Stocks on Wall Street slid on Wednesday for a second consecutive session, continuing their tumultuous ride since the discovery of the Omicron variant of the coronavirus last week.
The S&P 500 fell 1.2 percent, as an early gain quickly faded after news that the variant had been detected in the United States. The Nasdaq composite lost 1.8 percent.
Early gains by oil futures also faded. West Texas Intermediate, the U.S. benchmark, fell about 1 percent to $65.57, erasing earlier gains of as much as 5 percent.
Shares of companies likely to be most affected by an increase in pandemic precautions were among the hardest hit. American Airlines fell 8 percent and was one of the worst performers in the S&P 500. United Airlines was down nearly as much, as were the cruise lines like Norwegian and Carnival.
Even as they have cautioned against overreacting to the news of a new variant before much is known about it, several world governments have put in place restrictions on travel — including limits on entry for visitors from southern Africa, where the variant was first detected, and blanket bans on all foreigners.
In the United States, the Centers for Disease Control and Prevention has said it plans to toughen coronavirus testing and screening requirements for international fliers bound for the country. The agency is considering requiring travelers to provide a negative result from a test taken within 24 hours before departure, among other steps, a spokesman said Tuesday night.
Investors also snapped up shares of companies that could benefit from a renewed vigilance to a spreading virus. Clorox rose nearly 2 percent. Quest Diagnostics, a lab company with a fast-growing Covid testing business, rose 1.7 percent. Becton Dickinson and Company, which makes an at-home Covid test, rose 1.9 percent.
As they consider the risk of the Omicron variant, and the potential impact on the global economy as governments again restrict travel and tighten testing requirements, investors are also grappling with a shifting outlook for interest rates.
On Tuesday, the S&P 500 declined 1.9 percent when the head of the Federal Reserve said the central bank might speed up its plan to reduce support for the economy because of high inflation. The back-to-back declines added up to a 3.1 percent drop for the U.S. benchmark index, its worst two-day dive since October 2020.
A measure of volatility in the U.S. stock market surged to its highest since early March on Friday after the Omicron variant was reported by researchers in South Africa. The VIX index has declined a little since then, but it remains above levels seen in the past two months.
Traders had pushed back their expectations about when the Fed might eventually raise interest rates, in light of the news about the variant and some predictions that current vaccines will be less effective against it. But Jerome H. Powell, the Fed chair, said on Tuesday that the risk of higher inflation had increased. If the central bank finishes tapering its bond-buying program sooner than expected, it could also raise interest rates sooner.
Yields on long-term Treasury bonds dropped, suggesting that investors were moving money out of shares and into the safety of government securities as they await more information about the Omicron variant. (Yields on Treasury bonds fall as prices rise.)
The yield on the 10-year Treasury note, often viewed as a barometer of the market’s expectations for economic growth and inflation, dropped to about 1.43 percent, the lowest level in over two months.
The Omicron variant could prolong the bottlenecks and shortages that have caused inflation to run hotter than expected, a risk Fed officials will assess as they “grapple” with how quickly to remove economic support, another Fed official said.
“Clearly, it adds a lot of uncertainty to the outlook,” John C. Williams, president of the Federal Reserve Bank of New York, told The New York Times in an interview that was published on Wednesday.
The payments company Square said on Wednesday that it was changing its name to Block, a nod to one of the main focuses of the company’s chief executive, Jack Dorsey, an enthusiast for cryptocurrency and the blockchain technology it runs on.
Mr. Dorsey said Monday he was stepping down from the helm of his other company, Twitter, a move that many believed was so that he could dedicate more of his attention to cryptocurrency and to Square.
Block will become the name of the “corporate entity,” with Square continuing to be the segment of the company that helps people and businesses process payments, the company said in a news release. The parent company also owns Tidal, a music streaming service, Cash App, a payment service, and a developer platform focused on Bitcoin called TBD54566975. Square said there would be no organizational changes made to the company other than the name change.
“The name has many associated meanings for the company — building blocks, neighborhood blocks and their local businesses, communities coming together at block parties full of music, a blockchain, a section of code, and obstacles to overcome,” the company said in its release. It expects the name change to be official on Dec. 10.
