Jerome H. Powell, the Federal Reserve chair, soothed the stock market on Tuesday by telling Senate lawmakers what he has been repeating for months: The central bank sees limited risk that inflation is about to take off, it is focused on returning a pandemic-damaged labor market to full strength, and it will keep using its policies to support the economy.
On Wednesday, he delivered a second day of congressional testimony, this time before the House Financial Services Committee. He repeated his calm and controlled message, which has become noteworthy at a time when some lawmakers — in particular Republicans — have become worried that big government spending could fuel economic overheating that leads to rapid inflation.
Mr. Powell’s unworried tone when it comes to price increases is also reassuring investors, some of whom had begun to speculate that the Fed might dial back its bond-buying campaign sooner rather than later as consumer costs creep higher. The Fed’s asset purchases, often called quantitative easing, help to keep many kinds of borrowing cheap and can push up stock and other security prices.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Mr. Powell said to House lawmakers, according to his prepared remarks.
Besides buying huge quantities of bonds, the Fed has also held interest rates near-zero since last March. The central bank has signaled that it wants to see the economy return to full employment, achieve its 2 percent inflation goal and get on track to exceed that inflation target for some time before lifting its policy interest rate.
Workhorse, a start-up striving to be a major producer of electric delivery vans, got bad news on Tuesday: It lost out on a $482 million deal to make tens of thousands of vehicles for the United States Postal Service. And now investors are punishing its stock.
The company’s shares fell by almost 50 percent on Tuesday after the Postal Service announcement and were down an additional 14 percent in morning trading on Wednesday.
Workhorse, an Ohio-based company with a factory in Indiana, was counting on the postal contract to provide a surge in revenue. By early February, its shares had risen from under $2 to more than $40 in less than a year, largely on hopes it would win all or part of the postal contract. Instead, the Postal Service awarded the work to Oshkosh Defense, a subsidiary of the Oshkosh Corporation of Wisconsin that makes military vehicles and mobility systems.
Under an initial deal for what the Postal Service is calling its next-generation delivery vehicle, Oshkosh is to complete the design and then assemble 50,000 to 165,000 vehicles over 10 years.
The Oshkosh vehicles will be equipped with either fuel-efficient gasoline engines or electric batteries, and they will be retrofitted to keep pace with advances in electric vehicle technology, the Postal Service said. Workhorse proposed delivering an all-electric order.
Workhorse Group, which employs about 130 people and had sales of less than $1 million in the first nine months of last year, was a bit of a David to the Goliath of Oshkosh, whose corporate revenue was $8.4 billion in the 2019 fiscal year.
On Wednesday, Workhorse said in a statement that “pursuant to the bid process rules,” it had asked the Postal Service for more information, and that it “intends to explore all avenues that are available” to an unsuccessful finalist in a government bidding process.
Fry’s Electronics, a big-box retailer on the West Coast, announced on Wednesday that it was shutting down operations, effective immediately.
The company, which is based in San Jose, Calif., replaced the contents of its website with a statement that said it had ceased operations and had begun the winding-down process. The retailer blamed the shutdown on “changes in the retail industry and the challenges posed by the Covid-19 pandemic.”
“It is hoped that undertaking the wind-down through this orderly process will reduce costs, avoid additional liabilities, minimize the impact on our customers, vendors, landlords and associates, and maximize the value of the company’s assets for its creditors and other stakeholders,” the statement said.
Fry’s has 31 stores across nine states and has been in business for nearly 36 years, according to the statement.
More than 150 corporate executives in New York — including a steadfast Trump supporter, Stephen A. Schwarzman of the Blackstone Group — have signed a letter urging Congress to pass President Biden’s $1.9 trillion coronavirus bill over Republican objections.
The letter, released on Wednesday, calls on congressional leaders from both parties to “act swiftly and on a bipartisan basis” to enact the sweeping package, which Mr. Biden is pushing through Congress using a procedural loophole called reconciliation to bypass a possible Republican filibuster.
“Previous federal relief measures have been essential, but more must be done,” the executives wrote, bolstering the White House message that passing the measure quickly was justified by the magnitude of the crisis.
The business leaders represent a cross-section of prominent chief executives, including Sundar Pichai of Google, David M. Solomon of Goldman Sachs, Laurence D. Fink of BlackRock and Pat Gelsinger of Intel, as well as Mr. Schwartzman and another longtime friend of former President Donald J. Trump, the New York developer Richard S. LeFrak.
