“The legislation is not expected to advance, since that would require support from Democrats, and House Speaker Nancy Pelosi (D-Calif.) called the measure ‘pathetic,’” Erica Werner writes of the state-of-play on the effort to provide more support for an economy rocked by the coronavirus pandemic. “McConnell has struggled even to unite Republicans behind the measure, and is likely to suffer some GOP defections.”
So what might look like earnest efforts to reach agreement in coming days will amount to political positioning. Meanwhile, 29 million jobless Americans are still relying on some form on unemployment insurance. Enhanced federal benefits to help those out of work make ends meet expired at the end of July, and only six states are handing out $300 a week meant as a temporary patch. The unemployment rate ticked down to 8.4 percent in August, but the economy has replaced roughly half of the 22 million jobs it has lost since the pandemic struck. And measures of sentiment show consumer and small business confidence turning increasingly pessimistic.
“We do think it will get harder from here, because of those areas of the economy that are so directly affected by the pandemic still,” Federal Reserve Chair Jerome H. Powell told NPR in an interview Friday. “There’s going to be a long period, we believe, where we’ll have to take our time and see those people get back to work.”
Yet the White House is playing down the need for a new relief package as President Trump touts an economy he says is already roaring back. “This will be a self-sustaining economic recovery with very big numbers in Q3 and Q4,” Larry Kudlow, Trump’s top economic adviser, told Fox News.
One development that could grab some attention in the White House: The stock market, one of Trump’s preferred gauges, continued a dramatic three-day slide. There’s little evidence investor fear of a backsliding recovery is fueling the sell-off. (Rather, a collapse in big tech names is dragging the major indexes lower.) But some top Wall Street economists continue to predict lawmakers will reach a deal on a relief package by the end of the month.
McConnell is aiming to use the package to put pressure on Democrats.
“Senate Republicans and administration officials believe Pelosi will come under growing pressure from moderate members of her own caucus who face tough reelections and have been uneasy about the failure to act on additional economic stimulus,” Werner writes. “McConnell’s new legislation is partly an attempt to attract the attention of such lawmakers.”
But Pelosi and Senate Minority Leader Charles E. Schumer (D-N.Y.) were quick to dismiss the Republican leader’s proposal, with Schumer calling it “one of the most cynical moves I have ever seen.”
McConnell’s bill, which comes with an approximately $500 billion price tag, would:
- Provide jobless Americans with an extra $300 a week in extra federal benefits through the end of the year, down from the $600 boost they received through July.
- Resupply the Paycheck Protection Program with an additional $250 billion to fund a second round of forgivable loans to small businesses.
- And offer $150 billion for schools; $47 billion for testing, tracing and vaccine development; $20 billion for farmers; and $10 billion each for child-care support services and to forgive a loan to the U.S. Postal Service, per Werner.
It would not provide state and local governments with money to relieve budget crunches they are facing — nor would it fund another round of relief checks to lower- and middle-income Americans. McConnell proposes to offset some of the cost of the package by repurposing $350 billion in unspent funds from the first Cares Act.
But there is no sign yet of bipartisan talks reviving. And the top line of McConnell’s offer marks a major step back from the $1.5 trillion the Trump administration signaled it could support before its own negotiations with congressional Democrats broke down last month, Werner notes. The Republican leader’s proposal highlights how far apart the two sides remain:
Wall Street hasn’t reckoned with the likelihood that Washington remains deadlocked on economic relief.
Goldman Sachs economists acknowledged in a Tuesday note that “fiscal stimulus looks like a much closer call than it did a couple of months ago amid mounting signs of trouble.” Yet the team still thinks Congress is “slightly more likely than not to enact a stimulus package by the end of the September.” And Morgan Stanley is projecting lawmakers adopt a $1.5 trillion to $2 trillion package this month that reduces unemployment to 7.6 percent by the end of the year.
Not all Wall Street strategists are as bullish.
David Kelly, chief global strategist at JPMorgan Asset Management, is dialing back his expectations for an agreement. “Many Senate Republicans seem unwilling to support a big bill, perhaps because it would seem to contradict their narrative that the economy is well on the road to recovery,” he writes in a note. “Meanwhile, House Democrats appear unwilling to compromise in favor of a skinny bill for fear that it would allow the President to goose up the economy just before election day and suggest that the status quo in Washington is working.”
