The Federal Reserve continued snapping up corporate bonds to help keep credit markets functioning, with the central bank disclosing on Friday that it had added more than $1.3 billion in bonds from individual companies as of June 30.
The central bank has been helping to support the secondary corporate bond market — the one for already-issued debt — by buying Exchange Traded Funds, which track a broad basket of bonds but trade like stocks, as well as individual bonds. It announced last month that it was beginning to shift its purchases to an index of corporate debt of its own design.
That index is meant to reflect the available universe of bonds that fit the program’s restrictions, with limits for individual issuers. According to its most recent disclosure, the Fed invested in bonds from companies including Apple, AT&T, Bayer, Berkshire Hathaway Energy, Ford Motor Co. and Verizon.
The Fed’s program is authorized to buy as much as $250 billion in already-issued bonds. Another program has been created to buy up to $500 billion of newly-issued bonds but the facility had not recorded any purchases at the end of June.
As of June 30, the Fed said it had $9.4 billion in total outstanding loans under its secondary market corporate credit facility. — Deborah Solomon
Goya Foods, whose products are a staple of American households, became the target of a boycott and considerable backlash on Friday after its leader praised President Trump during a visit to the White House.
Bob Unanue, the president of Goya Foods, was at the White House on Thursday to announce that the company would donate one million cans of chickpeas and another one million pounds of food to food banks in the United States as part of the Hispanic Prosperity Initiative, an executive order from Mr. Trump that was created to improve access to educational and economic opportunities.
During the appearance, Mr. Unanue said the United States was “blessed” to have Mr. Trump as its leader.
Mr. Unanue’s comments drew swift condemnation on social media from people who were upset that a company whose products are popular among Latinos and others would so openly support a president who has vilified immigrants, especially those from Latin America, and whose harsh policies have targeted them. The hashtags #Goyaway and #BoycottGoya quickly formed to share criticism from many, including those who routinely buy Goya products.
Goya Foods on Friday issued a news release about the company’s donation, but did not address the controversy around Mr. Unanue’s comments. — Derrick Bryson Taylor
The International Energy Agency warned Friday that the surge of coronavirus cases in nations like the United States and Brazil was “casting a shadow” over the outlook for global oil demand.
In its latest Monthly Oil Report, the group revised its forecast for demand this year slightly upward by 400,000 barrels a day, to 92.2 million barrels a day. This still represents a decline of nearly 8 percent compared to 2019, reflecting the diminished economic activity caused by efforts to curb the virus.
However, the agency said that uncertainty over the forecast had risen because of the acceleration of the spread of the virus in several countries. So far, analysts at the agency wrote, the resulting lockdowns — sometimes reimposed after being lifted earlier — were more localized than those imposed earlier, but the growing number of cases showed that the “pandemic is not under control.”
Despite the jitters, prices have recovered sharply from their April lows when futures contracts for some oil actually plunged into negative territory. The market recovery has been spurred by supply cuts by the Organization of the Petroleum Exporting Countries, Russia and by producers in the United States. Global output fell to a nine-year low of 86.9 million barrels a day in June.
On Friday, both Brent crude, the international benchmark, and West Texas Intermediate, the U.S. standard, were down about 2 percent. — Stanley Reed
Stocks on Wall Street drifted between gains and losses on Friday, while markets in Europe gained some ground, as investors weighed the impact of new coronavirus cases around the world.
The S&P 500 started the day with a modest gain, while markets in London, Frankfurt and Paris recouped early losses to climb about half a percent. In Asia, news of an apparently widening outbreak of infections in Hong Kong had sent shares skidding.
Coronavirus cases continued to spike in the United States, which recorded its sixth single-day record in 10 days on Thursday. Helping offset that was news from the drugmaker Gilead Sciences, which said its potential Covid-19 treatment cut mortality risk in patients.
In other markets, U.S. Treasury bond yields slumped, a sign that investors were seeking safety. Oil futures were lower after the International Energy Agency said that strong growth of coronavirus cases in the United States and Latin America is “casting a shadow” over the resurgence of oil demand.
Investors have seemed to largely shrug off a rise in coronavirus cases in the United States; the S&P 500 is up roughly 6 percent since late May. But trading has become more volatile lately over worries about the virus and restrictions that are being reimposed as a result.
In Europe, some company earnings reports caused bumps in share prices. The German biotech firm Qiagen, whose products and services are used in coronavirus testing, said its adjusted earnings per share were expected to rise nearly 70 percent this year; its shares rose about 4 percent. And Carlsberg, the Danish brewer, reported figures suggesting the fall in beer sales was flattening out, with strong growth in China. Shares jumped nearly 5 percent. — Mohammed Hadi and Kevin Granville
The biggest American banks will report their second-quarter earnings next week, and it could be ugly, according to today’s DealBook newsletter.
Lenders were quick to add billions to their loan-loss provisions at the end of the first quarter, and analysts expect at least as much to be added in the latest quarter, too. For the full year, S&P expects that credit losses will account for around three-quarters of the world’s largest banks’ pre-provision earnings, more than double the share last year.
The good news is that companies have taken on cheap debt and eagerly issued new shares into climbing stock markets, increasing banks’ fee income. That means that despite the drain on earnings from fresh provisions, banks with strong underwriting businesses, like Goldman Sachs, JPMorgan Chase and Morgan Stanley, could see a quarter-on-quarter rise in profit. All banks, however, are expected to announce huge drops in earnings versus the same quarter last year.
