After a turbulent few days, the S&P 500 recorded its first weekly drop since late September, as investors watched for signs of progress on stimulus talks in Washington.
The index ended Friday slightly higher, after swinging from gains to losses and back again. But for the week, the index is down about half a percent.
Stock trading has been volatile all week, as investor sentiment rose and fell with each update on the progress — or lack thereof — between Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin.
The two were trying to reach a compromise on a spending bill that would support out-of-work Americans, struggling small businesses and state and local governments that face budget shortfalls because of the coronavirus pandemic.
After initially pressing for a deal that would mean the bill could pass before the Nov. 3 election, both sides have now conceded that this is unlikely. Though they continue to say they are making progress toward an agreement, they’ve also been outspoken about the differences that remain.
“There are still significant policy differences between the two sides,” Larry Kudlow, the director of the National Economic Council, said on television Friday. “We’re probably closer than we were a week or two back,” he said, while noting that there are still major disagreements, including over how much aid to give to state and local governments.
Later Friday, Steven Mnuchin, the Treasury secretary, told reporters at the White House that Ms. Pelosi was “still dug in” on a number of issues. “If she wants to compromise, there will be a deal.”
“We want this to be a bipartisan bill, the next bill to come to the floor, one that removes all doubt that it would become the law,” Ms. Pelosi said on television Friday.
Economists, including the Federal Reserve chair Jerome H. Powell, have warned that without more support, the U.S. economy could struggle, as some business closures and job losses become permanent. So investors were initially encouraged as talks over a deal — which could authorize as much as $2 trillion in spending — picked up again this month.
In Europe, where coronavirus cases are rising, markets rose Friday even as business surveys showed some economic activity in the region had declined again in October. The IHS Markit Purchasing Managers’ Index for the eurozone was 49.4, below the 50 mark, which separates contraction from expansion. However, German manufacturing, an important engine of European economic growth, was still expanding strongly as manufacturers addressed a backlog of work, according to the surveys. Stock indexes in Japan and Hong Kong ended the day higher.
Guitar Center has begun to prepare for a potential bankruptcy filing that could come as soon as next month, people with knowledge of the situation said. The retailer missed an interest payment of roughly $45 million earlier this month, setting off a 30-day grace period that could end in default, the people said.
The country’s largest retailer of musical instruments has reached out to creditors to discuss a plan that would involve the company filing for bankruptcy this year and emerging from it in early 2021, said the people, who requested anonymity because the talks are confidential. A spokesperson for Guitar Center did not respond to a request for comment.
It’s still possible that Guitar Center could avert bankruptcy, as it did earlier this year when it resolved a skipped interest payment in April with a distressed debt exchange. That led to a downgrade by the credit ratings agency Moody’s in May, which noted that the transaction did not “fundamentally change” the company’s “untenable” capital structure. It was the third cut in the company’s credit rating this year.
Guitar Center, whose roots go back to 1959, has nearly 300 stores nationwide. It is owned by private equity firm Ares Management, which acquired a majority stake in 2014 by converting some of the debt it owned in the retailer into equity. The retailer generated about $2.3 billion in sales its most recent fiscal year, according to Moody’s. It has about $1.3 billion in debt. Ares declined to comment.
For years, the company has struggled with the shift to online shopping and debt built up from a leveraged buyout by Bain Capital in 2007. There had been signs of a turnaround — it notched 10 consecutive quarters of sales growth through the end of February, one of the sources said — before the pandemic hit its business hard, as it has for much of the store-based retail industry.
If Guitar Center files for bankruptcy, it would follow the path of other retailers including J. Crew, Neiman Marcus and J.C. Penney, which were unable to withstand the impact of the downturn during the pandemic. Some, like Neiman Marcus, have already emerged from bankruptcy protection.
A top executive of German carmaker Daimler said Friday that he does not expect a new surge in coronavirus infections to be as destructive to vehicle manufacturing as the first wave earlier in the year, when almost all major carmakers were forced to suspend production and close dealerships.
Harald Wilhelm, Daimler’s chief financial officer, said that showroom traffic remained strong and that parts were flowing, even though infection rates were reaching new highs in many European regions.
“I’m not aware that we have any problems with supply chains,” Mr. Wilhelm told reporters during a conference call. He added that the company was watching developments closely.
If big manufacturers like Daimler are able to keep operating and employing people, the economic impact of the pandemic may not be as bad as it was in March and April. Still, as countries like France, Denmark and Germany impose curfews and other restrictions on daily life, the impact is certain to be significant and unpredictable.
Daimler, the maker of Mercedes cars and trucks, said Friday that net profit in the third quarter rose 19 percent to 2.2 billion euros, or $2.6 billion, as the company was able to offset a decline in sales with cost cuts. While sales have improved from low points a few months ago, Daimler said it does not expect to be able to recoup all of the sales it lost earlier in the year.
The Federal Trade Commission is moving closer to a decision about filing an antitrust lawsuit against Facebook for its market power in social networking, according to two people with knowledge of the agency’s talks.
The five members of the F.T.C. met on Thursday to discuss its investigation into Facebook and whether the company had bought smaller rivals to maintain a monopoly, the people said. They said three documents about Facebook had been prepared by the agency and circulated among its leaders: One addresses the company’s potential antitrust violations, another analyzes its economics, and a third assesses the risks of litigation.
No decision on a case has been made, the people said. The commissioners must vote before any case is pursued.
Facebook and the F.T.C. declined to comment. The Washington Post reported earlier that the commission met about the Facebook investigation on Thursday.
