with Brent D. Griffiths
Consider top Wall Street banks.
JPMorgan Chase
CEO Jamie Dimon drew a lot of attention last week for striking former San Francisco 49ers quarterback Colin Kaepernick’s bent-knee protest pose in a photo at a bank branch. And a spokeswoman for the nation’s largest bank pointed to its work “investing hundreds of millions of dollars in combined philanthropic and business resources to address some of the most persistent challenges facing the black community,” including building affordable housing and hiring people with criminal records.
But as The Post team notes, just 4 percent of its top executives are black. A New York Times report in December exposed racism at some of its branches in Arizona, eliciting criticism from Democratic lawmakers and a pledge from bank brass to review the company’s culture and practices. That came a year after the bank agreed to pay six current and former employees a $19.5 million settlement for racial discrimination.
Morgan Stanley
CEO James Gorman has similarly committed his bank to promoting more minorities in its top ranks. The Post team reports after watching protesters stream past his Manhattan apartment, Gorman held a conference call with some of the bank’s top black executives to announce two black women would be joining its operating and management committees. As of last year, only 2.2 percent of the bank’s top executives were black.
Goldman Sachs
The firm this month announced it is establishing a $10 million fund to back groups confronting “racial injustice, structural inequity and economic disparity” and will match employee contributions to it.
That week, Frederick Baba, a managing director at the firm who is black, wrote an email about his experience there that went viral both within the bank and beyond it. “A common bit of feedback from our junior colleagues is that while our firm expresses a commitment to equality and social justice up top, they don’t necessarily see commitment and support from their direct managers,” he wrote. And as The Post team notes, the bank “paid $9 million in 2019 to settle federal allegations of racial and gender pay bias,” though it disputed the government’s analysis.
Bank of America
The bank has committed to spending $1 billion over the next four years to combat inequality by promoting small businesses and community groups. CEO Brian Moynihan indicated in a statement announcing the pledge that the Floyd killing and its aftermath has created a sense of “true urgency” to address “racial injustices we have seen in the communities where we work and live.”
The bank “paid a $4.2 million settlement last year after being accused of discriminating against black, Hispanic and female job applicants,” though the company denied allegations of discrimination, per the Post team. And “about 5 percent of senior leaders are black.”
Wells Fargo
CEO Charlie Scharf wrote employees in late May to tell them “as a white man, as much as I can try to understand what others are feeling, I know that I cannot really appreciate and understand what people of color experience and the impacts of discriminatory behavior others must live with.” The bank is convening a daily meeting of senior executives to “develop recommendations for addressing societal inequalities facing black employees and customers,” per my colleagues.
It also has a checkered recent history. The firm — which has seen a decline in the number of black senior executives in recent years, from 8.5 percent in 2015 to 3.5 percent in 2019 — agreed to pay $10 million to the city of Philadelphia last year to settle charges it steered black and Hispanic borrowers into more expensive mortgages. It denied the allegations.
The industry is confronting its own contributions to racial iniquity as the phenomenon grows worse economywide.
Minority communities have born the brunt of the economic shock from the pandemic shutdowns. Black unemployment, for example, ticked up to 16.8 percent in May, while white unemployment declined to 12.4 percent. That has drawn calls from some progressive economists for the Federal Reserve to focus its policy response to the crisis in part on reducing black joblessness.
Dallas Federal Reserve President Robert Kaplan on Sunday said systemic racism is restricting economic growth. “A more inclusive economy where everyone has opportunity will mean faster workforce growth, faster productivity growth, and we’ll grow faster,” he said on CBS’s “Face the Nation.” “We're right to focus on this and bore in on this. it's in the interests of the U.S. The fastest-growing demographic groups in this country are blacks and Hispanics. If they don't participate equally, then we're going to grow more slowly.”
Market movers
Stocks poised for a rough start to the week.
Futures indicate more selling as coronavirus outbreaks persist: “Stock futures fell in early trading on Monday, pointing to more losses ahead as investors grapple with signs of a second wave of coronavirus cases as the U.S. economy reopens," CNBC's Yun Li reports. “Futures on the Dow Jones Industrial Average lost 511 points, or 2%. The move implied a loss of about 580 points at the open. S&P 500 futures fell 1.7%. Nasdaq-100 futures dropped 1.35%.”
Fed Chair Jerome Powell's testimony headlines a busy news week for jittery markets: “Stocks could be caught in a tug-of-war in the week ahead, as investors weigh the potential positives of a reopening economy against worry that the coronavirus continues to spread,” CNBC's Patti Domm reports.
“Investors will hear more of the same when Fed Chairman Jerome Powell speaks before Congress this Tuesday and Wednesday in his semi-annual economic testimony. He may provide more clarity on the Fed’s bond buying and other policy moves. Retail sales for May are released Tuesday, and that will be an important look at consumer spending activity. It is the most important data in the coming week, other than the weekly jobless claims report on Thursday.”
