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Eurozone growth surges, but another slowdown is probably ahead. - Press "Enter" to skip to content

Eurozone growth surges, but another slowdown is probably ahead.

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  • Stocks fell on Friday, dropping for the fourth time in the past five days in a retreat that has added up to Wall Street’s worst week since March, as rising pandemic cases, new shutdowns and a sell-off in large technology stocks all dragged the major benchmarks lower.

  • The S&P 500 fell 1.2 percent, bringing its loss for the week to 5.6 percent. That’s its biggest weekly drop since the week through March 20, when stocks plunged 15 percent before they began to rebound after the Federal Reserve and lawmakers in Washington stepped in to bolster the economy. The Dow Jones industrial average fell 6.5 percent this week.

  • The latest sell-off has come as a second wave of cases forced more lockdowns in Europe, threatening the economic recovery and spooking investors around the world. In the United States, a record number of cases is prompting city and county governments to start imposing some curfews and limits on gatherings.

  • And trading has been volatile for much of October, with investors whipsawed by expectations about whether Congress and the White House would agree on a new economic relief plan, anticipation of a contested election next week and concern about the sharp rise in virus cases.

  • The decline on Friday leaves the S&P 500 with a gain of 1.2 percent for the year. As recently as Oct. 12, the index was up more than 9 percent for the year.

  • “The Covid infections are moving in the wrong direction at a pretty quick pace, not just here in the U.S., but globally as well, so there’s a lot of concern about that among investors,” said Chris Larkin, managing director of trading and investment products at E-Trade Financial.

  • Concern about the economic impact of any pandemic-related shutdown has been particularly evident in energy markets. West Texas Intermediate crude, the American benchmark, fell 1 percent on Friday, bringing its losses to 10 percent for the week, its biggest five-day decline since April.

  • In the stock market on Friday, big technology stocks led the retreat even after many of them reported a jump in profit. Twitter was the worst-performing stock in the S&P 500, dropping 21 percent, after its user growth fell short of expectations. Apple fell more than 5 percent, after it said a delay in the release of the iPhone 12 led to a drop in iPhone sales.

  • Facebook and Amazon were also sharply lower. Alphabet was the only one of the four tech giants that reported results on Thursday to gain, climbing more than 3 percent after reporting a rise in advertising on Google and YouTube. The Nasdaq composite fell 2.5 percent.

  • Shares in Europe were mixed on Friday, with the Dax in Germany and the FTSE 100 in Britain lower, while the CAC 40 index in France rose slightly.

  • Data published Friday showed Europe’s economy recorded its strongest rebound on record in the third quarter, jumping 12.7 percent from the previous quarter in countries that share the euro. But the latest lockdowns mean economists are now worried about a double-dip recession, if economic growth is wiped out by weeks of orders to stay at home and the closure of bars, restaurants and nonessential shops.

Credit…Kevin Mohatt/Reuters

Four tech companies with a combined market value of $5 trillion — Alphabet, Amazon, Apple and Facebook — reported their latest earnings after the market closed on Thursday. The DealBook newsletter compiled some of the big numbers in the filings:

$64.7 billion: Apple’s revenue rose just 1 percent, but that beat expectations as analysts were expecting a decline because of the delayed release of the new iPhone. Sales of services helped cover the shortfall.

197 percent: Amazon’s quarterly profit nearly tripled, to $6.3 billion. Bonus stat: The company also added almost 250,000 employees in the period, surpassing more than a million workers for the first time.

2.54 billion: The number of people using one or more apps in Facebook’s family — Instagram, WhatsApp, Messenger and its core app — rose 15 percent.

$5 billion: Advertising revenue at Google’s YouTube unit set a record, rising 30 percent, bolstered by stay-at-home viewing.

Credit…Amr Alfiky/The New York Times

As concerns about another wave of coronavirus inflections swept the globe in recent months, shoppers again hit grocery stores and loaded up on pantry items, sending sales of Kraft Heinz’s food products soaring in the third quarter.

The maker of Heinz ketchup, Kraft macaroni & cheese and Oscar Mayer cold cuts said on Thursday that organic sales, which strip out currency movements, acquisitions and divestitures, rose 6.3 percent to $6.4 billion in the third quarter from a year ago. On a call with Wall Street analysts, the company’s chief executive, Miguel Patricio, said Kraft Heinz saw retail demand for its products accelerate again in the second half of September.

Kraft Heinz, which was struggling with its product mix and company structure before the pandemic, said net income fell 33.7 percent in the quarter to $597 million because of charges stemming from its September announcement to sell part of its cheese business, including Cracker Barrel and Polly-O to the French company Lactalis.

But like other large food manufacturers, Kraft Heinz has benefited from the broad shift by consumers to eating more meals at home during the pandemic. Expecting that trend to continue through the end of the year, Kraft Heinz increased its outlook for all of 2020.