“More than 10 million fewer Americans are working today than when the pandemic began, small businesses across the country are facing bankruptcy, and schools are struggling to reopen,” the executives wrote in the letter, an effort organized by the Partnership for New York City, a business advocacy group.
The letter comes as opposition to the Biden package among Republicans in the Senate stiffened after the White House politely but emphatically rejected efforts, led by Senator Susan of Collins of Maine, to negotiate a much smaller compromise.
“We have indicated a willingness to come up from our $618 billion, but unfortunately the White House seems wedded to a figure that really can’t be justified,” Ms. Collins told reporters at the Capitol on Tuesday. “I would be surprised if there was support in the Republican caucus if the bill comes out at $1.9 trillion even if we’re able to make some beneficial changes.”
Mr. Biden’s proposal includes $1,400 stimulus checks for taxpayers making less than $75,000 a year, $400 billion for coronavirus vaccinations, an increase in unemployment benefits and hundreds of billions more in relief for local governments.
The House is expected to vote on the measure, which is expected to pass on a mostly party-line basis, on Friday or over the weekend, according to Democratic aides.
From there, it will head to the Senate, where Republicans will have an opportunity to add amendments. Democrats, who control an upper chamber deadlocked at 50-50 with the tiebreaking vote of Vice President Harris, cannot afford a single defection.
President Biden is expected to sign an executive order on Wednesday that will kick off a review of the supply chains that support several crucial American manufacturing industries, including automobiles, pharmaceuticals and clean energy.
The order will not target imports from any specific country, senior Biden administration officials said Tuesday in a conference call previewing the move, but it is widely seen as the next step in an effort to counter the economic rise of China and to promote factory growth in the United States. The officials cast it as a successor to the “Buy American” order that Mr. Biden signed last month.
The president’s order comes as a global shortage in semiconductors — a key component in cars and electronic devices — has forced several major American auto plants to close or scale back production and sent the administration scrambling to appeal to allies like Taiwan for emergency supplies.
The officials said the order would not offer a quick fix for that shortage. Instead, it would start an effort to insulate the American economy from future shortages of critical imported components.
Mr. Biden plans to order yearlong reviews of six sectors and a 100-day review of four classes of products where American manufacturers rely on imports: computer chips, high-capacity batteries, pharmaceuticals and their active ingredients, and critical minerals and strategic materials, like rare earths.
Subsequent actions to strengthen those supply chains will depend on the vulnerabilities that each review finds, the officials said.
The order is an early salvo in the administration’s economic battle with China. China’s dominance of global supply chains for critical products like medical masks and for raw materials has prompted deep concerns that Beijing’s authoritarian government could cut off the United States at a whim.
China has periodically moved to ban the export of rare earth materials that are crucial for manufacturing electronics, fighter jets and weaponry. Early in the coronavirus pandemic, Beijing halted exports of surgical masks and protective gear as it diverted supplies to its own local governments and hospitals.
Beijing has also sought to expand its foothold in certain emerging technologies by investing heavily in research and subsidizing new factories, raising concerns that China could dominate the supply of electric vehicles, advanced telecommunications gear and semiconductors in the same way it has cornered other global markets.
GameStop’s chief financial officer, Jim Bell, is leaving the company in late March, following a stock-trading frenzy that briefly sent shares in the video game retailer surging.
The company gave no reason for Mr. Bell’s departure in its announcement on Tuesday, but noted it would look for a successor “with the capabilities and qualifications to help accelerate GameStop’s transformation.” Mr. Bell joined GameStop less than two years ago.
GameStop jumped into the headlines in late January when amateur investors used trading apps to buy options and pump up its share price, defying hedge funds that had bet the price would fall. The chaotic trading led to congressional hearings last week, but executives from GameStop, which was essentially caught in the middle, were not called to testify.
GameStop’s share price closed at about $45 on Tuesday. It reached $483 on Jan. 28 after starting the year at $19.
The wild swings in share price were detached from what was happening at the company, where a major stockholder has been trying to force a turnaround. In early January, Ryan Cohen, the manager of RC Ventures and a large stockholder, joined the GameStop board. He has been pressuring the company’s executive team to overhaul GameStop’s strategy and focus on digital growth. The company has more than 5,000 stores, many in American malls and shopping strips, but has steadily lost sales to major online retailers like Amazon.