Mr. Dorsey has in recent years grown more fascinated by cryptocurrencies and the promise of decentralization that blockchain technology could allow for. In 2019, he said Twitter would help create a decentralized type of social media in which users could make their own algorithms and moderate their own communities. The only thing in his Twitter bio is “#bitcoin.”
A foray deeper into cryptocurrencies and blockchain could be alluring for Mr. Dorsey, who in his last few years as a social media chief executive spent increasing amounts of time defending Twitter’s role in disseminating misinformation, testifying in front of politicians and receiving frequent criticism from former President Donald J. Trump, who was barred from Twitter shortly after the Jan. 6 attack on the Capitol.
Mr. Dorsey did not reference cryptocurrencies or the blockchain in a brief quote in the news release about his company’s name change, saying only that despite the new name, “our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.”
Workers at three plants owned by the luxury apparel-maker Canada Goose in Winnipeg, Manitoba, have voted overwhelmingly to unionize, according to results announced by the union on Wednesday.
Workers United, an affiliate of the giant Service Employees International Union, said it would represent about 1,200 additional workers as a result of the election.
Canada Goose, which makes parkas that can cost more than $1,000 and have been worn by celebrities like Daniel Craig and Kate Upton, has union workers at other facilities, including some in Toronto, and has frequently cited its commitment to high environmental and labor standards. But it had long appeared to resist efforts to unionize workers in Winnipeg, part of what the union called an “adversarial relationship.”
The company denied that it sought to block unionization, and both sides agree that it was neutral in recent weeks, in the run-up to the election. The union said 86 percent of those voting backed unionization.
“I want to congratulate the workers of Canada Goose for this amazing victory,” Richard A. Minter, a vice president and international organizing director for Workers United, said in a statement. “I also want to salute the company. No employer wants a union, but Canada Goose management stayed neutral and allowed the workers the right to exercise their democratic vote.”
Reacting to the vote, the company said: “Our goal has always been to support our employees, respecting their right to determine their own representation. We welcome Workers United as the union representative for our employees across our manufacturing facilities in Winnipeg.”
Canada Goose was founded under a different name in the 1950s. It began to raise its profile and emphasize international sales after Dani Reiss, the grandson of its founder, took over as chief executive in 2001. Mr. Reiss committed to keeping production of parkas in Canada.
The private equity firm Bain Capital purchased a majority stake in the company in 2013 and took it public a few years later.
The union vote came after accusations this year that Canada Goose had disciplined two workers who identified themselves as union supporters. Several workers at Canada Goose’s Winnipeg facilities, where the company’s work force is mostly immigrants, also complained of low pay and abusive behavior by managers.
The company has denied the accusations of retaliation and abuse and said that well over half its workers in Winnipeg earned wages above the local minimum of about 12 Canadian dollars (about $9.35).
Workers United is also seeking to organize workers at several Buffalo-area Starbucks stores, three of which are in the middle of a mail-in union election in which ballots are due next week.
Nearly 30 percent of workers are unionized in Canada, compared with about 11 percent in the United States.
Inditex, the giant Spanish fashion retailer, has appointed Marta Ortega, daughter of the company’s co-founder, as its chairwoman, unexpectedly fast-tracking a generational handover at a time when the fashion sector is facing important supply chain challenges linked to the pandemic, the company said on Tuesday.
Ms. Ortega, 37, will take over in April from Pablo Isla, who has led the company since 2011 and has been widely credited with steering the group’s online and international growth, including into the Chinese market. Inditex sells brands that include Zara, Massimo Dutti, Bershka and Pull & Bear.
Ms. Ortega has spent the past 15 years working for her family’s company, starting as an assistant at Bershka.
“I have always said that I would dedicate my life to building upon my parents’ legacy, looking to the future but learning from the past,” she said in a statement.
Inditex also appointed a new chief executive, Óscar García Maceiras, a former state attorney who joined Inditex in March. The current chief executive, Carlos Crespo, is switching back to his former job, chief operating officer.
Ms. Ortega had long been considered in line to take over from her father, Amancio Ortega, 85, who is regarded as Spain’s richest man and is the majority shareholder in the company.
Inditex shares tumbled more than 5 percent on Tuesday after the appointment was announced. Investors were concerned that the new team of Ms. Ortega and Mr. García Maceiras lacked operational experience at a time when retailers have been struggling with the coronavirus pandemic, as well as its resulting supply bottlenecks.