Lawmakers and policymakers in Washington have ramped up antitrust actions against the largest technology companies, often in a bipartisan effort. On Tuesday, the Justice Department sued Google, accusing it of illegally maintaining its monopoly power in search and search advertising — the first such government action against a tech company in two decades. Two weeks ago, the House Judiciary Committee recommended taking action to break up the big tech platforms, including Facebook, Amazon, Apple and Google.
With a vaccine still out of reach and many companies pushing return-to-office dates back until at least summer 2021, people with the means to do so are increasingly buying what they need to hunker down for the pandemic long-haul.
“Traditionally, during an economic recession, you would expect to see discretionary categories, such as home furnishings, consumer electronics or big-ticket items like appliances, take a hit,” said Andrew Lipsman, an analyst at the data analytics firm eMarketer. “What’s interesting is that the pandemic has caused a couple of these categories to really buck that trend.”
Some start spending on luxuries again
Even as millions of Americans remain unemployed, workers who have kept their jobs and are not dining out or going on vacations may find themselves with seemingly more discretionary money to spend.
“If you’re still working from home and you’re getting a steady paycheck, you may feel confident enough to splurge on a renovation,” said Ted Rossman, an industry analyst for CreditCards.com. “There’s actually a shortage of things like refrigerators, as we’re seeing a big increase in demand.”
Others, sick of grocery shopping and the taste of their own cooking, are choosing take out instead. Chipotle said revenue increased 14.1 percent in the third quarter compared with last year. Revenue decreased 4.8 percent in the second quarter.
Spending on staples stabilizes
Sales of basic necessities like groceries are leveling out, months after people panic-bought toilet paper and cleaning supplies.
The grocery chain Albertson’s reported sales and other revenue increased more than 11 percent to $15.8 billion during the second quarter, compared to $14.2 billion during the same period last year, with revenue from digital sales up 243 percent as consumers looked to avoid crowded stores.
Coronavirus testing businesses see boost
Abbott Laboratories Inc. and Thermo Fisher Scientific Inc, both big players in coronavirus testing, reported significant growth. Abbott’s $881 million in Covid-19 testing revenue accounted for nearly 10 percent of its total sales in the third quarter, and Thermo Fisher generated $2 billion in Covid-19 related revenue, up from $1.3 billion last quarter.
Proposition 22, a California ballot measure that would exempt gig companies from a new state labor law and save them hundreds of millions of dollars, has become the most expensive voter initiative in the state’s history.
The backers of Prop 22, which include Uber, Lyft, DoorDash and other companies, have already spent $200 million on television advertising and other attempts to win over voters when they vote on Nov. 3.
Prop 22 would exempt the companies from complying with a law that went into effect at the beginning of the year. The law is intended to force them to treat gig workers as employees, but Uber and its peers have resisted, fearing that the cost of benefits like unemployment insurance and health care could tip them into a downward financial spiral.
The ballot fight gained additional urgency Thursday when a state appellate court ruled that Uber and Lyft must treat their California drivers as employees under the new labor law. The state attorney general and the city attorneys of San Francisco, Los Angeles and San Diego had sued the companies in May to enforce the law.
Most economists agree this much is clear: The main thing holding back the economy is not formal restrictions. It is people’s continued fear of the virus itself.
A growing body of research has concluded that the steep drop in economic activity last spring was primarily a result of individual decisions by consumers and businesses rather than legal mandates, report Ben Casselman and Jim Tankersley.
Iowa was one of only a handful of states that never imposed a full stay-at-home order. Restaurants, movie theaters, hair salons and bars were allowed to reopen starting in May, earlier than in most states. Gov. Kim Reynolds has emphasized the need to make the economy a priority, and has blocked cities and towns from requiring masks or imposing many other restrictions.
Even so, Iowa has regained just over half of the 186,000 jobs it lost between February and April, and progress — as in the country as a whole — is slowing. Many businesses worry they won’t be able to make it through the winter without more help from Congress. Others have already failed. Now, coronavirus cases are rising there.
“You can’t just open the economy and expect everything to go back to pre-Covid levels,” said Michael Luca, a Harvard Business School economist who has studied the impact of restrictions during the pandemic. “If a market is not safe, people won’t participate in it.”
For the first time in nearly a decade, the median asking rent for an apartment in Manhattan has fallen below $3,000 a month, as vacancies soar and tenants reorder priorities amid the pandemic. Of the city’s five boroughs, Manhattan has the highest share of affluent, mobile renters, many of whom chose not to renew leases during the pandemic, and the once reliable stream of newcomers, who paid a premium to be close to Midtown offices, has slowed, according to Nancy Wu, an economist at StreetEasy.
Gap Inc., the owner of the Gap, Banana Republic and Old Navy chains, has long been synonymous with the American shopping mall. But now it’s rushing to get out of a slew of malls as the company repositions its decades-old brands to adapt to changes in how people shop. The company plans to close 30 percent, or about 350, of its Gap and Banana Republic stores in North America by the beginning of 2024, executives said during a presentation to investors on Thursday. That will leave 870 total stores.
Workers at Amazon are calling on groups around the country to help shut down Amazon warehouses temporarily on Halloween if the company does not give all its employees a paid day off to vote. The move is an escalation of the internal pressure being put on executives at the company, the country’s second-largest private employer. The organizing is led by Amazon Employees for Climate Justice, which has also mobilized thousands of corporate employees over the past year and a half to push the company to address its climate impact.