The cereal giant Kellogg said sales of its cereals and snacks gained in the third quarter, but at a slower rate than the previous period. After soaring 9.2 percent in the second quarter, organic sales at Kellogg grew 4.5 percent in the third quarter to about $3.6 billion. Net income climbed to $348 million, up from $247 million a year ago.

Executives said consumers in the quarter snacked on Pringles chips, and loaded up shopping carts with Eggo waffles and Morningstar Farms meat-alternative foods, including a new line of plant-based burgers and chicken nuggets called “Incogmeato.”

Consumers’ love of tacos and burritos pushed Yum Brands revenue up 8 percent to $1.45 billion in the third quarter. Net income rose 11 percent to $283 million from a year earlier.

Taco Bell was the big winner for the company, with people buying larger meal packs for families and embracing a new product, the grilled cheese burrito.

Taco Bell, whose sales were hit by a reduction in breakfast and late-night meals since the pandemic started, reported same-store sales gains of 3 percent in the third quarter. Those gains offset losses at Yum Brands’ two other large chains, KFC and Pizza Hut. Both chains grew same-store sales in the United States, but they reported declines in global sales as demand lagged.

Softness in international markets could continue to affect Yum Brands in the fourth quarter. Europe makes up less than 10 percent of Pizza Hut’s sales and 5 percent of KFC’s, but executives said they were keeping a close eye on the area as France moved to another national lockdown and Germany inched closer to one in response to rising coronavirus cases.

The United States and China markets rebounded faster than expected for the coffee chain Starbucks, resulting in just a in global same-store sales in the quarter as compared with the same period last year.

As more Starbucks opened to limited in-store dining in the United States and China, which make up 61 percent of the company’s total global stores, same-store sales improved significantly from the 40 percent drop in the prior quarter.

In this past quarter, revenue declined 8 percent to $6.2 billion while net earnings were slashed in half to $392 million.

On a call with analysts, the chief executive, Kevin Johnson, said the company was adjusting to changing consumer patterns. Traffic has moved from dense metro areas to the suburbs, and early-morning coffee runs have shifted to midmorning business, he said.

Starbucks’ fall seasonal menu, specifically its “pumpkin platform,” was also a boon as Pumpkin Cream Cold Brew coffee outsold a longtime fan favorite, the Pumpkin Spice Latte.

Credit…Tannen Maury/EPA, via Shutterstock

Exxon Mobil and Chevron, the country’s two energy giants, on Friday reported quarterly losses as the oil and gas industry continued to reel from the pandemic.

Demand for oil and gas tumbled this spring as governments and businesses shut down the economy and told millions of people to stay home, sending prices sharply lower. Although it has recovered a bit since then, demand remains lower than it was before the pandemic, and a recent rise in cases in Europe and the United States could send it even lower.

Exxon Mobil said that it lost $680 million in the third quarter, its third consecutive quarterly loss. Chevron reported a loss of $207 million for the quarter, compared with a gain of $2.6 billion for the same quarter in 2019.

Exxon’s results were better than analysts had expected. The company’s loss for the three months that ended in September was about $400 million smaller than its loss in the second quarter as oil and natural gas prices recovered somewhat from a deep slump in the spring.

Exxon reported that its production of oil and gas were up 1 percent from the second quarter. But revenue fell 29 percent, to $46.2 billion from same period in 2019 because demand for oil and gas continued to be weak.

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking necessary actions to preserve value while protecting the balance sheet and dividend,” Darren W. Woods, Exxon’s chairman and chief executive, said in a statement.

Chevron had quarterly revenue of $24 billion, down from $35 billion in the same period a year earlier. Oil and gas production was down 7 percent from a year ago, while refining and other downstream earnings plummeted to $141 million in the quarter from $389 million a year earlier.

“The world’s economy continues to operate below prepandemic levels, impacting demand for our products which are closely linked to economic activity,” Michael K. Wirth, Chevron’s chairman and chief executive, said in a statement.

Credit…Ralph Orlowski/Reuters

Armed with cash, and offering services and products that stuck-at-home Americans needed, the biggest technology companies — Amazon, Apple, Alphabet, Microsoft and Facebook — weathered the early days of the pandemic better than most businesses.

The recovery may provide another catalyst to help them generate a level of wealth that hasn’t been seen in a single industry in generations.

With an entrenched audience of users and the financial resources to press their leads in areas like cloud computing, e-commerce and digital advertising, the companies demonstrated again that economic malaise, upstart competitors and feisty antitrust regulators have had little impact on their bottom line, The New York Times’s technology reporters, Daisuke Wakabayashi, Karen Weise, Jack Nicas and Mike Isaac, write.

