July 24, 2020, 10:23 a.m. ET
The downdraft on Wall Street continued on Friday as new doubts rose about the economic recovery in the United States and continuing concerns about U.S.-China relations gave traders reasons to avoid risky investments.
The S&P 500 fell half a percent, adding to its 1.2 percent decline the day before. Tech stocks again struggled with the Nasdaq composite falling by more than 1 percent. In Europe, shares fell about 1 to 2 percent, while every major market in Asia suffered losses.
Earnings reports from several large companies in recent days continued to weigh on their share prices. Intel slid more than 17 percent, becoming the worst performing stock in the S&P 500, after the company said on Thursday that new chip technology was several months behind schedule. Its rival, Advanced Micro Devices, surged more than 11 percent.
American Express fell about 3 percent after its revenue fell short of analysts expectations, and the company set aside about $628 million to prepare for defaults on credit cards during the economic crisis. The company is the latest of many lenders to warn that they are preparing for a sharp downturn. The provision, and lower spending by customers, led to an 85 percent plunge in profit for the three months through June, from a year earlier.
And the Walt Disney Company was also lower after the company said it would delay the release of its live action “Mulan” indefinitely and push back three upcoming “Star Wars” movies and four scheduled “Avatar” sequels by one year each.
Stock investors have mostly shaken off concerns about the pandemic, and warnings from policymakers that the economic crisis could last much longer than the stock market anticipates. The S&P 500 is still on track to gain more than 3 percent in July.
But market has proved itself prone to sudden shifts in sentiment, and the change in tone in financial markets this week came after data released on Thursday showed the first increase in new state unemployment insurance claims in the United States in nearly four months, providing evidence that the American economy is backsliding.
The claims are rising just as a $600-a-week federal supplement to jobless benefits is set to expire, and as the virus continues to spread: The United States surpassed four million total cases on Thursday, and another day of at least 1,100 deaths.
Investors were also troubled by continuing problems between the world’s two largest economies. China on Friday ordered the United States to shut its consulate Chengdu, in retaliation for the Trump administration’s order to close Beijing’s consulate in Houston. The move was not unexpected, but that was little consolation to investors.
Smithfield Foods, one of the nation’s largest meat packing companies, has been under scrutiny for refusing to publicly disclose the number of positive coronavirus cases among its employees and for its decision to export large amounts of meat to China while publicly warning about a looming meat shortage in the United States. Now, the company is pushing back.
“Think this has been easy?” Kenneth Sullivan, Smithfield’s chief executive, wrote in a letter to two leading Democrats in the Senate, Elizabeth Warren and Cory Booker, who have asked the company for information about their response to coronavirus outbreaks in many of its plants. “It has not. I would gladly let you live in my shoes.”
In a letter to the senators, co-signed by thousands of Smithfield employees, Mr. Sullivan complained of “Monday morning quarterbacks everywhere” and “revisionist historians” who have held the company to unfair and impractical standards regarding masks and social distancing measures.
“Processing plants were no more designed to operate in a pandemic than hospitals were designed to produce pork,’’ Mr. Sullivan wrote. “In other words, for better or worse, our plants are what they are. Four walls, engineered design, efficient use of space, etc. Spread out? Okay. Where?”
Smithfield’s response to the senators’ requests for information is far more combative than those submitted by other meat packing executives at Tyson, JBS and Cargill.
Mr. Sullivan was the first meat packing executive to warn publicly in April that the virus was threatening the U.S. meat supply, prompting the Trump administration to issue an executive order to keep them operating.
It was later revealed by The New York Times that Smithfield and other meatpackers exported record amounts of pork to China in April while they were warning of shortages, prompting Ms. Warren and Mr. Booker to demand more detailed information about the companies’ exports.
The companies have said many of those exports were packaged before the pandemic. In its letter to the senators, Smithfield, which is owned by a Chinese company, did not disclose how much it exported to China. Mr. Sullivan said he was “increasingly concerned about the xenophobic zeal that perpetuates falsehoods and unfairly stigmatizes our 42,000 U.S. employees who can do nothing about our corporate structure.”
In a statement, Ms. Warren chided the companies, saying they failed to provide substantive answers to her questions. “The Covid-19 pandemic has made it painfully clear that these giant meatpackers can use their power to exploit their workers for profit.” she said.
