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The Dow tumbles 500 points amid record drop in retail sales

The Dow tumbled 500 points on Wednesday as a record drop in retail sales and dire first-quarter earnings reports lent weight to forecasts for the biggest economic slump since the 1930s. 

All major US indexes dropped at the open with the Dow slipped 530 points, or 2.2%, the S&P 500 dropping 2.3% and the Nasdaq trading 1.9% lower.

It comes as UnitedHealth Group Inc, the biggest US health insurer, reported a fall in quarterly profit, but its shares rose 2.6% in premarket trading as it maintained its 2020 profit outlook at a time when major companies have withdrawn forecasts due to the coronavirus pandemic.

J.C. Penney Co Inc slumped 14.7% as sources said the retailer was exploring filing for bankruptcy protection after the virus outbreak upended its turnaround plans.

JPMorgan Chase & Co and Wells Fargo & Co kicked off the earnings season on Tuesday by reporting a slump in quarterly profits and setting aside billions of dollars to cover potential loan defaults.

With dire forecasts of the biggest economic slump this year since the Great Depression, analysts expect earnings for S&P 500 firms to slide 12.3% in the first quarter and 23.6% in the second, according to IBES estimates from Refinitiv.

The benchmark S&P 500 index has climbed about 30% from its March trough, lifted by a raft of US monetary and fiscal stimulus and on early signs that coronavirus cases were peaking in some hotspots, but is still down about 16% from its record high.

The index jumped 3% on Tuesday on hopes the Trump administration could move to ease lockdowns as the outbreak showed signs of ebbing. However, hotspot New York later sharply raised its official virus death toll to more than 10,000.

Oil majors Exxon Mobil Corp and Chevron Corp slipped about 3% as oil prices tumbled, pressured by reports suggesting persistent oversupply and collapsing global demand.

Bank of America, Goldman Sachs and Citigroup Inc fell between 0.9% and 2% before the release of their financial results later in the day.

J.C. Penney faces bankruptcy after being forced to temporarily close its 850 department stores and furlough 85,000 employees 

J.C. Penney Co Inc is exploring filing for bankruptcy protection after the coronavirus pandemic forced the U.S. retailer to temporarily shut its 850 department stores, upending its turnaround plans, according to people familiar with the matter.

The Plano, Texas-based company has access to enough cash to survive in the months ahead, even as revenue dries up because of the store closures, the sources said.

Still, the company is contemplating a bankruptcy filing as one way to rework its unsustainable finances and save money on looming debt payments, which include significant annual interest expenses, the sources added.

Concerns about prolonged store closures and customers remaining sparse even when outlets eventually reopen have also factored in to J.C. Penney’s deliberations, some of the sources said.

J.C. Penney has not made any final decisions on how to address its strained finances, the sources said.  

The retailer is also considering asking creditors for breathing room through transactions that would rework debt outside of bankruptcy court proceedings, the sources added. There is also a possibility that J.C. Penney will be able to secure rescue financing, one of the sources said.

The sources spoke on condition of anonymity to discuss confidential deliberations.

J.C. Penney Co Inc is exploring filing for bankruptcy protection after the coronavirus pandemic forced the U.S. retailer to temporarily shut its 850 department stores

J.C. Penney Co Inc is exploring filing for bankruptcy protection after the coronavirus pandemic forced the U.S. retailer to temporarily shut its 850 department stores

The 118-year old company, which has had to furlough some of its roughly 85,000 employees and slash spending, is now considering skipping looming debt payments and filing for bankruptcy to address its debt, the sources said.

Its online business is still running, though it does not contribute to the lion’s share of the company’s sales.

J.C. Penney ‘has been engaged in discussions with its lenders since mid-2019 to evaluate options to strengthen its balance sheet and maximize its financial flexibility, a process that has become even more important as our stores have also closed due to the pandemic,’ a company spokeswoman said in a statement.  

The pandemic ‘has created unprecedented challenges,’ she said, adding the company remains focused on its turnaround plan and looks forward to reopening stores.

J.C. Penney attempted unsuccessfully to persuade creditors earlier this year to restructure and push out due dates on portions of its nearly $4 billion of long-term debt without the need for bankruptcy proceedings.

It hoped to buy time for Chief Executive Jill Soltau’s turnaround plan to bear fruit, as it faced fierce competition from e-commerce firms as well as discount retailers such as the TJX Cos Inc’s Marshalls and T.J. Maxx chains.

J.C. Penney had recently made some strides in its turnaround attempt, meeting or exceeding guidance on financial objectives for 2019 and improving sales at some stores.

The company has been reducing inventory and refocusing on its core higher-margin business of selling mid-priced apparel to middle-class families.

The novel coronavirus outbreak threw a wrench in its plans.