Here’s what you need to know:
- The Fed is set to release the first economic projections of 2020.
- After an initial rush, $130 billion is still sitting in the small business relief fund.
- The global economy faces the worst downturn in a century, the O.E.C.D. says.
- Stocks tread water as investors await a signal from the Fed.
- Mnuchin will appear before the Senate to defend the Paycheck Protection Program.
The Fed is set to release the first economic projections of 2020.
The Federal Reserve is widely expected to leave interest rates near zero on Wednesday while pledging to continue buying bonds, but economists are watching for any hint about how the central bank might adjust policy in the longer run.
Officials are set to release their first set of economic projections of 2020, having skipped the quarterly summary in March as the pandemic gripped the United States, sowing uncertainty. The forecasts will show how they expect unemployment, inflation and growth to shape up in the years ahead.
The economic forecasts will be a major focus given that the last time they were released — December 2019 — Fed officials were projecting 2020 unemployment to close out at 3.5 percent with 1.9 percent inflation and 2 percent growth.
The coronavirus most likely upended those expectations. Now the major question is how quickly the country can recover — and Wednesday’s release will offer a sense of how the Fed is thinking about that.
Many Fed watchers expect officials to use the interest rate projections and their post-meeting statement, released at 2 p.m., to clearly signal that borrowing costs will remain at rock-bottom for some time. Policymakers could also use the statement to make clear they will try to goose the economy through their bond-buying program. The Fed has been snapping up government-backed bonds to keep markets functioning normally, but conditions have calmed, so they could make that program explicitly focused on stimulating the economy.
But the more significant moment may come when Fed Chair Jerome H. Powell holds a web-based news conference at 2:30 p.m. While he has sounded wary about the path ahead, analysts are curious to hear his take on the economy as states gradually open and the job market stages an early rebound.
After an initial rush, $130 billion is still sitting in the small business relief fund.
About $130 billion is sitting in the federal government’s Paycheck Protection Program, waiting to be tapped by small businesses hurt by the pandemic.
When it was first launched in April with $349 billion, the paycheck program ran out of money in less than two weeks, prompting Congress to swiftly approve additional funding of $310 billion. The outflow of money has been slower since. Many small businesses are wary of borrowing, mainly because they find the program’s rules confusing and limiting.
Even more striking is the fact that on many days last month, more money was coming back into the fund than going out — meaning that businesses that had received the money were returning it. Some public companies that got P.P.P. money returned it after a public outcry. Some small businesses got duplicate loans, and that money has been returned too. But there are thousands of small businesses that have sent back the money because they don’t think they can use it as the program intended — to mostly pay workers.
The global economy faces the worst downturn in a century, the O.E.C.D. says.
The world economy is facing the most severe recession in a century and could experience a halting recovery as policymakers brace for a potential second wave of the coronavirus and as countries embrace protectionist policies, the Organization for Economic Cooperation and Development warned in a new report.
A grim economic outlook released by the O.E.C.D. on Wednesday depicted a world economy that is walking on a “tightrope” as countries seek to reopen after three months of lockdowns. Considerable uncertainty remains, however, as the prospects and timing of a vaccine remain unknown. Health experts fear that the spread of the virus could accelerate again later this year.
“Extraordinary policies will be needed to walk the tightrope towards recovery,” said Laurence Boone, the O.E.C.D.’s chief economist.
The O.E.C.D., which comprises 37 of the world’s leading economies, predicts that the global economy will contract 6 percent this year if a second wave of the virus is avoided. If a second wave does occur, world economic output would fall 7.6 percent, before rebounding by 2.8 percent in 2021. The two scenarios are viewed as equally plausible.
Barring a second wave, the O.E.C.D. expects the United States economy to shrink 7.3 percent and the euro area to shrink 9 percent. Among developed countries, Britain’s predicted fall was the steepest, at 11.5 percent. Emerging economies like Brazil, Russia and South Africa, will be hit hard given the strain on their already fragile health systems.
Stocks tread water as investors await a signal from the Fed.
U.S. stocks drifted Wednesday as investors awaited a forecast from the U.S. Federal Reserve.
The S&P 500 wavered between gains and losses in early trading. European markets turned positive in afternoon trading, after Asian markets ended mixed.
Investors expect the Fed to keep interest rates near zero on Wednesday. What they’re really watching for is the expected release of the Fed’s first set of economic projections this year, which will signal how the central bank is thinking about a recovery from the economic damage of the coronavirus pandemic.
Investors were also sizing up a pessimistic forecast from the Organization for Economic Cooperation and Development that warned that the world economy was facing the most severe downturn in a century.
Stocks have pulled back from a string of gains that had lifted Wall Street by 6 percent in June. On Monday, the S&P 500 erased its losses for this year. Investors have taken heart in signs that the global economy is on the mend, particularly in China, Europe and the United States. They have also been cheered by government and central bank efforts to use money to fight the global freeze.
But that rally cooled in recent days as concerns grew about a second wave of the virus. Infections are still rising in many U.S. states and public health officials are concerned that the nationwide protests over police brutality may lead to new cases of the virus.
Mnuchin will appear before the Senate to defend the Paycheck Protection Program.
Treasury Secretary Steven Mnuchin will defend the Trump administration’s efforts to prop up the economy on Wednesday, arguing that the extraordinary array of stimulus measures will set the stage for a dramatic recovery in the second half of the year.
Mr. Mnuchin, who will testify before the Senate’s small business committee, is expected to offer an optimistic outlook about the trajectory of the economy. He will highlight the recent employment figures that were better than expected and point to data that show Americans have been building their savings in recent months and will be ready to spend as the economy reopens.
“We remain confident that the overall economy will continue to improve dramatically in the third and fourth quarter,” Mr. Mnuchin will say, according to his prepared testimony.
