date.
The coronavirus panic pushed sales of orange juice in grocery stores up 40% for the week ended March 14 from the same time last year, according to market-research firm Nielsen. Sales of fruit juices overall were up 37% in the same time frame and sales of consumer packaged goods climbed 44%, according to the firm.
“We are seeing an increase in demand for our products and are working diligently to ensure we meet this demand during this unprecedented time,” said a spokeswoman for Tropicana, a brand of orange juice owned by PepsiCo.
With a deluge of grocery-store traffic putting retailers on their heels, speculators have been betting on further gains in the relatively sedate market for OJ futures, which typically trade at much lower volumes than other soft commodities.
Also pushing futures prices higher are questions about a possible bottleneck in supplies from Florida or Brazil. “Pickers are not going out into groves to pick the fruit for fear of getting too close to affected fellow workers and catching the coronavirus disease,” said Jack Scoville of brokerage firm Price Futures Group in a research note last week.
Before the panic-buying spurred by the virus, orange-juice futures were engaged in a steady descent—falling 51% from a high of $1.91 a pound reached in May 2018 to a low of 94 cents a pound earlier this month. Even with brief events such as Hurricane Dorian sparking upward movement, orange-juice prices have been bogged down by decreasing consumer demand and stable production. According to the Florida Department of Citrus, Florida citrus growers will produce 71 million boxes of oranges, similar to production last year.
Ample supplies of citrus are available from both Florida and Brazil and any hiccups in transportation for juice—and any constraints on available supply—are temporary, said Neil Murray, head of processed commodities with research firm IHS Markit.
“It’s exactly like toilet paper—there’s plenty of it around but everyone wants to be sure they have enough,” he said.
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- Prices of wheat and rice, two of the world’s staple grains, are rising sharply, as consumers load up while supply lines are disrupted and governments restrict exports. The price of wheat futures trading in Chicago, the global benchmark, has risen 15% since mid-March and reached as high as $5.72 a bushel Monday. Meanwhile the price of a variety of Thai rice, a key benchmark for international trade, has jumped 17% to $490 a metric ton since the start of the year, according to the International Grains Council.
- Companies ranging from Oracle to Nike are borrowing record amounts in the investment-grade bond market to build cash before the full impact of the novel coronavirus hits the U.S. economy. Issuance of investment-grade bonds in the U.S. hit about $73 billion last week, roughly 21% higher than the previous high-water mark reached in 2013, according to data from Dealogic. Much of the new debt is being purchased by stock investors seeking a haven from volatility.
- On this day in 1854, U.S. Navy Commodore Matthew Calbraith Perry—after belching black smoke from his warships in Tokyo Bay and then unloading a telegraph, a daguerreotype camera and a chronicle of the Mexican War illustrated with bloody battle scenes—armtwisted the Japanese imperial government into signing the Treaty of Kanagawa, opening Japan to U.S. trade for the first time.
The S&P/Case-Shiller home-price index for January is out at 9 a.m. ET.
The Chicago purchasing manager index for March, due at 9:45 a.m., is expected to fall to 40.5 from 49.0 a month earlier.
The Conference Board’s consumer confidence index for March, due at 10 a.m., is expected to drop to 110.0 from 130.7.
The Bank of Japan’s quarterly tankan survey of business sentiment is out at 7:50 p.m.
The China Caixin manufacturing index for March is out at 9:45 p.m.
Downtown Los Angeles streets on Sunday. The economic damage from the coronavirus crisis would depend not just on how high unemployment goes in the next month or two, but how long it stays there. PHOTO: ALLISON ZAUCHA FOR THE WALL STREET JOURNAL
How to avoid another great recession. The U.S. economy has suffered a body blow with no modern precedent, but it isn’t a foregone conclusion that this must wreak as much damage as the great recession, much less the depression.
Treasury Secretary Steven Mnuchin said small-business loans for the coronavirus are expected to start Friday. The roughly $2 trillion economic relief package includes nearly $350 billion in loans for companies with fewer than 500 employees, which will be administered by the Small Business Administration.
Pressure is mounting on insurance companies to pay out for coronavirus. Lawmakers and regulators are pressuring insurers to go beyond the legal language of policies to get cash to Americans amid the mounting cost of shutdowns from the coronavirus pandemic.
Surveillance of Wall Street traders is relying on pen and paper. As banks, asset managers and hedge-fund firms adjust to employees working from home, they also have to comply with one of the key financial regulations governing their conduct: recording all trading-related calls.
Hidden Chinese lending is putting emerging-market economies at risk. More than $200 billion in Chinese overseas lending hasn’t shown up in official data in recent years, allowing emerging markets indebted to China to also borrow from other investors. Now borrowers are at risk of drowning in debt and investors face the reality that China may be ahead of them in collecting.
Exor made a $200 million investment in ride-share company Via. The investment would give Exor just under a 9% stake in Via and would value Via at $2.25 billion.
Bank of New York Mellon made its interim CEO permanent. The bank said it named Todd Gibbons as chief executive. He has been interim CEO since last fall.
What We’ve Heard on the Street
“It is like a switch has been thrown on the economy, turning out the lights first here, then there. The economy could be in good shape when the switch finally gets flipped back on, but that is going to depend on how the country handles the crisis.”
Stocks to Watch
American Airlines, Delta Air Lines, United Airlines: The Treasury Department released new details Monday night on how it will award grants and loans for airlines affected by the coronavirus pandemic, and urged companies to submit some applications by Friday to begin receiving funds as soon as possible.
Walt Disney: Chairman and former CEO Robert Iger agreed to forgo most of his salary while his successor, CEO Bob Chapek, along with several executives, will take pay cuts amid the coronavirus pandemic.
Blackstone: The investment firm’s shale driller Gavilan Resources is preparing a potential bankruptcy filing over the plunge in commodity prices and an unresolved dispute with Sanchez Energy, people familiar with the matter said.