The share price, however, rebounded on Wednesday, gaining 4.5 percent.
“The timing is not the best,” Kepler, a brokerage, wrote in a note to investors. “We believe that both Marta Ortega and the C.E.O. Óscar Maceiras have a lot to prove when it comes to their ability to run this big monster in the middle of the Covid crisis.”
Inditex was founded by Mr. Ortega and his then-wife, Rosalía Mera, in 1975 in Galicia, in northwestern Spain, where Inditex still makes some of its clothing. The company also produces in other parts of Europe, Asia and Africa, and has more than 6,000 stores worldwide.
A new Covid-related downturn would probably cause more severe unemployment in the United States, while in Europe growth would suffer more, the Organization for Economic Cooperation and Development said on Wednesday.
The prediction came as the organization released its latest economic outlook, which reported a fast but uneven recovery from the disruption of the pandemic, emphasizing the stark imbalances in growth between advanced and less developed countries, as well as among the biggest industrial nations. .
Differing policy choices were the primary reason distinguishing the Europe and the United States, said Laurence Boone, the organization’s chief economist. “Europe has been focusing on protecting jobs throughout the crisis, and as a result employment is now already at its pre-crisis level,” she said.
By contrast, the United States has “largely focused on supporting households’ incomes rather than jobs,” she said, resulting in a quicker rebound in gross domestic product.
If the economy were to be walloped again, Ms. Boone said, “in Europe, it would be output that would be hurt more while in the U.S., it would be jobs that would take the hit.” At the start of the pandemic in 2020, Europe’s output fell much more sharply than in the United States.
Ms. Boone said that despite the new coronavirus variant, Omicron, the economic outlook remains “cautiously optimistic.” Global growth this year is expected to come in at 5.6 percent before dropping to 4.5 percent next year and 3.2 percent in 2023, according to the report.
She did warn, however, that Omicron adds to already high levels of uncertainty and could threaten the recovery.
The organization also emphasized that whatever imbalances may exist among countries in North America and Europe, the starkest asymmetries are between advanced and emerging economies, where growth and vaccination rates are lagging far behind.
Ms. Boone noted that the Group of 20 countries have collectively spent $10 trillion in response to the virus, while a scant fraction of that amount has gone to providing vaccinations to poorer countries — even though such support is crucial to the global economy’s recovery.
The organization’s latest forecast echoed concerns about prolonged inflation that were voiced on Tuesday in Washington by Jerome H. Powell, the Federal Reserve chair.
Ms. Boone cautioned that the severity of the pandemic could play out in different ways. More disruptions in the supply chain could aggravate inflation, but a new wave of Covid-related restrictions could instead cut into demand and cause inflation to recede faster.
Rising prices on essentials like food would be particularly burdensome on the poor, the organization said.
The Consumer Financial Protection Bureau said on Wednesday that it would begin closely examining banks that had an outsize reliance on overdraft fees, the much-maligned charges that turn $3 coffees into $38 gotchas.
Overdraft fees ensure that consumers’ bills will be covered and purchases won’t be denied when spending exceeds their account balance. Initially marketed as a convenience, the fees have proliferated over the past quarter-century and have become known as an aggressive way to siphon money from consumers.
They’re a moneymaker: The banking industry collected $15.47 billion in overdraft fees in 2019, according to a report that the consumer bureau released on Wednesday.
Though overdraft revenues dipped in 2020 when Americans received stimulus money, Rohit Chopra, the bureau’s director, said the fees had been steadily rising before the pandemic struck. They remain a major revenue source for many institutions, dwarfing other fees like those for account maintenance and A.T.M. use, he added.
“Large financial institutions are still hooked on exploitative junk fees that can quickly drain a family’s bank account,” Mr. Chopra said in a statement.
The bureau did not identify any banks it may be targeting, but Mr. Chopra said it had asked its examiners to focus on banks that rely heavily on overdraft fees. Banks with “a higher share of frequent overdrafters or a higher average fee burden for overdrafting” should also expect close supervisory attention, he said.
Mr. Chopra said the bureau would take action against banks that violated rules governing overdraft fees and would “seek to uncover the individuals who directed any illegal conduct.”