The Treasury secretary will appear with Jovita Carranza, the administrator of the Small Business Administration, to update lawmakers on the status of the Paycheck Protection Program, a lending initiative that was created in March as a lifeline for small businesses.
The program was initially plagued by glitches, delays and changing rules. But it has proved to be a lifeline for millions of businesses, allowing them to continue paying workers and overhead costs while they were forced to shut down operations.
Lawmakers on the committee are expected to question Mr. Mnuchin and Ms. Carranza about what a next phase of the program might look like and what additional changes might be beneficial to small businesses.
They are also likely to face questions about measures to ensure that businesses owned minorities and women have sufficient access to loans. A report by the S.B.A.’s inspector general found last month that the administration failed to prioritize underserved groups in accordance with the legislation.
Farewell to gummy bear jars: Tech offices are getting a virus safety makeover.
When employees at Salesforce, the cloud software giant based in San Francisco, eventually return to their office towers, they may find that the fun is gone from their famously fun-loving workplaces.
No more chatting in the elevator. No hugging. No more communal snack jars.
Before employees can even enter the office, they will be required to fill out online health surveys and take their temperature. For those who pass the health screening and have a good reason to go in, Salesforce will schedule their shifts — and send them digital entry tickets for the lobby with an arrival time.
These new command-and-control work practices are intended to help protect Salesforce’s more than 50,000 employees as the company undertakes a colossal task: figuring out how to safely reopen its more than 160 offices around the world.
“It’s going to be different,” Salesforce’s chief executive, Marc Benioff, said. “It’ll be more sterile. It’ll be more hospital-like.”
Salesforce’s vision of a more micromanaged workplace is indicative of the complexities that many businesses are grappling with during the pandemic and signals a significant cultural shift for office workers across the United States.
Restaurants are reopening, ready or not.
Governments are impatient to open their economies and consumers are willing — if also wary, reports today’s DealBook newsletter.
Consider the hard-hit restaurant business. In a new Zagat’s study of the future of dining, based on a survey of 6,775 diners, two-thirds of people will wait more than a week after restaurants reopen, and the vast majority of that group would wait over three months. Social distancing, masks and other safety measures are important for people to feel comfortable returning to their favorite establishments, the poll found.
“People want to be back at restaurants,” said Chris Stang, chief executive of Zagat. But the already embattled restaurant business could struggle to adopt these measures and still turn any sort of profit. Governments, he believes, will need to provide some economic assistance to keep restaurants alive: “There’s going to need to be a plan beyond, ‘Hey, open up and good luck.’”
AMC to reopen most of its theaters next month.
AMC Theaters, the world’s largest cineplex operator, announced on Tuesday that “almost all” of its locations in the United States and Britain would reopen next month. Over all, theaters in 90 percent of overseas markets will be running again by mid-July, according to the National Association of Theater Owners, a trade organization for movie exhibitors in 98 countries.
In just three weeks, Hollywood is scheduled to restart its supply pipeline of new films. “Unhinged,” a $33 million Russell Crowe thriller, will arrive in theaters on July 1, followed in mid-July by Christopher Nolan’s “Tenet,” a $200 million-plus mind bender.
Theater owners are desperate to start selling tickets again. AMC, based in Leawood, Kan., lost $2.18 billion in the first quarter, compared with a loss of $130 million a year earlier. Revenue totaled $942 million, a 22 percent decline. As of April 30, AMC had $718 million in cash, enough to stave off bankruptcy through the end of the year, even if theaters remain closed.
What an Amazon warehouse looks like now.
The question, however, is whether moviegoers — even while watching movies in well-sanitized theaters with limited capacity — will feel safe from the coronavirus, the spread of which rose to a record high worldwide on Sunday, as measured by new cases.
After months of being embattled over its response to the coronavirus, Amazon is working to convince the public that its workplaces — specifically, the warehouses where it stores everything from toys to hand sanitizer — are safe during the pandemic.
The giant internet retailer has started running television ads that show that its warehouse and delivery employees have masks and other protective gear. It has pushed out segments to local news stations touting its safety improvements. It has asked journalists to visit its warehouses to see for themselves.
Amazon is spreading its safety message after a period that Jeff Bezos, the company’s chief executive, has called “the hardest time we’ve ever faced.” As the coronavirus swept through the United States, Amazon struggled to balance a surge of orders with the health concerns of the one million workers and contractors at its warehouses and delivery operations.
Catch up: Here’s what else is happening.
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Simon Property Group, the biggest mall operator in the United States, said on Wednesday that it was terminating its $3.6 billion agreement to buy Taubman Centers, which operates malls including the Mall at Short Hills in New Jersey and Westfarms in Connecticut. Simon Property said that the pandemic “has had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry.” It is the second high-profile retail deal to fall apart because of the pandemic, following the termination of the sale of Victoria’s Secret to a private-equity firm last month.
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Starbucks on Wednesday said that it expects to lose up to $3.2 billion in revenue in the current quarter, with an operating income decline of up to $2.2 billion. The coffee chain said it would permanently close about 400 stores in the Americas over the next 18 months.
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Shares of Chesapeake Energy, a pioneer in extracting natural gas from shale rock, went on a wild ride on Tuesday amid reports that it was preparing a bankruptcy filing. Trading was halted for more than three hours in the morning. When buying and selling resumed, the trading was quickly interrupted again by circuit breakers. The company’s shares closed just below $24 for a loss of about 66 percent for the day.
Reporting was contributed by Alan Rappeport, Jeanna Smialek, Stacy Cowley, Sapna Maheshwari, Michael J. de la Merced, Natasha Singer, Mohammed Hadi, Brooks Barnes, Karen Weise and Clifford Krauss.
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