Combined, the five companies reported a quarterly net profit of nearly $52 billion this week.

Credit…Ting Shen for The New York Times

The Federal Reserve said on Friday that its pandemic business lending program will now support smaller loans, a change that could help appeal to a bigger universe of would-be borrowers.

The central bank first announced that it would roll out the loan program for small and midsize businesses, called the Main Street program, on March 23, but the effort has been a challenge from the start.

The Fed makes the loans through commercial banks, which must retain a 5 percent slice of the loans while selling the remainder to the central bank. Lenders have been hesitant to participate, and many borrowers have found the Main Street loans unattractive — or have failed to qualify.

The program has supported $3.7 billion worth of loans to almost 400 businesses, the Fed said Friday, but that remains far short of its $600 billion capacity.

The Fed and the Treasury Department, which supports emergency lending programs like Main Street, have come under pressure from businesses and lawmakers to broaden and improve the program’s terms. Representative Maxine Waters, Democrat of California and chairwoman of the House Financial Services Committee, asked Treasury Secretary Steven Mnuchin and the Federal Reserve chair, Jerome H. Powell, to lower the minimum loan size for the program below $250,000 at a hearing last month.

The program will now offer minimum loans of $100,000, the Fed said Friday.

Mr. Powell told Ms. Waters that there might be limited demand for smaller loans, but the central bank made several adjustments to try to spur banks to use the smaller-loan program option. Lenders will make more in servicing and transaction fees on tiny loans, in recognition that they might be less profitable and thus unattractive from a bank’s point of view.

Main Street offers qualifying small and midsize businesses and nonprofit organizations five-year loans, with temporarily deferred principal and interest payments. The goal is to help companies that came into the pandemic in good financial health to weather the crisis, especially as credit becomes harder for many businesses to tap.

  • The Department of Labor said on Friday that it had finalized a rule that could discourage retirement plans from making investments based on environmental, social and governance considerations. When the department proposed the rule in June, experts said it would not meaningfully change employers’ obligations to act in workers’ financial interests, but that it could make employers more cautious for fear of breaking the law. In its final rule, the department appeared to soften its language, merely cautioning employers not to select investments based on “non-pecuniary” benefits.

  • Personal income rebounded in September to post a gain of 0.9 percent after a revised decline of 2.5 percent in August, the Commerce Department reported Friday. Consumer spending was up 1.4 percent, the fifth straight monthly increase.

Credit…Michael Nagle for The New York Times

The Department of Defense offered few details to a congressional oversight committee about why a struggling trucking company, YRC Worldwide, was determined to be critical to national security, a designation that allowed it to receive a $700 million stimulus loan.

The loan, which was approved in July by the Treasury Department, has been the subject of a congressional inquiry into whether the money was properly awarded and why YRC, which ships military supplies, was designated as critical to national security. The Congressional Oversight Commission, which was set up to police stimulus funds, has also been examining whether YRC’s ties to the White House were a factor in a loan.

In a letter to members of the commission, the Defense Department provided limited explanation for why YRC deserved so much government assistance.

The letter, which was reviewed by The New York Times, said that YRC qualified for the loan because it was the Department of Defense’s largest domestic shipping provider, moving food, electronics and other supplies to military bases around the country. The explanation echoed the justification that the Treasury Department shared when it approved the loan in July, but provided no additional reason that the firm, which was on shaky financial ground and had been sued by the government, should receive a bailout when other shipping providers were available.

YRC lost more than $100 million in 2019 and was being sued by the Justice Department over claims it defrauded the federal government for a seven-year period. The case is unresolved.

The Defense Department noted in the letter that it had access to other shipping companies such as FedEx and UPS. YRC is the fourth-largest small-freight shipping company in the United States.

Credit…Arnd Wiegmann/Reuters

Growth in Europe rebounded sharply in the third quarter of the year, according to data published Friday, but hardly anyone was celebrating. Economic activity remains well below what it was a year ago as a surge in coronavirus cases and new lockdowns have raised the risk of another slowdown.

Gross domestic product in the 19 countries that use the euro rose 12.7 percent from July through September compared with the previous quarter, the European Union statistics office said. But economic output was 4.3 percent lower than the same time last year — a severe recession by any standard — and could sink further as Germany, France and other countries order restaurants and theaters to close and restrict travel.

European countries are increasingly desperate to contain the virus before it overwhelms hospitals. But the economic cost will be high, particularly in industries that depend on person-to-person contact. The longer the pandemic lasts, the greater the risk of mass bankruptcies among businesses like hotels, fitness studios and nail salons, leaving lasting scars on the economy.

“There is unfortunately still no evidence that you can simply turn on and off an economy like a light switch without causing more structural damage, maybe even a short circuit,” Carsten Brzeski, global head of macroeconomics at ING Bank, said in a note to clients.


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