U.S. stocks continue slide after holiday weekend.
Big tech lost particularly big: “The Dow Jones industrial average shed 632.42 points, or 2.3 percent, to close at 27,500.89. The Standard & Poor’s 500 index dropped 95.12 points, or 2.8 percent, to settle at 3,331.84, while the tech-heavy Nasdaq tumbled 465.44 points, or 4.1 percent, to end at 10,847.69,” Hamza Shaban and Hannah Denham report.
“Amazon gave up 4.4 percent, Facebook shed 4.1 percent and Alphabet fell 3.6 percent. And biotechnological firm Moderna, which is working on a coronavirus vaccine candidate, lost nearly 13.2 percent.” (Amazon chief executive Jeff Bezos owns The Washington Post.)
- Tesla experienced its worst single-day loss in its history: “Shares tumbled, after Elon Musk’s electric vehicle maker was left out of the S&P 500 by the committee that decides on new additions to the index,” CNBC’s Ryan Browne and Jessica Bursztynsky report.
From the U.S.:
- AstraZeneca pauses vaccine study. “Late-stage studies of AstraZeneca’s COVID-19 vaccine candidate are on temporary hold while the company investigates whether a recipient’s ‘potentially unexplained’ illness is a side effect of the shot,” the Associated Press reports. “In a statement issued Tuesday evening, the company said its ‘standard review process triggered a pause to vaccination to allow review of safety data.’”
- Fauci says a vaccine is “unlikely” by the election: Anthony Fauci, the nation’s top infectious disease expert, said “it’s more likely a vaccine will be ready by ‘the end of the year’ as drug companies Moderna and Pfizer race to complete patient enrollment for their late-stage vaccine trials by the end of September,” CNBC’s Berkeley Lovelace Jr. reports.
- Doctors are shifting their approach: “They are shifting large portions of their patients to virtual telehealth visits. They are being forced to make do with less revenue, some of which may never come back. Medical associations say some doctors are retiring early or joining larger groups as they seek strength in numbers,” Christopher Rowland reports.
- Los Angeles County has banned trick or treating this year: “Door-to-door trick-or-treating is banned because it can be very difficult to maintain proper social distancing on porches and at front doors especially in neighborhoods that are popular with trick or treaters,’ the county’s Department of Public Health said in a news release,” CNN’s Sarah Moon and Madeline Holcombe report.
From the corporate front:
- Boston Fed chief: Congress needs to clarify whether Main Street lending program can take bigger risks. The move could make it easier for the Fed to get more money to struggling businesses. “Of the program’s $600 billion pot, $1.2 billion in loans had been completed as of Thursday, [Boston Fed president Eric] Rosengren told The Washington Post last week,” Rachel Siegel reports.
- Bankrupt retailers struggle to clear inventory: “Firms that specialize in winding down stores say liquidating now is markedly different from what it was before the pandemic. Companies are offering deeper discounts to win over consumers — with sales starting at 40 percent off instead of the usual 20 percent — as well as other incentives. Even then, results can be spotty,” Abha Bhattarai reports.
- Shopify is suddenly worth $117 billion: The company “charges sellers a monthly fee and takes a percentage of every transaction on its platform. Its revenue nearly doubled to $714.3 million in the second quarter as the number of new stores created on Shopify increased 71 percent compared with the previous quarter,” the Wall Street Journal’s Inti Pacheco reports.
- Lululemon quarterly sales top expectations: “But its stock fell by more than 6 percent in after-hours trading as investors looked for more …CEO Calvin McDonald said the retailer is ‘cautiously optimistic’ about the rest of the year,” CNBC’s Lauren Thomas reports.
Trump weighs opening up his wallet for his campaign.
The president has discussed the matter, but many are skeptical he’ll follow through: “The billionaire president has talked about the idea with multiple people, though he hasn’t yet committed to any self-funding … Though Trump personally contributed $66 million to his 2016 campaign, it would be unprecedented for an incumbent president to put his own money toward winning a second term,” Bloomberg News’s Jennifer Jacobs, Mario Parker, and Bill Allison report.
“If I have to, I would,” Trump said Tuesday of putting money into his campaign. “But we don’t have to,” he told reporters.
