S&P 500, Dow Slip on Fear of New Infection Wave

US ECONOMY & POLITICS

U.S. Economic Recovery Will Drag On Through Next Year, CBO Says

• The Congressional Budget Office said the U.S. economy’s recovery from the downturn related to coronavirus responses will drag on through the end of next year, as investment collapses and the labor market experiences its sharpest deterioration since the 1930s.
• Gross domestic product will likely be 5.6% smaller in the fourth quarter of 2020 than a year earlier, the CBO said Tuesday, despite an expected pickup in economic activity in the coming months.
• Though the CBO raised its projection for GDP growth in the fourth quarter of 2021 to 4.2% from 2.8% in an April forecast, the outlook continued to depict a long road to recovery.
• The CBO estimated GDP will shrink 11.2% in the current quarter from the January-to-March period, more than quadruple the next-biggest quarterly decline in records going back to 1947.
• Business and residential investment will be the main drags on growth this year, the CBO said, falling 15.8% and 13.8%, respectively, in the fourth quarter from a year earlier.
• Consumer spending is seen declining 4.1%, while government purchases will likely slip 1%.
• The agency sees the number of U.S. jobs falling to 133 million in the second quarter from 158.6 million at the end of 2019—more than triple the number of job losses in the 2007-09 recession.
• While jobs should start to gradually return in the third quarter of this year, the CBO expects household employment to remain below pre-pandemic levels at 148 million in the last three months of 2021.

Trump Holds Off on Specifying Coronavirus-Relief Priorities

• President Trump didn’t press Senate Republicans on Tuesday about specific ideas for the possible next round of coronavirus relief, instead focusing on the 2020 election and other concerns, adding to the uncertainty over the timing of any future deal with Democrats.
• On Tuesday, Mr. Trump spent much of the lunch discussing polling he cast as favorable, as well as his concerns about investigations into Russian election interference and the pace of approving nominees, according to lawmakers who attended.
• They said they left the meeting without a sense of what Mr. Trump wants to see in the next bill.
• Mr. Trump did address one aspect of the current stimulus package. He told lawmakers that he was concerned that enhanced unemployment benefits were slowing the economic recovery, according to Sen. Lindsey Graham (R., S.C.).
• White House economic adviser Larry Kudlow reiterated that Mr. Trump is looking at a payroll–tax holiday, as well as potential corporate tax cuts, but said the White House continues to evaluate proposals.

Powell, Mnuchin Outline Contrasting Perils Facing Economy

• The nation’s top two economic policy leaders offered contrasting visions about the economic outlook, with Treasury Secretary Steven Mnuchin favoring a wait-and-see approach to more federal aid and Federal Reserve Chairman Jerome Powell suggesting more would be needed.
• Mr. Mnuchin reflected the Trump administration’s belief that the biggest danger to the economy is waiting too long to restart activity after two months in which millions of Americans have sheltered in their homes to slow the spread of infections.
• Mr. Powell challenged the premise that there is a trade-off between economic growth and protecting the public’s health.
• Fear of coronavirus infection is the economy’s biggest hurdle, he said, and the recovery will be held back until Americans believe it’s safe to resume commercial activities involving person-to-person contact.
• Mr. Mnuchin echoed comments by President Trump and other administration officials who are predicting a V-shaped recovery—a sharp downturn followed by a strong bounceback.
• Mr. Powell and other senior central bank officials have indicated they don’t think a V-shaped recovery is likely.

Fed’s Rosengren Warns Premature Reopening of Economy Carries Risk

• Federal Reserve Bank of Boston President Eric Rosengren cast a cautious eye at attempts to restart the economy amid the unresolved coronavirus crisis, while also reaffirming the central bank’s desire to do what it takes to offset the pandemic’s impact.
• In his remarks, Mr. Rosengren, who is not currently a voting member of the rate-setting Federal Open Market Committee, said the U.S. economy had suffered massive damage from the necessarily public health response to the crisis.
• But he warned that trying to jump start activity is very risky before coronavirus risks are contained.
• As other Fed officials have done, Mr. Rosengren said that for the economy to truly recover, the public must be confident they can go out in public without negative effect. And that comes down to a real solution to the crisis.

