Live Stock Market Tracker: Fed’s Dividend Cap Hits Banks

Live Stock Market Tracker: Fed’s Dividend Cap Hits Banks

Stocks slide as economic fears resurface on Texas closures.

Stocks slid Friday, with losses accelerating after Texas said it would reinstate some measures aimed at curbing the coronavirus outbreak there, a move that added to investors’ concerns that a recent surge in Covid-19 cases would put a halt to the economic recovery.

The S&P 500 was down more than 2 percent. The selling deepened after the governor of Texas ordered all bars to close on Friday, a day after he paused the state’s reopening amid surging cases there. Shortly after Texas’s announcement, Florida’s governor also ordered bars in that state to stop serving food and alcohol for on-site consumption.

“The Texas response to close bars and restaurants is a the real driver of lower markets today, as it portends to a possible second shutdown across the country if we see Covid spikes,” said Doug Rivelli, president of institutional brokerage firm Abel Noser in New York. “And a second shutdown would be devastating to the overall economy.”

Shares of big banks led the declines, dropping after the Federal Reserve said it would put a temporary cap on their dividend payments to preserve cash during the pandemic. Goldman Sachs and Fifth Third Bancorp fell about 6 percent. JPMorgan Chase and Bank of America were about 3 percent lower.

Institutional investors — such as pension funds — typically rebalance their portfolios at quarter end, resulting in sales of assets that have outperformed.

Stocks are up roughly 17 percent in the second quarter, trouncing the roughly 2 percent gains for the broadest measure of the bond market.

“Money managers will look to take profits and lock in gains ahead of quarter end,” Steven Ricchiuto, U.S. chief economist, Mizuho Americas, wrote in a note to clients on Friday. “Doing so before the weekend allows them to better enjoy the more seasonal weather rather than worry about the markets.”

Consumer spending surged in May as businesses began reopening.

Consumer spending rose by a record 8.2 percent in May, the Commerce Department said Friday, as businesses began reopening and the economy slowly started to recover.

The increase followed record drops in spending in March and April at the start of the coronavirus pandemic, when businesses were shuttered and millions of Americans lost their jobs, sending the economy into a recession.

The report showed that the spending came despite personal income dropping 4.2 percent in May, the most since January 2013, after surging by a record 10.8 percent in April when the government handed out one-time $1,200 stimulus payments to millions of people and bolstered unemployment benefits.

Spending by consumers is closely watched because it accounts for more than two-thirds of economic activity in the United States. A surge of new infections, however, is causing some businesses to close once more, and could affect the recovery.

Economists cautioned against reading much into last month’s surge in consumer spending. They noted that the increase followed two record declines and that it still left spending 11 percent below its pace before the pandemic hit.

“Amid rapidly rising infections across many states, risks to the outlook are dangerously tilted to the downside,” Gregory Daco, chief U.S. economist at Oxford Economics, said in a research note.

The commerce report showed that among the categories for which consumers ramped up spending in May, the sharpest increase — a 29 percent jump — was for durable goods such as autos. Spending on a category called nondurable goods, which includes food and clothing, rose nearly 8 percent. And spending on services — everything from cellphone contracts to hospital visits — rose more than 5 percent.

Bain Capital will take control of Virgin Australia.

Ben & Jerry’s, an ice cream brand owned by Unilever, said earlier this week that it is participating in the advertising boycott. Other companies involved include Verizon, Patagonia and Eddie Bauer.

Marc Pritchard, the chief brand officer of Procter & Gamble, said in an online speech on Wednesday for the Cannes Lions festival that the company would not be “advertising on or near content that we determine is hateful, denigrating or discriminatory.” Ad agencies like IPG Mediabrands said they were working with companies that wanted to cut ties with Facebook.

The pandemic may force older workers to face retirement decisions sooner.

The recession itself is likely the biggest obstacle to returning to work. The best odds for older workers to land or retain a job are typically found when the economy is strong, noted Peter Cappelli, a professor of management at the Wharton School at the University of Pennsylvania. Some experts worry about an increase in pandemic-related workplace age discrimination.

The motion-sensing lights sense nothing. The swivel chairs do not swivel. Only one sign of life remains in the abandoned corporate floor plan: potted plants.

Intended as a note of vibrancy amid bland surroundings, workplace greenery now seems an eerie symbol of the suddenness with which workers abandoned their routines.

Yet the cactuses and philodendrons we left behind have not been forgotten. During the pandemic, some have had their own essential workers keeping them alive. So-called interior horticulturalists water — and occasionally pet — the plants every few weeks, tending to a patch of the American economy.

“Most people just call me the plant guy when I walk in,” said Mac Rogers, an interior horticulturalist with Cityscapes, which designs and maintains interior landscapes.

“It’s kind of eerie going into spaces when there’s nobody around,” he said. “Now, there’s a lot less air movement. People have turned heat down. Plants are dormant and growing slower.”

Catch up: Here’s what else is happening.

  • Microsoft said Friday that it would permanently close its retail store locations, after having shuttered them since March because of the coronavirus outbreak. The company did not directly tie the closures to the outbreak, saying only that “our product portfolio has evolved to largely digital offerings.” The company will take a $450 million charge related to the closing. According to its website, Microsoft has 83 stores worldwide, including 72 stores in the United States, where it showcases its laptops and other hardware.

  • The Dutch government said it would throw KLM, the national carrier, a financial lifeline totaling 3.4 billion euros, or $3.8 billion, to help it weather the travel freeze. Wopke Hoekstra, the Dutch finance minister, said on Friday that the rescue package would include bank loans totaling €2.4 billion and a €1 billion direct loan. KLM’s corporate partner, Air France, earlier received its own €7 billion rescue package from the French government.

Reporting was contributed by Tiffany Hsu, Mark Miller, Alex Traub, Livia Albeck-Ripka, Mohammed Hadi, The Associated Press, Clifford Krauss, Katie Robertson, Carlos Tejada and Niraj Chokshi.


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