Mr. Bell joined the company in June 2019 at the age of 51 from Wok Holdings, which owns the restaurant chain P.F. Chang's. In a short statement, GameStop thanked Mr. Bell “for his significant contributions and leadership, including his efforts over the past year during the Covid-19 pandemic.”
Stocks on Wall Street drifted lower on Wednesday as yields on government bonds continued to tick higher, signaling that investors continue to see fast economic growth and inflation ahead.
The S&P 500 index reached record highs earlier in the month as traders bet on the recovery and a successful vaccine rollout. Easy-money policies has also helped push asset prices higher. But fears that stronger economic growth and higher inflation would prompt the Fed to withdraw some monetary support have caused bond prices to fall, pushing up yields. This temporarily unsettled stock markets.
On Wednesday, yields on U.S. bonds resumed their march higher. The yield on 10-year notes jumped to as high as 1.42 percent. The S&P 500 was slightly lower in early trading.
Investors will be watching the Federal Reserve chief’s second day of testimony on Capitol Hill. On Tuesday, he reiterated the need to provide plenty of support for the economic recovery from the pandemic.
“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Jerome Powell, the Fed chair, told the Senate Banking Committee on Tuesday. He will speak to lawmakers in the House on Wednesday.
Europe and Asia
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Most European stocks indexes gained and the Stoxx Europe 600 rose 0.3 percent. The fourth quarter growth of Germany’s economy was revised higher to 0.3 percent, from 0.1 percent.
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Most Asian indexes fell. The Hang Seng in Hong Kong dropped 3 percent with financial and consumer stocks falling the most after the government announced a plan to increase a tax on stock trading. Shares in Hong Kong Exchanges & Clearing fell by nearly 9 percent, the most in the index.
Commodities
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Futures of West Texas Intermediate, the U.S. benchmark, rose more than 1 percent to $62 a barrel, the highest in 13 months. This week, for the first time since 2011, copper prices climbed above $9,000 a metric ton in London.
A winter storm in Texas that pushed its power grid to the brink of collapse and left millions without electricity during a brutal cold snap has led to the resignations of five officials who oversaw the state’s electric grid.
The Electric Reliability Council of Texas, which governs the flow of power for more than 26 million Texans, has been blamed for the widespread failures. The governor, lawmakers and federal officials quickly began inquiries into the system’s failures, particularly its preparation for cold weather, reports Rick Rojas for The New York Times.
The five board members, who announced on Tuesday that they intended to resign after a meeting set for Wednesday morning, were all from outside of Texas, a point of contention for critics who questioned the wisdom of outsiders playing such an influential role in the state’s infrastructure. In a statement filed with the Public Utility Commission, four board members said they were stepping down “to allow state leaders a free hand with future direction and to eliminate distractions.” In a footnote, the filing added that a fifth member was also resigning.
Those departing are the chairwoman, Sally Talberg, a former state utility regulator who lives in Michigan; Peter Cramton, the vice chairman and an economics professor at the University of Cologne in Germany and the University of Maryland; Terry Bulger, a retired banking executive who lives in Illinois; and Raymond Hepper, who is a former official with the agency overseeing the power grid in New England. Another person who was supposed to fill a vacant seat, Craig S. Ivey, has withdrawn from the 16-member board.
The board became the target of blame and scrutiny after the winter storm last week brought the state’s electric grid precariously close to a complete blackout that could have taken months to recover from. In a last-minute effort to avert that, the council, known as ERCOT, ordered rolling outages that plunged much of the state into darkness and caused electricity prices to skyrocket. Some customers had bills well over $10,000.
During two enormous crises — a public health emergency and an economic crash — restaurant service workers have found themselves double-exposed.
Many say their average tips have declined, while they’ve been saddled with the added work of policing patrons who aren’t social distancing, or as one service worker put it, “babysitting for the greater good,” Emma Goldberg reports for The New York Times.
On top of this, women, who make up more than two-thirds of servers, say they are facing “maskual harassment” — a term coined by the nonprofit organization One Fair Wage to describe demands that servers remove their masks to receive a tip.
