Corporate America is getting more worried even as stocks soar

CNN's Jon Sarlin explains why just looking at the stock market at a time of mass unemployment isn't good enough.

Posted: Sep 1, 2020 7:01 AM
Updated: Sep 1, 2020 7:01 AM

Corporate America was much more positive about the economic recovery before summer arrived.

What's happening: A survey conducted by Accenture in July found that nearly half of executives in North America think a "U"-shaped recovery is more likely than the rapid bounce back characterized by a sharp "V." That's up from 36% in May.

Jimmy Etheredge, Accenture's CEO of North America, told me that he's observed a sharp change in sentiment in recent conversations with other executives.

"I'm not accustomed to seeing such dramatic changes in just a few months," he said. "Clearly, the early days of optimism about a 'V'-shaped recovery are fading into the rearview mirror, and everyone's buckled down."

Remember: A spike of coronavirus cases across US Sun Belt states, which prompted the reimposition of some restrictions in June, served as a reality check for companies expecting a more linear recovery. The US economy is now operating at 79% of where it was in early March, according to the Back-to-Normal Index from CNN Business and Moody's Analytics.

Firms are bracing for another difficult nine months.

Business leaders increasingly believe their companies won't revert to pre-coronavirus growth plans until mid-2021, according to Accenture, and most return-to-work efforts have been put on ice.

Etheredge said he does not anticipate the majority of Accenture workers in North America going back into the office until the spring — and even that's up in the air.

"I could easily see that timeline shifting out," he said.

Investor insight: While executives are bracing for a prolonged era of slow growth, investors have put their faith in central banks. Unprecedented support from the Federal Reserve helped drive the S&P 500 up 7% in August for its strongest month since April.

Morgan Stanley points to school reopenings and Congressional gridlock on the next round of fiscal stimulus as risks to the rally, as well as an end to the recent string of promising economic data. But its strategists also said that if economic data heads south quickly, that could encourage lawmakers to come together and approve an even bigger package than expected.

Zoom cashes in on the work-from-home era

Video conferencing has become an integral part of our daily lives — and Zoom is reaping the benefits.

Details, details: The California-based company said Monday that revenue surged more than 350% to more than $663 million in its most recent quarter, which ended in July, my CNN Business colleague Laura He reports.

The company has been cashing in by courting corporate clients who are willing to pay for subscriptions.

By the end of July, Zoom had about 370,000 corporate customers with more than 10 employees, up nearly 460% from a year ago. Its biggest paying customers — those that pay more than $100,000 a year for the service — more than doubled to 988 compared with the same quarter a year ago.

CEO Eric Yuan told analysts that ExxonMobil is now a paying subscriber, while companies like video game maker Activision Blizzard are ramping up their use of the service.

Investor insight: Shares of Zoom are up 31% in premarket trading after reaching an all-time high of $325.10 on Monday. The company's stock is up 210% since March, making it once of the top beneficiaries of the stay-at-home era.

Airlines ditch change fees to woo wary travelers

In a desperate bid to encourage would-be fliers to purchase plane tickets, airlines are ditching the change fees that brought in billions of dollars per year.

The latest: United announced Sunday that it was dropping most of its change fees for good. Rivals American Airlines and Delta Air Lines quickly followed suit, announcing on Monday that they'd ditch most change fees as well, my CNN Business colleague Chris Isidore reports.

"When we hear from customers about where we can improve, getting rid of this fee is often the top request," United CEO Scott Kirby said. "Following previous tough times, airlines made difficult decisions to survive, sometimes at the expense of customer service. United Airlines won't be following that same playbook as we come out of this crisis."

The change is a sign of the extent to which airlines feel they need to court customers to make up for a huge drop in demand due to the pandemic. With a muted summer travel season coming to an end, many carriers don't have a choice.

"The airlines are in a position where they are not generating a lot of revenue," Cowen analyst Helane Becker said. "If this gets people to book, that's a huge positive for them."

Investor insight: Investors appear unsure about the strategy. Shares of American, United and Delta all fell more than 3% on Monday.

Up next

The August reading of the ISM Manufacturing Index, a closely watched gauge of US industry, posts at 10 a.m. ET.

Coming tomorrow: Macy's reports earnings as retailers struggle to get back on track.

St. Joseph
37° wxIcon
Hi: 57° Lo: 36°
Feels Like: 33°
Partly Cloudy
37° wxIcon
Hi: 53° Lo: 34°
Feels Like: 29°
St. Joseph
37° wxIcon
Hi: 56° Lo: 34°
Feels Like: 33°
Partly Cloudy
41° wxIcon
Hi: 56° Lo: 34°
Feels Like: 41°
Falls City
34° wxIcon
Hi: 54° Lo: 33°
Feels Like: 28°
A few areas of frost are possible this morning as temperatures have fallen into the mid 30s. Today temperatures will remain below average with highs in the upper 50s and lower 60s under mostly sunny skies. A few clouds will move back into the area tonight as temperatures dip down into the mid to lower 30s. Areas of frost will be possible again early Thursday morning. Conditions will stay relatively the same on Thursday with highs in the upper 50s under mostly sunny skies. Rain chances will move back into the area on Friday, mainly through the afternoon and evening keeping temperatures in the lower 50s. A few rain showers could linger through early Saturday morning before moving out of the area. Sunday looks to be a dry and mild day with temperatures remaining in the upper 50s. Temperatures will start to warm up on Monday with highs back in the low to mid 60s before a cold front moves through the area dropping temperatures back into the 50s on Tuesday.
KQTV Radar
KQTV Temperatures
KQTV Alerts

Community Events