British retail sales have returned to levels last seen before the pandemic and government-imposed lockdown, according to official statistics published Friday. The volume of sales jumped nearly 14 percent in June from the previous month.
It’s a welcome sign for an economy on track for its worst recession in three centuries, although the types of spending has changed substantially. About a third of all spending was online in June, compared with 20 percent in February. Average weekly online sales jumped from 1.5 billion pounds ($1.9 billion) in February to a record £2.5 billion in June.
Spending in food stores, which has been strong through the pandemic, is still historically high. Spending on clothes and shopping in town centers were still down by a third. In June, sales for household goods, such as furniture and hardware recovered their lockdown losses as these stores reopened.
Samuel Tombs, an economist at Pantheon Macroeconomics, cautioned that the jump in retail spending didn’t mean a wider recovery was taking hold. This “is not a sign that households’ overall spending also is recovering fully and rapidly,” Mr. Tombs wrote in a note.
Retail spending usually accounts for less than a third of household expenditures, he said, and it was bolstered in June because consumer services — such as eating out, going to a hairdresser, leisure travel — remained largely unavailable.
He said recent payments data suggests spending on non-urgent items, such as household goods and clothes, peaked in early July. “Real-time data suggest that this pent-up demand already has been satiated,” he added.
— Eshe Nelson
The weekly number of workers filing new claims for state unemployment benefits rose for the first time in three months.
The government reported on Thursday that more than 1.4 million workers filed new claims last week, up from about 1.3 million in the two preceding weeks.
“Increasingly I fear that we’re going to see net payrolls in July will show an actual decline” when the next monthly jobs report is released, said Gregory Daco, the chief United States economist at Oxford Economics.
Mr. Daco said the rush to reopen in many states had been counterproductive, contributing to the increasing virus caseloads, particularly in the South and West, that are compelling businesses to close again.
During the worst of the last recession, weekly unemployment insurance applications never exceeded 700,000. Since mid-March, new state claims have yet to fall below a million.
With more than 30 million people claiming unemployment insurance for the week ending July 4, roughly one in every five workers is collecting benefits.
Getting a precise nationwide count of the number of people collecting unemployment benefits has been hampered since the start of the coronavirus pandemic. Data from overwhelmed and understaffed state offices has been inconsistent and strewn with errors. And there may be some double-counting as the agencies struggle to clear out the flood of new and backlogged claims.
Despite the pandemic, 16 states are proceeding with summer “back-to-school” tax holidays, temporarily exempting clothing, shoes, notebooks and other school supplies, sometimes including computers, from state, and often local, sales taxes.
What states are holding sales tax holidays this year?
States holding sales tax promotions in 2020, according to the Federation of Tax Administrators, are Alabama, Arkansas, Connecticut, Florida, Iowa, Maryland, Massachusetts, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
Alaska, Delaware, Montana, New Hampshire and Oregon don’t charge statewide sales taxes in the first place. And other states may exempt clothing and food from sales tax, at least up to certain limits, year round.
How much can I save during a sales tax holiday?
State sales taxes range from about 4 to 7 percent but can be as high as 9 percent when additional local option sales taxes are included. Most sales tax holidays include state and local taxes, but some exclude local taxes or make them optional, reducing the savings.
Your savings may also be limited by a dollar cap on purchases, whether it is based on the cost of an individual item or on the total receipt.
Are computers eligible?
Fewer than half the states with tax holidays include computers on their tax-exempt menus, and all set limits on the exempt amount, according to a list compiled by the Federation of Tax Administrators. (The ones that do are Alabama, Florida, Massachusetts, Missouri, New Mexico, South Carolina and Tennessee.)
I’m not comfortable shopping in stores because of the pandemic. Can I get the tax break by shopping online?
Generally, online purchases are eligible for the tax break, tax experts say.
Disney on Thursday gave a worrisome update on its movie business — the largest in Hollywood, by far, and still mostly shut down because of the pandemic — by delaying the theatrical release of its live-action “Mulan” indefinitely and pushing back three upcoming “Star Wars” movies and four scheduled “Avatar” sequels by one year each.