Skeptics of the market's rise are sticking with their cautious bets for now: “Some of these doubters have been bruised by the S&P 500’s 18% climb this quarter and are perplexed by what they deem a seismic disconnect between the battered economy and roaring financial markets. Hopes for a swift economic recovery following coronavirus lockdowns and historic stimulus measures by the world’s central banks have lifted stocks, pushing the technology-laden Nasdaq Composite to a record last week,” the Wall Street Journal's Amrith Ramkumar and Michael Wursthorn report.
“In recent weeks, prominent investors including billionaire Jeffrey Gundlach of DoubleLine Capital LP and Scott Minerd, the global chief investment officer for Guggenheim Partners LLC, have publicly called stocks overvalued, only for them to continue ripping higher. Famed money manager Jeremy Grantham wrote in a recent letter to investors that ‘the current market seems lost in one-sided optimism.’ The Boston investment firm he co-founded, Grantham, Mayo, Van Otterloo & Co., said in the letter that it lowered its stockholdings in its flagship benchmark free-allocation strategy.”
Coronavirus fallout
Cases surge across the U.S. as states continue to reopen.
Twenty-one states have seen an increase in their daily average: “Alabama, Oregon and South Carolina are among the states with the biggest increases. Alabama saw a 92 percent change in its seven-day average, while Oregon’s seven-day average was up 83.8 percent and South Carolina’s was up 60.3 percent. Hospitalizations have risen as well. For example, Arkansas has seen a 120.7 percent increase in hospitalizations, from 92 cases to 203, since Memorial Day,” Samantha Pell and Jacqueline Dupree reported over the weekend.
“An increase of coronavirus cases in counties with fewer than 60,000 people is part of the trend of infections surging across the rural United States. Health experts worry those areas, already short of resources before the pandemic, will struggle to track new cases.”
Kudlow says the unemployment insurance plus-up will end next month.
The top White House economic adviser was reminded a lot of jobs are not coming back: Larry Kudlow, director of the National Economic Council, ”said that the $600 checks being sent to Americans on unemployment as part of coronavirus relief efforts are expected to end in July and called them a ‘disincentive’ for people to get back to work," the Hill's Rebecca Klar reports.
“He said the Trump administration is looking at other incentives, including smaller checks that ‘still provide some kind of business for returning to work.’”
Mnuchin's secrecy over bailout money sparks rift with Congress: “Treasury Secretary Steven Mnuchin ignited controversy on Wednesday when he said the Trump administration will not reveal the names of companies and nonprofits that got the so-called Paycheck Protection Program loans, which are guaranteed by the taxpayer and can be forgiven in full if borrowers maintain their payrolls,” Politico's Zachary Warmbrodt reports.
“Republicans and Democrats have pressed the administration to disclose loan recipients in recent weeks, and Mnuchin's refusal has created a new flashpoint in Congress' oversight of the Trump administration's use of coronavirus bailout funds. It's fueling concerns that have dogged the program since its April 3 launch that too much of the aid is going to well-financed businesses that don't need it. ‘Given the many problems with the PPP program, it is imperative American taxpayers know if the money is going where Congress intended — to the truly small and unbanked small business,’ Senate Minority Leader Chuck Schumer said Friday.”
Democrats want to simplify the PPP application. Forty-seven senators are pressing the Small Business Administration. They want the agency "to set up a streamlined application process for ‘low-dollar’ subsidized small business loan recipients, according to a letter released Friday by [Schumer's office],” Aaron Gregg reports.
"The lawmakers say the SBA’s existing 11-page loan forgiveness application takes too long to complete and may be too difficult for some ‘underserved’ small businesses such as sole proprietors, who may not have lawyers and accountants to help with the application. “We are especially concerned that so many of these very small and underserved businesses will feel compelled to hire accountants and attorneys to complete the forgiveness form in a manner that provides comfort that the loans will be forgiven,” the senators wrote.
From the U.S.:
- At least 2,084,000 coronavirus cases have been reported; at least 113,000 have died.
- Millions of job losses are at risk of becoming permanent: "New research by Bloomberg Economics reckons 30 percent of U.S. job losses from February to May are the result of a reallocation shock. The analysis -- based on the relationship between hiring, firing, openings and unemployment -- suggests the labor market will initially recover swiftly, but then level off with millions still unemployed. Jobs in the hospitality industry … are among the most at risk, alongside retail, leisure, education and health,' Bloomberg News's Olivia Rockeman and Jill Ward report.
- There's still a huge dearth in contact tracers: “Health departments in many of the worst-affected communities are way behind in hiring and training those people. The effort may also be hobbled by the long-standing distrust among minorities of public health officials, as well as worries about promising new technologies that pit privacy against the public good,” Frances Stead Sellers and Ben Guarino report.
- Fauci says a second phase isn't guaranteed, but a return to normal is a long way off: “With infection rates now surging across a host of states, and protests sweeping the globe, Anthony S. Fauci, the nation's top disease expert, expressed concern, and said the crisis was far from over,” the Telegraph's Nick Allen reports. "'The question is will they have the capability to do the appropriate and effective isolation, and contact tracing, to prevent this increase from becoming a full blown outbreak? I'm concerned it's happening,' Fauci said. 'I hope the individual states can blunt that. It [the virus] could go on for a couple of cycles, coming back and forth. I would hope to get to some degree of real normality within a year or so. But I don't think it's this winter or fall, we'll be seeing it for a bit more.'"
