with Brent D. Griffiths

As President Trump pushes to lift pandemic restrictions and restart the economy, his administration is sending a host of mixed signals about the gravity of the ongoing crisis and the next steps in the federal response.

The lack of a unified narrative on key planks of the recovery threatens to undermine a White House-led response that polls show has already hurt President Trump’s standing with voters. And it comes at a time when public confidence in official judgments about the safety of lifting restrictions could go a long way toward determining whether Americans return to a sufficient semblance of normalcy to drive an economic rebound.

But in recent days, the Trump team is presenting mismatched messages on:

  • The impending economic carnage. Treasury Secretary Steven Mnuchin and White House economic adviser Kevin Hassett painted a bleak picture Sunday, projecting the worst is yet to come even after the April jobs report showed unemployment surging to 14.7 percent, the highest level since the Great Depression. Hassett said the jobless rate in May could top 20 percent. However, while National Economic Council Director Larry Kudlow acknowledged job losses this month will be “very difficult,” he focused on a different 20 percent, projecting economic growth at that clip in a “very strong second half of the year.”
  • The safety of emerging from lockdown. Trump is seeking to project confidence that the threat of the virus has receded enough for Americans to get back to working, shopping and spending. But the coronavirus has penetrated his inner circle, forcing Vice President Mike Pence and three top health advisers to self-isolate as the vice president's press secretary and a presidential valet tested positive for the virus.
  • The necessity of testing. A stepped-up regimen of testing uncovered the infections at the top levels of the White House, even as the president insists the rest of the country doesn’t need rigorous screening. In fact, Trump contended the administration’s experience proved “testing isn’t necessary,” because it hadn’t prevented the infections. Trump’s view dismisses the “consensus of health experts, scientists and some of his Republican allies that widespread testing is key to the safe end of restrictions,” Anne Gearan, Mike DeBonis and Brady Dennis wrote.
Trump officials also are at odds on the danger of more deficit spending

Trump has never demonstrated the traditional conservative concern for debt and deficits. That hasn’t changed as he has approved nearly $3 trillion in new spending to cushion the blow of the economic shutdown. But other senior administration officials are increasingly wary of the growing federal debt pile, sowing uncertainty about the path the White House will take as congressional Democrats prepare to roll out another relief package.

The administration’s deficit hawks have grown nervous enough about all the red ink the rescue efforts are spilling that they are eyeing ways to put a cork in new spending. These officials have “gone as far as exploring policies such as automatic spending cuts as the economy improves, or prepaying Social Security benefits to workers before they become eligible, although these measures are unlikely to advance given the political stakes,” Jeff Stein, Josh Dawsey and John Hudson write.

The green eyeshade crowd — which includes new chief of staff Mark Meadows, acting budget director Russ Vought, and Marc Short, chief of staff to Vice President Pence — are considering a plan that would allow Americans to receive $5,000 in exchange for delaying their Social Security benefits. Another proposal would dole out $10,000 checks to those who agree to curb their retirement benefits.

But White House spokesman Hogan Gidley said the president would reject any plan that calls for cuts to social safety net spending on seniors, per Jeff, Josh, and John. “It’s unclear how hard conservatives will push Trump on the deficit,” they write. And it’s not clear when Trump will force the issue. As they note, Trump said Friday he is in “no rush” to support another round of economic relief.

White House officials are in “informal” talks with lawmakers of both parties on what to do next, National Economic Council Director Larry Kudlow said Sunday on ABC’s “This Week.” 

“There’s no formal negotiations yet — I say ‘yet,’” Kudlow said. “After all this assistance, let's have a look at what the impact is in at least the next couple of weeks for the economy.”

Market movers

Fed's corporate bond programs provide major opportunity for big money managers.

BlackRock is about to start buying billions in corporate bonds: “The central bank has tapped BlackRock Inc. to help it direct money into both new and already-issued corporate bonds, assisting the Fed in its recently adopted role as lender of last resort for businesses. The Fed is expected to launch the program in coming days,” the Wall Street Journal's Dawn Lim and Gregory Zuckerman report.

“The Fed also has given Pacific Investment Management Co., or Pimco, the job of helping it purchase commercial paper, or companies’ short-term borrowings. That program is already up and running … Their role as agents of the Fed’s intervention is the latest chapter in a decade-long shift in the financial power structure, with the largest asset managers gaining ground on Wall Street banks.”