The next “Star Wars” movie will not arrive until 2023, making for a far less promising 2022 for Disney’s movie and consumer products divisions. “Mulan” was supposed to arrive in theaters on Aug. 21 after being pushed back several times already.
“It’s become clear that nothing can be set in stone when it comes to how we release films during this global health crisis,” Disney said in a statement.
In a similar move, Warner Bros. on Monday indefinitely delayed Christopher Nolan’s big-budget “Tenet,” which had been scheduled to arrive in theaters on Aug. 12.
Some upcoming Disney movies are being delayed because the coronavirus has halted movie production across Hollywood. But the “Mulan” postponement reflects the economics of blockbuster-style films and the inability of theaters in some crucial markets — New York, Los Angeles, the San Francisco Bay Area — to reopen without government approval, the timing of which is impossible to predict. To release “Mulan” on Aug. 21, Disney would need to start its advertising barrage now. But no company wants to spend a minimum of $150 million to market a movie worldwide if it can’t be sure that the advertised product will be available.
Similarly, because these movies cost roughly $200 million just to produce, the only way to make them financially viable is to make them available everywhere all at once, thwarting piracy as much as possible. New York, Los Angeles and the Bay Area are the country’s three biggest markets for ticket sales; it would be a financial calamity to release a “tent pole” movie with even one of those areas offline.
Disney’s next megamovie will now not arrive until at least November, when “Black Widow” is set to roll into theaters.
AMC Theatres, the nation’s largest cinema chain, said Wednesday it was delaying the opening of its more than 1,000 theaters in the United States until mid-to-late August.
Without its movie division to generate revenue, Disney’s theme parks have become even more important to the conglomerate. Disney reopened Walt Disney World in Florida earlier this month. It has been accused of irresponsibility from people concerned about visitor and worker health, but Disney has developed what it believes are safe operating procedures. And it gets to tell investors on its Aug. 4 earnings call that at least something came back online in the quarter.
Pennies and dimes are hard to find in many parts of America after pandemic lockdowns disrupted their flow and kept households from exchanging their coin jars for dollar bills.
The United States Mint wants you to know that you can be part of the solution.
“We ask that the American public start spending their coins,” the Mint, which is part of the Treasury, implored in a release on Thursday. “The coin supply problem can be solved with each of us doing our part.”
Other options include depositing coins or exchanging them for cash.
The coin shortage has forced regional Federal Reserve banks, which distributes coins, to institute a rationing system. On June 30, the Fed established a coin task force to deal with the unfolding crisis, complete with “industry leaders in the coin supply chain.”
The shortage has become a problem for many small businesses across America and has been the topic of local news coverage and of discussion on a corner of Reddit devoted to prepping strategies.
Even big retailers are feeling the penny pinch — Walmart, CVS, Kroger and other chains have begun asking customers to pay with plastic when possible or to use exact change.
While digital payments have become prevalent, coins have remained crucial to some parts of the economy: parking meters, vending machines, amusement parks and even campground showers. For the millions of households without bank accounts, cash is an essential part of daily life.
“For millions of Americans, cash is the only form of payment and cash transactions rely on coins to make change,” the Mint said.
“As important as it is to get more coins circulating, safety is paramount,” it added. “Please be sure to follow all safety and health guidelines.”
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🤳🏻 BuzzFeed said it had laid off 50 employees, including 10 people in its news division.The employees were among a group of 74 who were furloughed in the spring, the company said. Buzzfeed cut the salaries of its U.S. workers earning more than $40,000, and top executives had their pay reduced by 25 percent. Jonah Peretti, the company’s chief executive, said he would forgo his salary until the crisis passed. Employees will get between four and eight weeks of severance, and BuzzFeed will pay for insurance through September 30, a spokesman said.
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📽 AMC Theatres delayed the opening of its more than 1,000 theaters in the United States until mid-to-late August. The move was not a surprise, given that it arrived on the heels of the Warner Bros. announcement earlier this week that its big-budgeted thriller “Tenet” would not be released on its rescheduled date of Aug. 12. With the coronavirus showing no signs of abatement, the studios and their movie theater partners have been playing a game of chicken, postponing the return to moviegoing until the virus numbers show a decline.
— William P. Davis