Stocks Climb After Trump Speaks on China

Stocks climb after President Trump addresses China tensions.

Stocks staged a late-day rebound on Friday, climbing after President Trump gave a long-awaited news conference on China without laying out any new tariffs or sanctions against the country.

Investors had spent most of Friday bracing for Mr. Trump to unveil new measures aimed at punishing China, after Beijing moved to strengthen its authority over Hong Kong, a semiautonomous Chinese city that enjoys special trade and financial relations with the United States.

Mr. Trump said that he would ask his administration to revoke special privileges afforded to Hong Kong, including on trade and law enforcement, and that it would impose sanctions on certain Chinese officials. Both those measures have been discussed by other administration officials and lawmakers in recent days.

“My announcement today will affect the full range of agreements we have with Hong Kong,” he said, including “action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.”

The S&P 500 posted a small gain for the day, the last trading session in May, leaving the benchmark stock index up more than 4.5 percent for the month. Technology companies, which are particularly sensitive to tension with China because the country serves as an important manufacturing hub and market, rallied.

Combined with a 12.7 percent gain in April, it was the best two-month jump for the markets in 11 years, a rise that reflects investors focus on the return of economic activity in regions were locked down in an attempt to fight the coronavirus, as well trillions of dollars’ worth of monetary and fiscal stimulus that has surged into financial markets and consumer bank accounts in recent weeks.

“The market has sort of intuitively decided that the worst of the Covid risk is behind us,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn.

That may prove incorrect. There’s no guarantee that current efforts to reopen will go smoothly. Experts say infections could begin to rise again as people begin to return to their normal activities. A second wave of infections in the fall remains a possibility.

Jerome H. Powell, the chair of the Federal Reserve, said that central bankers saw the need to use their tools “to their fullest extent” as coronavirus lockdowns shuttered economies around the world and caused U.S. unemployment to soar.

“We felt called to do what we could,” Mr. Powell said on Friday, during a Princeton University webinar. “We crossed a lot of red lines that had not been crossed before, and I’m very comfortable with — this is that situation in which you do that, and you figure it out afterward.”

The Fed has taken a variety of actions to support the economy, including cutting interest rates to near-zero, rolling out unlimited bond purchases and introducing a variety of emergency lending measures to keep credit flowing to businesses and state governments.

The central bank’s efforts have come at a time of dire economic need. Economists are bracing for a deep plunge in output in the second quarter, which runs from April through June, and most predict only a gradual recovery over the remainder of the year. It could be months or years before output climbs back to its precrisis level and the unemployment rate falls to the 50-year lows that prevailed before the coronavirus came to the United States.

More than 40 million people, the equivalent of one out of every four American workers, have filed for unemployment benefits since mid-March, based on data released this week. A report next Friday is expected to show that the unemployment rate jumped to 19.5 percent in May, based on the median estimate in a Bloomberg survey of economists.

Government checks caused a surge in April incomes, but spending still slumped.

Government infusions to Americans’ bank accounts led to a surge in personal income in April, the Commerce Department reported Friday, but the coronavirus-related economic shutdown still caused a steep decline in consumer spending.

Personal income rose overall by $1.97 trillion, a gain of 10.5 percent in March and 11.7 percent from the previous April. The drop-off in wages was offset by nearly $3 trillion in government transfer payments. Of that, $360 billion was unemployment benefits and $2.6 trillion was “other” — reflecting the checks of up to $1,200 a person that the federal government sent to most households.

That extra cash did not translate, at least immediately, into spending on consumer goods, which was down 13.6 percent from March. The decline was spread across all major categories — durable goods, nondurable goods and services.

“It’s not every year you get these kinds of crazy swings,” said Greg Daco, chief U.S. economist at Oxford Economics. “It requires a bit of coolheadedness to understand what is transitory and what is permanent.”

Government payments, which pumped up personal income “are a one-time shot,” he said, adding, “If you take these benefits out, then you are left with a massive loss of income.”

On the other hand, lingering fear is likely to restrain spending on social activities and discretionary for a while. There are signs that spending had begun to rebound slightly in May, Mr. Daco added, but there’s a long way to go before activity returns to precrisis levels.

“You might see strong growth numbers on spending but we’re coming out of a deep hole,” he said.

There is widespread agreement that the United States economy will soon begin to recover from coronavirus lockdowns. The big debate is whether that rebound will resemble a V, a W, an L or a Nike Swoosh.

Increasingly, economists and analysts are penciling in another glyph: a question mark, writes Jeanna Smialek.

Forecasters often label their expectations for a post-recession rebound with letters — a “V” suggests a rapid recovery, a “W” a double-dip, and so on — but that’s hard to do this time around. As all 50 states begin to open up and consumers trickle out of their homes, the path ahead is wildly uncertain, making prognostication dicey.

It isn’t just Wall Street forecasters eschewing the alphabet in favor of a range of what-if’s. From the Federal Reserve to the White House, analysts have suggested that posing confident prognostications is probably more misleading than helpful. John C. Williams, president of the Federal Reserve Bank of New York, said during an appearance last week that it was important for policymakers to prepare for every eventuality, rather than focus on one type of recovery.

Google has rescinded offers to more than 2,000 people who had agreed to work at the company as temporary and contract workers.

Google employs more than 130,000 contractors and temp workers, a shadow work force that outnumbers its 123,000 full-time employees. Google’s full-time staff are rewarded with high salaries and generous perks, but temps and contractors often receive less pay, fewer benefits and do not have the same protections, even though they work alongside full-timers.

Many of the contract and temp candidates who had agreed to work at Google before the pandemic took hold in the United States were let go without any severance or financial compensation. This came after weeks of uncertainty as Google repeatedly postponed their start dates during which time they were not paid by Google or the staffing agencies through which they were recruited.

