Here’s what you need to know:
- U.S. stocks tumble amid a spate of glum forecasts.
- Another 1.5 million filed new state unemployment claims last week.
- China pushes for more street vendors, suggesting its recovery may not be all it seems.
- As energy prices tumble, some developing countries trim subsidies.
- European food delivery service to buy Grubhub.
U.S. stocks tumble amid a spate of glum forecasts.
Stocks plunged on Thursday, a third-straight day of declines on Wall Street, as investors considered a space of grim forecasts about the economy and an uptick in new coronavirus cases in parts of the United States and around the world.
The S&P 500 fell more than 2 percent, on track for its worst daily drop since early May. Shares of airlines, hotels, and other businesses that have rallied recently amid optimism over the lifting of pandemic lockdowns fell sharply.
Oil prices, a measure of concern about the economy, also tumbled and shares of energy companies were sharply lower.
Stocks in London, Paris and Frankfurt were also about 3 percent lower.
Even as stocks have rallied in recent weeks, some Wall Street analysts have cautioned that a second wave of coronavirus cases that triggers a new round of stay-at-home restrictions or layoffs could spook investors.
Coronavirus infections were spiking in 21 states on Thursday, as cases in the United States topped two million. More than 113,000 people have died in the country from the coronavirus. On Wednesday, Texas set a record for hospitalizations, which have increased 42 percent in the state since Memorial Day, for the third consecutive day.
The pullback in recent days also comes on the heels of a rally that had lifted the S&P 500 by nearly 45 percent from its lows, and 6 percent in the first week of June alone — a run that had arguably gotten ahead of the economic recovery. Despite the fact that corporate profits are still falling and millions out of work in the United States, the S&P 500 recouped all of its losses for 2020 by Monday.
On Thursday, the U.S. government reported that another 1.5 million people filed for state unemployment claims last week. The day before, the Federal Reserve forecast that the unemployment rate could stay above 9 percent this year and will be high for the next several years. Earlier on Wednesday, the Organization for Economic Cooperation and Development warned in a report that the world economy is facing the most severe recession in a century and could experience a halting recovery.
Another 1.5 million filed new state unemployment claims last week.
The Labor Department said Thursday that 1.5 million Americans filed new state unemployment claims last week — the lowest number since the coronavirus pandemic shut down much of the U.S. economy in March, but far above normal levels.
The weekly report on unemployment claims comes after the government reported that jobs rebounded last month and that the unemployment rate fell unexpectedly to 13.3 percent. Correcting for a classification error, the actual rate was closer to 16.4 percent — still lower than in April, but higher than at any other point since the Great Depression.
A further 700,000 workers who were self-employed or otherwise ineligible for state jobless benefits filed new claims for Pandemic Unemployment Assistance, a federal aid program.
The overall number of workers collecting state benefits fell slightly in the most recent seasonally adjusted tally, to 20.9 million in the week ended May 30, from a revised 21.3 million the previous week.
Jerome H. Powell, the Federal Reserve chair, warned on Wednesday that the economic pain could last for years and that there would be “a significant chunk” — millions of workers — “who don’t get to go back to their old job, and there may not be a job in that industry for them for some time.”
Mr. Powell said that “it’s possible Congress will need to do more,” but a divide has arisen on Capitol Hill over whether to extend a $600 weekly supplement to state unemployment benefits beyond July 31, as Democrats advocate, or to pare or halt it, possibly replacing it with government incentives to return to work, as some Republicans have proposed.
China pushes for more street vendors, suggesting its recovery may not be all it seems.
Xie Yiyi, who is American-educated, lost her job last Friday, making the 22-year-old Beijing resident one of millions of young people in China left unmoored and shaken by the coronavirus.
So that same day, heeding the advice of one of China’s top leaders, she decided to open a barbecue stall.
Street vendors are seen by many Chinese people as embarrassing eyesores from the country’s past, when it was still emerging from extreme poverty. In many Chinese cities, uniformed neighborhood rules enforcers called chengguan regularly evict and assault sidewalk sellers of fake jewelry, cheap clothes and spicy snacks.
But Li Keqiang, China’s premier, had publicly called for the country’s jobless to ignite a “stall economy” to get the country’s derailed economy back on track. In the process, he laid bare China’s diverging narratives after the coronavirus epidemic. Is China an increasingly middle-class country, represented by the skyscrapers and tech campuses in Beijing, Shanghai and Shenzhen? Or is much of it still poor and backward, a country of roadside stalls in back alleys?