The economic challenges have raised existential questions: Could this crisis herald the end of tipping, or a raise in the minimum wage for tipped workers? Depending on subjective gratuities has long been a fraught issue, but rarely has it had the safety consequences that it does now, when workers are struggling to enforce public health compliance from the customers whose tips they depend on.
Natasha Van Duser, 27, who tended bar in Manhattan, had never thought to show up to work with pepper spray. That was before last spring, when, she said, a customer dining outside spat on her and threatened to kill her when she asked him to put on a mask before walking to the bathroom; there were others who shouted expletives at her or suggested she take the temperature of their behinds instead of their foreheads.
In a recent national study of more than 1,600 workers, conducted by One Fair Wage and the Food Labor Research Center at the University of California, Berkeley, over three-quarters of workers reported “witnessing hostile behavior” from customers who were asked to comply with coronavirus protocols, more than 40 percent reported a change in the frequency of unwanted sexual comments during the pandemic and more than 80 percent reported that their tips had declined.
Boredom’s impact on the economy is under-researched, experts say, possibly because there has been no modern situation like this one, but many agree that it’s an important one, Sydney Ember reports for The New York Times.
Feeling bored may result in different kinds of behaviors, like increasing novelty seeking and increasing reward sensitivity, said Erin Westgate, an assistant professor of psychology at the University of Florida, who studies boredom.
This swirl of reactions to boredom can help explain the GameStop phenomenon, Ms. Westgate said. Investing in the stock was not just an act that felt engaging, powered by a propensity for taking risks and the excitement of reward, but also something that felt meaningful: For many traders, it was a form of protest.
Early in the pandemic, bread-making fervor prompted stores across the country to sell out of yeast. Puzzle sales have skyrocketed. Gardening has taken off as a hobby. Home improvement, too, has boomed. Sherwin-Williams said it had record sales in the fourth quarter and for the year, in part because of strong performances in its do-it-yourself and residential repaint businesses. Pandemic boredom evidently has nothing on watching paint dry.
There has also been an increase in sales of things like video games to keep us occupied, as well as things to help relieve the stress of the pandemic (and, perhaps, boredom from being at home), including self-help books, candles and messaging appliances.
It is possible that not being bored during certain periods of the day is also making people less productive, said Bec Weeks, who worked as a senior adviser for the Behavioural Economics Team of the Australian government and is a co-founder of a behavioral science app called Pique.
Research has shown that mind-wandering, an activity that can happen during periods of boredom, can result in greater productivity. But during the pandemic, some of the best opportunities for mind-wandering, like the daily commute to work, have been lost for the millions of people now working from home.
“Even in those moments when we used to be bored, there were often a lot of things going on that we didn’t realize,” Ms. Weeks said.
Last month, Laurence D. Fink, BlackRock’s chief executive, wrote that the company wanted businesses it invests in to remove as much carbon dioxide from the environment as they emit by 2050 at the latest.
But crucial details were missing from the pledge, including what proportion of the companies BlackRock invests in will be zero-emission businesses in 2050. On Saturday, in response to questions from The New York Times, a BlackRock spokesman said that the company’s “ambition” was to have “net zero emissions across our entire assets under management by 2050,” The New York Times’s Peter Eavis and Clifford Krauss report.
As the biggest companies strive to trumpet their environmental activism, the need to match words with deeds is becoming increasingly important.
Household names like Costco and Netflix have not provided emissions reduction targets. Others, like the agricultural giant Cargill and the clothing company Levi Strauss, have struggled to cut emissions. Technology companies like Google and Microsoft, which run power-hungry data centers, have slashed emissions, but are finding that the technology often doesn’t exist to carry out their “moonshot” objectives.
Determining how hard companies are really trying can be very difficult when there are no regulatory standards that require uniform disclosures of important information like emissions.
Institutional Shareholder Services, a firm that advises investors on how to vote on corporate matters, analyzed what corporations are doing to reduce emissions. Just over a third of the 500 companies in the S&P 500 stock index have set ambitious targets, it found, while 215 had no target at all. The rest had weak targets.
“To realize the necessary emission reductions, more ambitious targets urgently need to be set,” said Viola Lutz, deputy head of ISS ESG Climate Solutions, an arm of Institutional Shareholder Services. “Otherwise, we project emissions for S&P 500 companies will end up being triple of what they should be in 2050.”
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