Some of the would-be contractors left stable, full-time jobs once they received an employment offer at Google and are now searching for work in a difficult labor market. Some, who are Americans, said the rescinded offers had complicated and, in some cases, delayed their ability to receive unemployment benefits because they left their last jobs voluntarily, according to several of the workers facing this quandary.

In mid-April, a company spokeswoman said that Google intended to bring on the people who it had already hired but who had not started.

But this did not seem to apply to contractors or temp workers for Google and Alphabet, which has a market capitalization of near $1 trillion. It made $6.8 billion in profit in the first three months of 2020, despite what it called “a significant and sudden slowdown” in advertising.

“If these people were promised jobs at Alphabet, which is worth a trillion dollars, it seems like the company has a responsibility to take them on,” said Ben Gwin, who works as a data analyst in a Google office for HCL America, a contracting agency. “It’s not like Google can’t afford it.”

The Centers for Disease Control and Prevention announced sweeping new recommendations on the safest way for American employers to reopen their offices to prevent the spread of the coronavirus.

Among the guidelines:

• Employees should get a temperature and symptom check on arriving at work.

• Desks should be six feet apart. If that isn’t possible, employers should consider erecting plastic shields around desks.

• Seating should be barred in common areas.

• Face coverings should be worn at all times.

If followed, the guidelines would lead to a far-reaching overhaul of the corporate work experience. They even upend years of advice on commuting, urging people to drive to work by themselves, instead of taking mass transportation or car-pooling, to avoid potential exposure to the virus.

The recommendations run from technical advice on ventilation systems (more open windows are most desirable) to suggested abolition of communal perks like latte makers and snack bins.

The country’s largest dollar-store chains reported their latest quarterly results on Thursday, blowing away expectations for sales and profits. These discounters generally thrive during periods of high unemployment and weak economic growth, and the coronavirus crisis is no exception.

“We do very good in good times and we do fabulous in bad times,” said Todd J. Vasos, the chief executive of Dollar General. His company reported a 28 percent rise in sales in its latest quarter.

Dollar Tree reported an 8 percent rise in revenue over the same period. “In 2008, folks lost jobs, too, and they needed us and they found us,” said Gary M. Philbin, the chain’s chief executive.

For the year, both companies’ stock prices are up nearly 20 percent, easily outperforming the S&P 500 and nearly doubling the rises recorded by Walmart and Target.

Dollar General said it had hired more than 50,000 people since mid-March, and Dollar Tree hired more than 25,000 over a similar stretch. Both are paying special bonuses for workers during the pandemic; Dollar General said these totaled $60 million in its latest quarter. Still, working conditions at these stores have faced criticism, before and since the coronavirus outbreak.

The French carmaker Renault said on Friday that it would cut nearly 15,000 jobs worldwide and drastically reduce production as it tries to deal with “the major crisis facing the automotive industry.”

About a third of the job cuts would be in France, Renault said. The company, which is partly owned by the French government, indicated it is likely to close several factories while it cuts the number of cars it produces annually to 3.3 million, from four million. Renault will also pull out of China, where it has failed to get much traction.

Renault has been hit hard by the pandemic. Renault sales in the European Union, its most important market, fell almost 80 percent in April, when dealerships were closed and most buyers were not leaving their homes.

Can the dollar keep its gains?

The U.S. dollar has gained about 7 percent this year against a basket of major currencies. But with interest rates at rock-bottom levels, the Fed’s printing presses revving up and the government borrowing enormous sums for stimulus spending, today’s DealBook newsletter asks: Can it retain its haven status?

A recent research note by Gregory Daco at Oxford Economics found that since 1973, the dollar has appreciated an average of 6 percent in the past six recessions, in line with its performance during the current downturn. Mr. Daco expects the dollar to remain strong this year, but not for the usual reasons.

Unlike in past recessions, when investors flocked to the safety of Treasury bonds, foreign investors dumped U.S. government debt at a record rate in March, which would normally push the dollar down. But since the Fed flooded the markets with stimulus, the U.S. stock market has, unusually, become a “safe refuge,” Mr. Daco writes, propelled by tech stocks whose businesses are benefiting from stay-at-home orders.

Catch up: Here’s what else is happening.

• Ascena Retail Group, the owner of Ann Taylor, Loft and Lane Bryant, said on Thursday that “the uncertainty created by Covid-19 requires us to evaluate all options available to protect the business and its stakeholders,” sending its shares down on Friday. The company, which also owns Justice, said that its revenue plummeted 45 percent in the quarter that ended May 2 and it had reopened only 450 of its 2,800 stores as of May 27.

• Nordstrom, the top-performing department store in the United States, said on Thursday that its net sales fell 40 percent to $2 billion in the first quarter, and that it posted a net loss of $521 million. Digital sales accounted for more than half of its total net sales during the quarter. The retailer closed stores on March 17 and started reopening in early May. It said it now has about 40 percent of its locations open.

• Costco Wholesale said on Thursday that its net sales rose 7.3 percent to $36.5 billion in its quarter ending May 10 and that it posted a net profit of $838 million, as the pandemic prompted customers to stock up on goods. The warehouse chain, which has more than 500 U.S. locations, said its income took a hit from a $283 million pretax charge “from incremental wage and sanitation costs related to Covid-19.”

Reporting was contributed by Nelson D. Schwartz, Ben Casselman, Niraj Chokshi, Daisuke Wakabayashi, Jason Karaian, Jeanna Smialek, Matt Richtel, Kate Conger, Jack Ewing, Mike Isaac, Maggie Haberman, Kevin McKenna, Mohammed Hadi and Carlos Tejada.