The corporate front:
- The economic ripple has begun to arrive: “The coronavirus recession has emerged as a distinctive blend of problems with both production and consumption. Initially, the outbreak of the disease in Wuhan, China, resulted in the closure of countless Chinese factories and interrupted international travel, threatening the ability of multinational companies to operate. That break in the global economy’s ability to supply products soon evolved into an unprecedented fall in demand, as shutdowns spread to companies that had not been directly affected at first, depressing total output and employment, according to a new paper by economists at the University of Chicago, Northwestern University, the Massachusetts Institute of Technology and Harvard University,” David J. Lynch reports.
- The $100 billion conventions industry begins to slowly reopen: “As states such as Florida and Texas take further steps to reopen, the industry is trying to bounce back, with some centers preparing to host events as soon as next month using safety measures that are becoming commonplace: temperature checks, social distancing, reduced capacity and contactless registration,” CNBC's Contessa Brewer and Katie Young report. Apple's annual conference will still be remote though.
Around the world:
- Macron tries to move beyond the virus: “French President Emmanuel Macron declared an initial victory over the coronavirus as he sought to shift France’s fight with the disease from the country’s hospital wards to the schools, restaurants and other businesses on the front lines of the pandemic’s economic fallout,” WSJ's Nick Kostov reports.
- Saudis blame spike on young people flouting rules: “On Sunday, authorities reported a new all time high in daily cases with 4,233 found, the largest number from the capital Riyadh. Since the outbreak, some 127,541 cases have been reported. Daily rates had dropped to just over 1,000 at the end of May," Paul Schemm reports from Dubai.
- Swedish prime minister Stefan Lofven defends his no lockdown response: “Sweden’s strategy of not imposing strict lockdowns, long a subject of debate, came under intense scrutiny earlier this month when the country’s top epidemiologist acknowledged that too many lives had been lost and that in retrospect it would have been better to follow an approach closer to that of other nations,” Antonia Farzan reports. “Lofven claimed that the country’s excess mortality rate was normal for the time of year, and pointed out that methods for tracking fatalities vary widely between countries.”
Trade fly-around
Two U.S. trade negotiators tried to cash in on rules they wrote.
The officials sought consulting work while still on the government payroll. “Jason Bernstein and Fred Fischer were key negotiators in U.S. Trade Representative Robert Lighthizer’s office responsible for the so-called rules-of-origin that dictate how much of a car must be made in North America to avoid tariffs under [Trump’s] renegotiated trade deal with Canada and Mexico,” Bloomberg's Ryan Beene, Jenny Leonard, and Bill Allison report.
“They have reached out to companies in the auto industry to offer help implementing the U.S.-Mexico-Canada Agreement after they leave government service… The outreach came after the two told auto industry officials as early as March that they intended to leave their posts at the USTR and in the meantime had recused themselves from work related to the auto industry content rules within USMCA, according to people familiar with the communications."
Pocket change
Elliott Management is hunting for giants now.
The hedge fund's growing size has changed its approach: “Until fairly recently, activist hedge fund Elliott Management’s core technology investing strategy was pretty straightforward: Target a smallish company known for selling software to businesses, agitate for a sale -- sometimes by offering to buy the company -- and profit when a buyer came along,” CNBC's Alex Sherman reports.
“But in the past few years, a gradual but noticeable transformation has taken place at Elliott: The technology targets have gotten bigger … As Elliott’s strategy shifted, it also got more sophisticated. When Elliott was investing in midsize enterprise software companies, the firm was ‘a bunch of technology investors,’ according to people familiar with how the firm was run. Today, when examining companies like eBay or Twitter, the firm calls upon its own Internet analysts, software analysts, operation analysts, consultants and stable of installed board members to help make decisions.”
Chart topper
Bloomberg's Tracy Alloway highlights a Goldman Sachs report showing stocks favored by retail investors have outperformed those of hedge funds and mutual funds since the market bottomed in March. (More on that here.)
A portfolio of stocks popular with retail investors has returned 61% since the March low vs. a 45% return for baskets of stocks beloved by hedge funds and mutual funds. pic.twitter.com/uUWNBurxPe
— Tracy Alloway (@tracyalloway) June 15, 2020
Daybook
Tuesday:
- Fed Chair Jerome H. Powell is set to testify in front of the Senate Banking Committee
- U.S. retail sales and industrial production data for May is released
- Oracle, Groupon, Lennar and H&R Block are among the notable companies to report their earnings, per Kiplinger
Wednesday:
- Powell is set to testify in front of the House Financial Services Committee
Thursday:
- The Labor Department releases weekly jobless claims
- The House Select Subcommittee on the Coronavirus holds hearing on “the unemployment pandemic”
- The House Ways & Means Subcommittee on Select Revenue Measures holds a hearing on tax relief during covid-19
- Smith & Wesson Brands is among the notable companies reporting its earnings
Friday:
- CarMax is among the notable companies reporting its earnings