U.S. Senator Rubio sees consensus for extending paycheck loan program

• There appears to be agreement in Washington to give companies more time to utilize their coronavirus aid under the Paycheck Protection Program, the head of the U.S. Senate’s small business committee said on Wednesday.
• Senator Marco Rubio told Fox News that he would like Congress to extend the current eight-week period that the program gives employers to make payroll with a quick, simple bill without further additions beyond that provision — a so-called clean bill.
• Any measure would have to pass the U.S. House of Representatives, which is controlled by Democrats who want more comprehensive action amid the pandemic and last week passed a $3 trillion coronavirus aid package that Senate Republicans, who control the upper chamber, quickly rejected.
• On Tuesday, U.S. House Republican Leader Kevin McCarthy on said he could support giving borrowers up to 10 or 12 weeks to utilize their PPP loans. President Donald Trump has also said he backs an extension.

U.S. Birthrates Fall to Record Low

• American women had babies at record-low rates last year and pushed U.S. births down to their smallest total in 35 years, according to federal figures released Wednesday.
• About 3.75 million babies were born in the U.S. in 2019, down 1% from the prior year, provisional figures from the Centers for Disease Control and Prevention’s National Center for Health Statistics showed.
• The general fertility rate fell 2% to 58.2 births per 1,000 women aged 15 to 44, its lowest level since the government began tracking the figure in 1909.
• The total fertility rate—a snapshot of the average number of babies a woman would have over her lifetime—ticked down to 1.7 in 2019, a slight decline from the previous year and another record low.
• In almost all years since 1971, that rate has been below the level of 2.1 needed for the population to replace itself, without accounting for immigration.

EUROPE & WORLD

Coronavirus Shutdowns Wreak Devastating Toll on Poorest Nations, World Bank Chief Says

• The coronavirus pandemic is causing a humanitarian emergency in the world’s poorest countries, and it won’t likely end until rich nations are able to safely reopen their economies, the head of the World Bank said.
• The World Bank estimates that 60 million people world-wide are likely to fall into extreme poverty—subsisting on less than $1.90 a day—this year, while hundreds of millions more could lose their jobs.
• For poor nations that rely heavily on tourism, crude oil or other commodities, the pandemic’s impact on domestic economies is compounded by declining exports and foreign investment.

Xiaomi gets first-quarter sales boost as smartphone demand rebounds

• Xiaomi Corp reported a 13.6% rise in first-quarter revenue on Wednesday, beating estimates, as the Chinese smartphone maker sold more phones and benefited from sales of its higher-priced 5G models.
• Sales in the first quarter of 2020 rose to 49.7 billion yuan ($7.00 billion) from 43.76 billion yuan in the same period prior year, beating analyst expectations of 47.86 billion yuan.
• The company attributed the jump to rising prices for its just-released 5G phones in China, as well as growing sales overseas.
• Profits fell by roughly one third due to a drop in the value of Xiaomi’s investments in other companies.

Lenovo profit beats estimates, sees growth as more people work from home

• Lenovo, the world’s biggest maker of personal computers, reported a deep slump in fourth-quarter profit due to disruptions caused by the coronavirus crisis, although the result was far better than expectations.
• Net profit tumbled 64% to $43 million but was ahead of estimates of $7.5 million. Revenue slid 9.7% to $10.6 billion.
• Worldwide shipments of personal computers tumbled 12.3% in the first quarter of 2020, the sharpest fall since 2013 due to the pandemic, research firm Gartner said last month.
• Lenovo took a 24.4% market share in PCs during the quarter, ahead of rivals HP Inc and Dell Inc which had 21.5% and 19.7% respectively, Gartner said.

High-Tech Push Boosts China’s Chipmakers

• Chinese semiconductor stocks have soared recently, as investors bet these companies will benefit from Beijing’s quest for high-tech self-reliance.
• The Chinese government is eager to become self-sufficient in key technologies amid trade tensions with the U.S. and as the Trump administration seeks to thwart access to semiconductors for China’s Huawei Technologies Co.
• In a show of commitment, China set up a $29 billion fund in October to nurture its domestic chip industry.

TODAY in HISTORY

• Charles Lindbergh began the first solo nonstop transatlantic flight, departing from Long Island aboard the Spirit of Saint Louis. (1927)
• Amelia Earhart took off from Newfoundland to become the first woman to fly solo across the Atlantic. (1932)