Some banks have already begun making changes: Just before the bureau’s announcement, Capital One said it would stop charging retail customers overdraft fees early next year, making it the latest bank to either eliminate them or provide less punitive alternatives.
In May, Ally Bank said it would eliminate its $25 overdraft fee, giving customers six days to get in the black again before it potentially limits how they use their accounts. A number of other banks, like Bank of America and PNC, are taking smaller but still notable steps that include grace periods and small short-term loans — if users qualify.
Customers who have already opted into Capital One’s overdraft program will be automatically moved to the no-fee version early next year, fully eradicating the $35 fees. The bank said eliminating them would cost it roughly $150 million in revenue annually.
While Capital One is not among the country’s very biggest banks — JPMorgan Chase, Wells Fargo and Bank of America generated 44 percent of the fees reported in 2019 by banks with assets above $1 billion, according to the consumer bureau — it is large enough for its decision to have some significance, advocates said.
“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” said Lauren Saunders, associate director at the National Consumer Law Center, an advocacy group. It also “puts pressure on the rest of the banking industry to eliminate these predatory fees, which are a back-end way of harming consumers.”
Regulations introduced in 2010 helped curtail some of the worst abuses by requiring banks to receive consumers’ consent to opt into overdraft services on debit transactions and A.T.M. withdrawals, but the practice is still worth billions. From 2015 to 2019, overdraft and related revenue at banks with $1 billion or more in assets increased about 1.7 percent annually to $11.97 billion, according to the bureau’s latest report. But it fell more than a quarter in 2020 to $8.84 billion, a decline credited at least in part to government aid programs in response to the pandemic.
The bureau has already taken action against some banks in recent years. In August, it ordered TD Bank to pay $122 million in penalties and customer restitution. In 2018, TCF National Bank — whose former chief named his boat Overdraft — reached a $30 million settlement.
Capital One customers who do not already have overdraft protection will be able to enroll in the no-fee program, but habitual overdrafters may not qualify. In a memo to staff, Richard Fairbank, the bank’s chief executive officer, said customers would need to show a steady pattern of deposits to be granted overdraft protection — and could not have a history of frequent overdrafts.
If a participant’s overdraft balance is not repaid after 56 days, the bank will write it off — the same procedure the bank follows now, according to a spokeswoman. The missed payment will not affect a consumer’s traditional credit score, but it will be reported to a specialty bureau, Early Warning Services, owned by seven of the largest banks.
The bank will continue to allow customers to sign up for automatic no-fee transfers from their Capital One savings or money market accounts to pay for transactions their checking account cannot cover.
A rushed emergency aid program for small companies devastated by the pandemic improperly sent nearly $3.7 billion to recipients prohibited from receiving federal funds, according to a government audit released on Tuesday.
The finding adds to a mountain of evidence chronicling what the Small Business Administration’s inspector general, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, Mr. Ware’s office chastised the agency for improperly doling out billions in relief money to self-employed people who made “flawed or illogical” claims of having additional workers on their payroll.
Its Economic Injury Disaster Loan program distributed more than $210 billion last year in loans and grants. The program was organized in a hurry by the Trump administration as millions of businesses temporarily shut down because of the coronavirus and was designed to quickly send out money to help companies keep up on their bills.
But the agency failed to do a legally required check of applicants’ identifying details against the Treasury Department’s Do Not Pay system, according to Tuesday’s report from Mr. Ware’s office.
The Do Not Pay system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. Mr. Ware found 117,135 applicants who got grants and 75,180 recipients who got loans despite matches in the system indicating a “high likelihood” that the payments were improper.
Isabella Casillas Guzman, who became the agency’s administrator in March, said at a House hearing this month that she had heightened the agency’s fraud controls over its Covid-19 relief programs. “The guardrails did not exist” last year, under the prior administration, she said.
In a response included in Mr. Ware’s report, the Small Business Administration said that on April 6, 2021 — more than a year after the disaster loan program began — it started checking Do Not Pay records before sending out funds. The agency also said it would review the loans and grants previously made to recipients who were flagged as ineligible.
“We agree with the S.B.A. Office of Inspector General that the Trump administration should have applied this risk management tool, and, therefore, the S.B.A. has done just that under the Biden-Harris administration,” Han Nguyen, an agency spokesman, said on Tuesday.