Trump flips on banning oil drilling amid a sensitive political environment.
The president is trying to fashion himself into an environmentalist: “Trump, who barely two years ago proposed a vast expansion of oil and gas drilling in U.S. continental waters, on Tuesday made clear there is at least part of the nation’s coastline he is eager to protect: the crucial electoral battleground of Florida,” Brady Dennis and Dino Grandoni report.
“Trump announced plans to extend a moratorium on oil drilling in the eastern Gulf of Mexico, an area that includes the Sunshine State’s west coast, as well as expanding it to include the Atlantic coasts of Florida, Georgia and South Carolina … For a president who has spent much of his first term working to expand U.S. oil and gas drilling and scale back Obama-era regulations on the fossil fuel industry, the move also underscores the political reality in Florida, where Republican governors have opposed oil exploration off their shores, fearing it could imperil beaches and harm the tourism-dependent economy.”
- Biden set to unveil plan to stop offshoring: The former vice president stumps in Michigan today where “he’ll unveil a new policy aimed at tackling offshoring — the practice of U.S. companies basing some operations in lower-tax countries — and hammer at what he sees as [Trump’s] broken promises on improving U.S. manufacturing and reducing offshoring, senior policy adviser Jake Sullivan said,” Bloomberg News’s Jennifer Epstein reports.
When superpowers collide
Disney is under fire for thanking groups tied to Uighur detention camps.
Filmmakers cooperated with authorities in China’s Xinjiang region while filming the new “Mulan”: “The movie’s credits offer ‘special thanks’ to a number of Chinese Communist Party and government agencies, including eight in Xinjiang, a mountainous frontier abutting Central Asia that about 12 million Turkic-speaking Muslim Uighurs regard as their homeland,” WSJ’s Chun Han Wong and R.T. Watson report.
“Grant Major, the Oscar-winning production designer who worked on the film, said a small portion of the shooting took place in Xinjiang. Film shoots anywhere in China require permission from local authorities … Human-rights watchdogs, exiled Uighur activists and foreign academics have criticized Disney over the film’s connection to Xinjiang, as has U.S. Sen. Josh Hawley (R-Mo.) on Twitter.”
JPMorgan is probing abuses of government relief funds.
The bank says some employees have “fallen short”: “The bank’s operating committee, led by CEO Jamie Dimon, sent an email to 256,710 employees saying that while the pandemic has brought out the best in many workers, there have been instances where customers abused the government’s coronavirus relief programs,” CNBC’s Hugh Son reports.
“Unfortunately, we’ve also seen conduct that does not live up to our business and ethical principles — and may even be illegal,” the bank’s committee said. “This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programs. Some employees have fallen short, too.”
GM CEO Mary Barra moves to remake automaker for EV future: “Barra has reeled off two significant deals in the past week in response to investor concerns the No. 1 U.S. automaker is stuck in neutral while Tesla Inc and other electric vehicle makers are leaving legacy automakers behind,” Reuters’s Ben Klayman reports.
“But investors want her to go further. A 10 percent jump in GM’s shares on Tuesday helped the stock top its post-financial crisis 2010 initial public offering of $33. Some investors want Barra to split up the company so its EV assets can be valued at headier levels like Tesla and other newly public EV automakers.”
- Ford’s incoming CEO Jim Farley is positioning his company for the future: “But it’s not just more trucks and vans that Farley wants to sell. As Jim Farley prepares to takes over as chief executive on Oct. 1, he is betting Ford can transform its commercial vehicle business to generate recurring revenue through sales of services that take advantage of the software, data and connectivity in its F-Series pickup truck and Transit vans.”
Salaries for congressional staffers keep dropping, via Vox’s Ian Millhiser:
- The Senate Banking Committee holds a hearing on the Fed’s emergency lending facilities
- The House Small Business Committee holds a hearing on transparency in small-business lending
- American Eagle Outfitters and GameStop are among the notable companies reporting their earnings
- The Labor Department reports weekly jobless claims
- The House Financial Services Committee holds a hearing on aid for states and territories during the pandemic
- A subcommittee of the House Small Business panel holds a hearing on the state of the rural economy
- Peloton, Oracle, Chewy and Dave & Buster’s Entertainment are among the notable companies reporting their earnings