Fed unlikely to entertain negative rates. “Federal Reserve officials are unlikely to consider using negative interest rates to stimulate economic growth in the current coronavirus-induced downturn after concluding the tool’s clear costs outweigh its uncertain benefits,” WSJ's Nick Timiraos reports. “The topic resurfaced Thursday after investors in futures markets began betting the Fed’s benchmark federal-funds rate would go below zero by year-end, which sent yields on two-year Treasury securities to an all-time low. Rates rose slightly on Friday, and futures contracts implied investors expected the fed-funds rate would be negative in June 2021.”

Shares of small U.S. companies are racing higher, stirring a debate among investors about how much longer the stock market can keep rallying despite grim economic news.
WSJ
Stocks may appear expensive relative to historical earnings valuation measures, but investors may have realized that stocks still look better than the alternatives.
MarketWatch

Coronavirus fallout

Tesla takes California county to court.

Elon Musk has led the fight against the shutdown of his company's plant: “The company alleged in its suit, filed in the U.S. District Court for the Northern District of California, that Alameda County had violated the due process and equal protection clauses of the Fourteenth Amendment and sought an injunction that would allow the company to operate. Its Fremont manufacturing plant is located in that county,” Faiz Siddiqui and Tony Romm report.

“The suit followed chief executive Elon Musk threatening in a series of tweets earlier Saturday that the company would sue and move Tesla’s headquarters and future programs to Texas and Nevada. He appeared to leave open the possibility of maintaining some operations in Fremont depending ‘on how Tesla is treated in the future …' Tesla issued a statement late Saturday saying it would resume production at its facility, implementing social distancing by spreading employees out across its 6 million square-foot facility and conducting on-site temperature screenings." 

More from the corporate front: 
  • Life insurance companies are turning some Americans away: “The driving force behind the action: a collapse in interest rates tied to the spread of the coronavirus and an expectation from insurers that rates won’t rebound significantly anytime soon,” WSJ's Leslie Scism reports. “In addition to suspending sales of some popular products and raising prices, insurers are also scaling back policy sizes and reducing benefits.”
  • The airline industry is in crisis and the outlook is even worse: “Passenger traffic is down about 94 percent and half of the industry’s 6,215 planes are parked at major airports and desert airstrips, according to Airlines for America, a trade group,” NYT's Niraj Chokshi writes. “Yet, devastating as the downturn has been, the future is even more bleak. With much of the world closed for business, and no widely available vaccine in sight, it may be months, if not years, before airlines operate as many flights as they did before the crisis.”
In the U.S.:
  • At least 1,324,000 cases have been reported; 79,224 people have died.
  • White House scrambles to address aides testing positive: “Food and Drug Administration Commissioner Stephen Hahn and Centers for Disease Control and Prevention Director Robert Redfield, both task force members, said they are self-quarantining or teleworking for two weeks after exposure to a coronavirus case at the White House," Seung Min Kim, Josh Dawsey and Amy Goldstein report. “But several administration officials said White House staffers were encouraged to come into the office by their supervisors, and that aides who travel with [Trump] and Vice President Pence would not stay out for 14 days, the recommended time frame to quarantine once exposed to the virus.”
  • Senate Republicans are worried about their majority: “Strategists from both parties said the key battles for Republicans remain races in North Carolina, Arizona, Colorado, Maine and, to a lesser extent, Iowa. Republicans are banking on picking up at least one seat now held by a Democrat — Alabama, where Sen. Doug Jones won a special election in 2017,” Seung Min Kim and Mike DeBonis report.
  • Democratic lawmakers criticize SBA's management of EIDL: “In a letter dated May 9 to SBA Administrator Jovita Carranza, Sens. Charles E. Schumer (N.Y.), Ben Cardin (Md.) and Jeanne Shaheen (N.H.) said the SBA has mismanaged an important federal aid program designed to help small businesses weather the economic crisis," Aaron Gregg reports. "The senators took issue with an earlier decision by the SBA to limit the size of its economic injury disaster loans to just $150,000, a policy change that was not communicated to those applying for loans until it was disclosed Thursday in a Post article." 
Around the world:
  • Britain to continue lockdown through May: “Prime Minister Boris Johnson said progress would be contingent on the government’s ability to perform massive testing and to supply enough protective equipment to health-care workers in hospitals and nursing homes — two settings where the virus is still spreading,” William Booth reports from London.
  • Bailing out Lufthansa remains a debate: Germany is working on a ‘concrete model’ to aid [the airline], Economy Minister Peter Altmaier said … amid a political row over whether the state should take a strategic shareholding and play an active role in the stricken airline,” Reuters's Douglas Busvine reports. “Altmaier’s comments followed calls by the Social Democratic Party, junior partners in Chancellor Angela Merkel’s ruling coalition, to tie aid for Lufthansa to protecting jobs, cutting the dividend and giving the government a say on strategy.”
  • Emirates to raise debt: “The state-owned airline, which suspended regular passenger flights in March due to the virus outbreak that has shattered global travel demand, said that a recovery in travel was at least 18 months away,” Reuters's Alexander Cornwell reports. “The airline, which has been promised financial aid from its Dubai state owner, did not say how much it expected to raise.”
  • South Korea sees flare up in cases: “More than 50 cases have been linked to a 29-year-old man who, in a single night last weekend, visited five clubs and bars in a popular Seoul neighborhood, health officials said,” Timothy W. Martin and Dasl Yoon report. Seoul has now ordered bars and clubs closed.
  • France starts to slowly reopen: “Since March 17, residents have only been allowed to leave home to report for jobs that are deemed essential, to buy crucial supplies and to exercise. But as of Monday, they will be free to travel for any reason at all, so long as their trips remain under 100 kilometers (60 miles),” Antonia Farzan reports. Hair salons and small shops are also reopening.
  • New Zealand moves to reopen: Prime Minister Jacinda Ardern said the nation must remain vigilant as stores and restaurants resume operations this Thursday with pubs to follow a week later, Anna Fifield reports.

