Federal Reserve officials on Wednesday will conclude a two-day policy meeting that is likely to yield little action — rates are already at near-zero and are almost certain to stay there for an extended period — but could provide a fresh read on how policymakers are thinking about the economic outlook, and hints about their plans for the future.
On Tuesday the Fed extended its emergency lending programs through the end of 2020, a three-month addition that, while not surprising, signaled how lasting the economic damage from the coronavirus is proving.
The chair, Jerome H. Powell, who will hold a remote news conference at 2:30 p.m., is sure to field questions on the newly extended programs, which were introduced to try to keep markets functioning and credit flowing.
The Fed took unprecedented actions in March and April to provide a first line of defense for the economy as coronavirus cases swept the nation and shut down entire business sectors. Most of the nine programs were set to expire on or around the end of September, evidence that officials expected that normal conditions might return by fall.
That optimism has been upended by a surge in new infections, which has continued to depress economic activity. While state and local economies have reopened, many have had to roll back or delay their plans, and experts warn that the situation could take a turn for the worse if the virus takes hold more deeply.
The fallout of the global coronavirus pandemic has pulled Hong Kong’s economy further into decline over the past three months, with the Chinese territory on Wednesday reporting a 9 percent contraction.
Hong Kong has been dealt additional economic blows alongside the virus, including monthslong anti-government protests last year and a bruising trade war between China and the United States that has dampened trade in the city.
Wednesday’s disappointing economic data showed a slight easing from January when the government reported economic growth dropped by the most in more than four decades. Nevertheless, it marked the fourth quarter of economic decline for the global financial hub battered by protests and a public health crisis that has weighed on consumer spending, tourism and trade.
The news comes as the city is dealing with another lockdown more severe than those in the past, as health authorities struggle to contain and trace new virus cases. It also stands in contrast to positive economic news from mainland China, where heavy infrastructure spending helped to pull the world’s second biggest economy out of its first contraction in nearly a half-century. Earlier this month, China reported its economy expanded by 3.2 percent over the three months ending June.
Global markets were mixed on Wednesday, and Wall Street futures were pointing to a small upswing when trading starts, as investors waded through a variety of corporate earnings reports while waiting for the U.S. Federal Reserve policymakers to announce the results of their meeting later in the day.
European markets were led by France’s CAC 40, which was 0.7 percent higher by midmorning. Asian markets had a mostly positive day.
The yield on the U.S. 10-year Treasury note rose and oil futures gained, with Brent crude reaching $43.89 a barrel, up nearly 1.4 percent. Gold, which nearly reached $2,000 an ounce earlier this week, was flat, at $1,958.
Among the European companies reporting quarterly earnings on Wednesday were Deutsche Bank (down 1.9 percent despite a surge in trading revenue), Barclays (down 4.5 percent after a net loss that it attributed to the pandemic) and the luxury group Kering, the parent company of Gucci (which gained 4 percent after a smaller-than-expected drop in sales).
Later on Wednesday, the Fed will issue a statement marking the completion of its two-day meeting. The get-together is likely to yield little action — rates are already at near-zero — but it could provide a fresh read on how Fed officials are thinking about the economic outlook, and hints about their plans for the future.
Hong Kong’s Hang Seng index gained 0.5 percent for the day, China’s Shanghai Composite jumped 2.1 percent and the Nikkei in Japan fell 1.2 percent.
In Hong Kong, after the markets closed, the government reported that the territory’s economy contracted 9 percent in the second quarter from a year ago, the fourth consecutive quarter of declines.
On Thursday morning, when the Commerce Department announces the nation’s second-quarter economic output, the data is likely to reflect the biggest decline in the 70-plus years that such statistics have been compiled. But you may see two widely different numbers.
Forecasters expect the report to show that gross domestic product — the broadest measure of goods and services produced — fell at an annual rate of about 35 percent. That doesn’t mean, however, that the economy shrank by more than a third in a mere three months.
The United States has traditionally reported the figure as an annual rate — that is, how much the economy would grow or shrink if the change were sustained for a full year. But when annual rates are applied to short-term changes, the results can be misleading.
For that reason, The New York Times plans to emphasize the nonannualized percentage change in its coverage. And on that basis, if the forecasters are on target, the G.D.P. should be about 10 percent lower in the second quarter than in the first.
Here are some of the big stories from Tuesday:
Universal Pictures and AMC Entertainment, the No. 1 movie chain in the world, reached a deal to allow movies to move to homes after a mere three weeks in theaters in the United States, almost certainly changing the way that Hollywood does business.
L Brands, the owner of Victoria’s Secret and Bath & Body Works, said that it would lay off 850 associates at its headquarters in Columbus, Ohio, or 15 percent of staff there, as it works to separate the brands into two stand-alone companies and manage sales drops tied to the coronavirus outbreak.
The Trump administration said that it would extend a $765 million loan to Eastman Kodak Company to begin producing critical pharmaceutical components, in an effort to allay American dependence on foreign countries for essential medicines.
Global same-store sales at Starbucks plunged 40 percent in the three months that ended in June from the same period last year because of store closures, shortened operating hours and fewer customers in the wake of the coronavirus pandemic.
Fraudsters may have obtained hundreds of millions of dollars in loans from a disaster loan program meant to help small businesses devastated by the coronavirus pandemic, the Small Business Administration’s internal watchdog said.
Big retailers have made strong statements recently about their new rules requiring customers to wear face masks when shopping, saying that the health of their workers and customers is paramount.
But when it comes to enforcing those mandates, the companies are taking a decidedly hands-off approach, writes Michael Corkery:
Walmart has told employees that they should not prevent a customer from entering the store if they refuse to wear a mask. Walgreens said that “for the safety of our team members” the company would not bar customers without masks from its stores. Lowes also said it would “not ask our associates to put their safety at risk by confronting customers about wearing masks.”
Many shoppers and workers say the retailers’ reluctance to police their customers’ mask wearing ultimately renders the new rules toothless and will perpetuate the spread of the coronavirus. And workers find themselves thrust onto the front line of a cultural and political war over masks that can lead to ugly confrontations and, at times, violence.
Last weekend, two episodes stood out: In one, a video of an altercation involving two shoppers in Walmart wearing masks with a Nazi swastika went viral, while a man was arrested after an incident in a Walmart in Palm Beach County, Fla., in which he pulled a gun on another shopper who had asked him to put on his mask.
Some shoppers say the retailers are taking the easy way out by announcing mask policies that are not true mandates. But retailers are likely on solid legal ground if they decline service to someone refusing to wear a mask, especially if they offer alternative ways for customers to shop, such as home delivery and curbside pickup.