The furniture companies that dot Hickory, N.C., in the foothills of the Blue Ridge Mountains, have been presented with an unforeseen opportunity: The pandemic and its ensuing supply chain disruptions have dealt a setback to the factories in China and Southeast Asia that decimated American manufacturing in the 1980s and 1990s with cheaper imports.
At the same time, demand for furniture is very strong.
In theory, that means Hickory’s furniture companies have a shot at building back some of the business that they lost to globalization. Local furniture companies had shed jobs and reinvented themselves in the wake of offshoring, shifting to custom upholstery and handcrafted wood furniture to survive. Now, furniture makers like Hancock & Moore have a backlog of orders. The company is scrambling to hire workers.
Yet the same forces that are making it difficult for overseas manufacturers to sell their goods in the United States — and giving American workers a chance to command higher wages — are also throwing up obstacles, Jeanna Smialek reports for The New York Times.
Many of the companies are dependent on parts from overseas, which have been harder — and more expensive — to obtain. Too few skilled workers are seeking jobs in the industry to fill open positions, and businesses are unsure how long the demand will last, making some reluctant to invest in new factories or to expand to towns with bigger potential labor pools.
READ THE ARTICLE →
-
The star CNN anchor Chris Cuomo was suspended indefinitely by the network on Tuesday after new details emerged about his efforts to assist his brother, Andrew M. Cuomo, the former governor of New York, as he faced a cascade of sexual harassment accusations that led to the governor’s resignation.
Chris Cuomo had previously apologized for advising Andrew Cuomo’s senior political aides — a breach of traditional barriers between journalists and lawmakers — but thousands of pages of evidence released on Monday by the New York attorney general, Letitia James, revealed that the anchor’s role had been more intimate and involved than previously known.
“The documents, which we were not privy to before their public release, raise serious questions,” CNN said in a statement on Tuesday, adding: “As a result, we have suspended Chris indefinitely, pending further evaluation.” READ MORE →
-
For four days, Elizabeth Holmes took the stand to blame others for the alleged fraud at her blood testing start-up, Theranos. On the fifth day, prosecutors tried making one thing clear: She knew.
Over more than five hours of cross-examination on Tuesday, Robert Leach, the assistant U.S. attorney and lead prosecutor for the case, pointed to text messages, notes and emails with Ms. Holmes — and with her business partner and former boyfriend, Ramesh Balwani — discussing problems with Theranos’s business and technology. Mr. Leach had a common refrain: No one hid anything from Ms. Holmes. As Theranos’s chief executive, he argued, she was to blame.
It was the culmination of three months of testimony and nearly four years of waiting since Ms. Holmes was indicted on charges of wire fraud and conspiracy to commit wire fraud in 2018. READ MORE →
Electric vehicles are central to the Biden administration’s push for clean energy and a revival of American manufacturing. But as Apple did with gadgets, Tesla is forming stronger ties with China to get closer to both its adroit manufacturing supply chain and huge market of car buyers.
China is poised to become a major player in electric cars, and Tesla and a slew of Chinese electric vehicle upstarts are helping its companies become even more competitive.
Tesla’s huge factory in Shanghai works with local suppliers to make increasingly sophisticated components that are helping them go head-to-head with Western and Japanese auto suppliers.
“China is overtaking its competitors by switching lanes in the car race,” said Patrick Cheng, chief executive of NavInfo, a mapping and autonomous driving technology company in Beijing. “The race used to be about internal combustion engine vehicles. Now it’s the electric cars.”
One hears the word “overtaking” a lot in the Chinese auto industry. Many of its executives and engineers believe that the transition to new-energy vehicles presents a similar opportunity as mobile internet did in the last decade, when Chinese companies created powerful platforms such as the mobile messaging app WeChat and the short video app TikTok.
That’s why the Chinese government has embraced Tesla with open arms. It has offered Mr. Musk’s company cheap land, loans, tax benefits and subsidies. It even allowed Tesla to run its own plant without a local partner, a first for a foreign automaker in China.
Beijing is seeking what the business world calls the catfish effect: Toss an aggressive fish into a pool so that the established denizens will swim harder.
Electric cars could shake up the auto industry — and, by extension, jobs, technology and geopolitical influence. READ THE FULL ARTICLE →