Global banks face $1.3 trillion in credit losses this year, according to S&P, more than double last year’s losses. The pain will continue into next year, when the strength of banks’ provisions will be tested by a surge in charge-offs as payment holidays and government support measures expire. “From a bank credit risk perspective, perhaps the greater danger at this time is the reduction of such support too early, resulting in a longer and deeper economic contraction, further impairing banks’ asset quality and increasing credit losses,” according to S&P’s analysts. — Jason Karaian
The U.S. subsidiary of Muji, the Japanese lifestyle brand, filed for Chapter 11 bankruptcy protection in Delaware on Friday, according to a court filing. Muji’s owner, Ryohin Keikaku Co., said in a statement that the brand had been hit hard by the coronavirus, with all 18 of its stores closed since mid-March. Ryohin Keikaku said it planned to close unprofitable stores and renegotiate rents on others, and that the U.S. filing would not affect its operations overseas.
China’s customs authority on Friday said it had suspended imports from three Ecuadorean companies after the coronavirus was detected on a container and on packages of frozen shrimp from Ecuador, China’s state broadcaster reported. China has already suspended imports from 23 meat producers, including American meat giant Tyson, Germany’s Tönnies, Brazil’s Agra and Britain’s Tulip, because of outbreaks at their plants, Bi Kexin, a senior Chinese customs official, said Friday. — Elaine Yu
When California shut down its economy in March, it became a model for painful but aggressive action to counter the coronavirus. The implicit trade-off was that a lot of upfront pain would help slow the spread, allowing the state to reopen sooner and more triumphantly than places that failed to act as decisively.
But the virus had other plans, and now the state’s economy is in retrenchment mode again. For the nation, this means that an important center of its output — a magnet of summer tourism and home to the technology and entertainment industries along with the world’s busiest port operation — is unlikely to regain momentum soon when growth is needed most.
For the state, it means a progressive agenda predicated on the continuation of good times will be hampered as governments move from expansion to cuts. Voters had mostly been open to paying for expanding services and priorities like affordable housing, but they seem to be turning wary of new taxes.
Unemployment, which was 3.9 percent in February, the lowest on record, shot up to 16.3 percent by May, compared with 13.3 percent nationwide. Container traffic at the Ports of Los Angeles and Long Beach is down about a third from a year ago, while many beaches and attractions like Disneyland were closed on July Fourth and are delaying their reopening plans. Most dispiriting is the sense that even after politicians made tough calls that Californians largely supported, the economy seems no better off.
Exactly how and how quickly the state should have reopened, and who is to blame for the backslide, are unlikely to ever be resolved. What the result means for the economy is more time in the dark, more need among the poorest citizens and more drain on the taxes required to support them. — Conor Dougherty
The Federal Reserve’s Main Street loan program for medium-size businesses was destined to be a challenge.
The central bank has never tried lending to midsize companies before and it is difficult to help a very diverse group of businesses without putting taxpayer money at risk. The Fed, the Treasury Department and members of Congress have also at times appeared to be on different pages about what they want the program to achieve.
The central bank and the Treasury, which is providing money to cover any loans that go bad, spent months devising the program, negotiating over credit risk and vetting terms. Many officials within the Fed wanted to create a program that businesses would actually use, but some at Treasury saw the program as more of an absolute backstop for firms that were out of options. Steven Mnuchin, the Treasury Secretary, has resisted taking on too much risk, saying at one point that he did not want to lose money on the programs as a base case.
What has emerged after three months, two overhauls and more than 2,000 comments filed with the Fed is a program that seems to be incapable of pleasing much of anyone.
Executives at La Colombe, a Philadelphia-based purveyor of fancy coffee and canned draft lattes, thought that the program would be their best shot at getting help. But when the central bank announced the details in early April, it was clear that La Colombe would not qualify. The company has too much debt relative to earnings to meet the Fed’s leverage restrictions.
“That just doesn’t make sense for companies like La Colombe, because we’re growing so quickly,” said Aren Platt, who leads special projects for the company. — Jeanna Smialek
The personal computer market shook off the effects of supply chain disruption caused by the coronavirus pandemic, posting growth of 3 percent to 11 percent in the second quarter compared with the same period in 2019, the research companies Gartner and IDC said on Thursday.
Between 64 million and 72 million PCs were shipped worldwide as distributors and retailers restocked. Sales of mobile computers rose strongly because more people were working or learning remotely and needed devices to entertain themselves, the researchers said.
Factory closures in China, caused by the spread of the coronavirus, had led to a weak first quarter for the PC market. But the latest numbers told a story of recovery — at least temporarily. Researchers cautioned that the bump in sales might not last.
“This uptick in mobile PC demand will not continue beyond 2020, as shipments were mainly boosted by short-term business needs due to the impact of the COVID-19 pandemic,” said Mikako Kitagawa, a Gartner analyst. — Kellen Browning
The investment adds to the sizable war chest that Rivian has amassed in recent months. In 2019, it raised close to $3 billion from a variety of investors, including Amazon, for whom Rivian is developing an electric delivery truck, and Ford Motor, which is developing an electric sport-utility vehicle based on Rivian’s technology.
The company’s latest funding round reflects investors’ increasing enthusiasm for electric vehicles. Tesla’s stock has soared this year and has turned the company into the most valuable automaker in the world, ahead of Toyota Motor.
Rivian is planning on beginning production next year of an S.U.V., a pickup truck and the Amazon delivery van at a plant in Normal, Ill.
“We are excited to continue this journey with Rivian’s innovative and talented team as they now prepare to deliver their groundbreaking products that help shift to a carbon-neutral planet,” said Joe Fath, portfolio manager of T. Rowe Price Growth Stock Fund.