When superpowers collide

The Trump administration is urging chip makers to come back.

The goal is to curtail expansion in Asia, especially in China: “A new crop of cutting-edge chip factories in the U.S. would reshape the industry and mark a U-turn after decades of expansion into Asia by many American companies eager to reap investment incentives and take part in a robust regional supply chain,” the WSJ's Asa Fitch, Kate O’Keeffe and Bob Davis report.

“The pandemic has underscored longstanding concern by U.S. officials and executives about protecting global supply chains from disruption. Administration officials say they are particularly concerned about reliance on Taiwan, the self-governing island China claims as its own, and the home of Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer and one of only three companies capable of making the fastest, most-cutting-edge chips. Trump administration officials are in talks with Intel Corp., the largest American chip maker, and with TSMC, to build factories in the U.S.” 

Pocket change

Oil is no longer the family Standard. 

And yet, Rockefeller heirs are finding their bottom line is better without black gold: “Five years ago, members of the Rockefeller family walked away from the fossil fuels that made them rich, alarmed that burning oil and gas was causing climate change. Now it also seems like a smart financial move. The $1.1 billion Rockefeller Brothers Fund — largely free of oil and gas — has outpaced financial benchmarks, defying predictions of money managers,” Steven Mufson reports.

“No other name reverberates in the oil industry quite like Rockefeller …The Rockefeller Brothers Fund, founded in 1940 by five sons of John D. Rockefeller Jr., became interested in global warming in 1986 but sharpened its focus on sustainable development and climate change starting in 2005. The fund spends about $15 million each year on grants to support climate change solutions globally. Several years ago the leaders of the Rockefeller Brothers Fund decided they wanted to match their programs’ priorities with their investment strategy.” 

Chart topper

From economist Adam Tooze: 

Daybook

Today:

  • Marriott International, Simon Property Group, Under Armour, Caesars Entertainment and Inovio Pharmaceuticals are among the notable companies reporting their earnings, per Kiplinger

Tuesday:

  • The Senate Banking Committee holds a hearing on the oversight of financial regulators. Randal Quarles, the Fed's vice chairman of supervision and Jelena McWilliams, chairman of the FDIC, are among those set to testify
  • Anthony S. Fauci, FDA Commissioner Stephen Hahn and CDC Director Robert Redfield are set to testify about reopening the country before the Senate Health, Education Labor & Pensions Committee
  • The Senate Judiciary Committee holds a hearing on liability during the pandemic 
  • Toyota Motor, Honda Motor, Duke Energy, Logitech and Casper Sleep are among the notable companies reporting their earnings

Wednesday:

Thursday:

  • The Labor Department releases the weekly jobless claim numbers
  • Denny’s is among the notable companies reporting its earnings

Friday:

  • The Census Bureau releases its monthly retail sales numbers for March and advance numbers for April
  • DraftKings is among the notable companies reporting its earnings

The funnies

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Bull session