Mr. Li’s comments defied the Communist Party’s usual narrative of untrammeled prosperity, which helped legitimize its rule.
Cities rushed to lure vendors to the streets. A few even set recruiting quotas for the chengguan, meaning that the people who once harassed and beat vendors now had to support them. An economist estimated that 50 million jobs could be created if the government gave more space to the vendors and farmers selling their produce.
But then a backlash began, and the state media began reining in the enthusiasm. “The stall economy isn’t appropriate for first-tier cities,” said China Central Television, the state broadcaster, referring to relatively wealthy cities like Beijing and Shanghai. Allowing the stall economy to make a comeback in those cities is “equivalent of going backward in decades overnight,” it wrote. “It’s a departure from high-quality growth.”
As energy prices tumble, some developing countries trim subsidies.
The coronavirus pandemic has sent economies into recession and reduced government revenue, so some countries are taking a politically perilous path: removing restraints on electricity and petroleum prices.
Nigeria and Tunisia have lowered fuel subsidies in recent weeks, and India has raised taxes on gasoline and diesel fuel. Sudanese officials plan to replace some subsidies with direct cash payments to the poor. Venezuela, where the economy was collapsing before the pandemic, has partly reversed decades of gasoline subsidies. And the state-owned electric utility in Dubai is seeking to raise rates for the first time in a generation.
In contrast to the recent past, elected leaders are facing little political blowback for taking away subsidies and raising taxes. That’s because the prices of oil, natural gas and other fuels have collapsed in recent months. In addition, driving, flying and industrial activity have dropped off sharply.
But that could change once world energy prices shake off the pandemic’s effects. Energy subsidies are often taken for granted outside the halls of power. But they constitute vital policy choices that weigh on government budgets and economic development.
“Governments are caught in a dilemma,” said Jim Krane, an energy expert at Rice University who has studied subsidies. “Do they want to protect the poor who may have lost their jobs and incomes, or do they want to take action against the pernicious long-term cost to their budgets?”
European food delivery service to buy Grubhub.
Just Eat Takeaway said on Wednesday that it had agreed to buy Grubhub for $7.3 billion, a deal that would give the European company a foothold in the United States.
Uber had been in talks to buy Grubhub, but those discussions foundered over price and regulatory concerns, said people with knowledge of the discussions, who were not authorized to speak publicly.
Food delivery has become more popular during the coronavirus pandemic. But profits in the food delivery business have been elusive. Uber Eats, DoorDash and Grubhub have all spent millions of dollars on marketing and incentives to lure customers away from the others. Grubhub, which had been profitable, began losing money as it spent more to fight off rivals. And restaurants have complained about the fees and tactics of those companies.
In the all-stock deal, Just Eat Takeaway said it would value Grubhub at $75.15 per share, a 27 percent premium to Grubhub’s closing price of $59.05. Grubhub’s founder and chief executive, Matt Maloney, will join Just Eat Takeaway’s board and oversee its business in North America, the companies said.
Just Eat Takeaway was created this year through the $7.8 billion combination of two of the earliest participants in Europe’s food-delivery market, Just Eat and Takeaway.com. It has been fighting competition in Europe from Uber Eats and Deliveroo, a London-based company whose investors include Amazon.
Catch up: Here’s what else is happening.
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Rose Marcario, the chief executive of Patagonia for 12 years, is stepping down effective June 12, the outdoors brand said on Wednesday evening. It did not give a reason for her departure. Patagonia’s sales have dropped 50 percent in North America because of the coronavirus pandemic. The company’s transition will be led by Doug Freeman, its chief operating officer.
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Disneyland in Anaheim, Calif., will reopen on a limited basis on July 17, the theme park’s 65th anniversary, the Walt Disney Company said on Wednesday. California Adventure, an adjacent Disney property, will also reopen on that date. A phased reopening of Disney’s hotels in Anaheim will follow on July 23. The plans must still be approved by state and local health officials. Disney World is scheduled to begin reopening on July 11. Disney parks in France, Japan and Hong Kong remain closed.
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Los Angeles County issued guidelines for film and television to begin production as early as Friday, but it’s more likely that production will not resume until July at the earliest. Studios and production companies are still waiting for unions to determine job protocols, even though the industry issued its own white paper last week that established general guidelines for resuming production.
Reporting was contributed by Tiffany Hsu, Clifford Krauss, Li Yuan, Mohammed Hadi, Kate Conger, Adam Satariano, Michael J. de la Merced, Brooks Barnes, Carlos Tejada and Nicole Sperling.
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