Publications

U.S. News

The Wall Street Journal reports that as states begin to loosen coronavirus restrictions, many companies are finding it nearly as difficult to be open for business as to be closed as new safety protocols raise the cost of doing business. Businesses are experimenting with various strategies to cope with tighter profit margins, including cutting back on staff and services and charging customers a coronavirus surcharge. WSJ

According to the Financial Times, companies are offering everything from cruise ships to airport operating rights as collateral for COVID-19 rescue deals. Secured debt deals, once relatively rare in the corporate bond market, have grown increasingly popular as creditors seek additional protection for risky lending, though investors note that the real value of such assets to creditors in the event of bankruptcy is extremely difficult to assess. FT

U.S. Economic Indicators

Initial jobless claims fell 249,000 to 2,438,000 last week. The four-week moving average fell 501,000 to 3,042,000. DOL Report

Existing home sales fell 17.8% to a seasonally adjusted annual rate of 4.33 million in April and were down 17.2% compared to a year ago. Home sales declined in all four major regions, with the largest decrease occurring in the West. NAR Report

The Conference Board’s Leading Economic Index (“LEI”) declined 4.4% in April following a 7.4% decline in March. The continued decline in the LEI suggest that while business conditions may recover for some sectors and industries in the near-term, selective re-opening does not imply a rapid rebound for the economy at large. Conference Board Report

U.S. News

The Washington Post reports that House and Senate lawmakers are working on new legislation to improve the flexibility of the Paycheck Protection Program, potentially providing much needed support to millions of small businesses that have avoided the program due to overly restrictive terms. Policymakers are primarily focused on extending the period during which funds must be spent to qualify for loan forgiveness while also discussing removing the requirement that 75% of funds be spent on payroll. WaPo

U.S. News

The Wall Street Journal reports that the latest projections from the Congressional Budget Office show that the current economic recovery is likely to drag on through the end of next year due to collapsing investment spending and historic deterioration in the labor market. While job growth is expected to gradually recover in the second half of 2020, the CBO cited three factors that could further dampen labor market recovery: the end of the Paycheck Protection Program, persistent health fears, and increased state and local government layoffs. WSJ

According to the Financial Times, a new wave of discretionary consumer spending on durable goods has taken off as Americans cash in their stimulus checks. While surging demand for certain non-essential items has been a boon for some retailers, it by no means signals the end of the historic squeeze in consumer spending amid the rapid rise in unemployment. FT

U.S. Economic Indicators

Privately-owned housing starts fell 30.2% in April to a seasonally adjusted annual rate of 891,000 (down 29.7% year-over-year). Housing permits fell 20.8% to a 1.07 million annual pace in April (down 19.2% from last year). Census Bureau Report

U.S. News

The Wall Street Journal reports that oil prices are staging a dramatic comeback amid global supply cuts, rising Chinese factory activity, and resurgent auto traffic. While some investors are optimistic that the normalization of crude inventories and consumer activity signal the beginning of a long-term trend, the price of crude still remains well below the breakeven point for most producers. WSJ

According to Bloomberg, the Federal Reserve’s unprecedented support of corporate debt markets has led to a surge in borrowing that may ultimately lead to a new wave of debt defaults and bankruptcies if the economy takes much longer than expected to recover. There are concerns that the Fed’s guarantees are encouraging a misallocation of capital away from high-growth companies towards so-called ‘zombie’ firms. Bloomberg

U.S. News

The NAHB Housing Market Index increased seven points to 37 in May. NAHB reports that most states classified home building as an essential business, helping to keep many residential construction workers on the job, while low interest rates should sustain demand as many states lift stay-at-home orders. NAHB Report

U.S. Economic Indicators

The Wall Street Journal reports that the Federal Reserve is heading deeper into uncharted territory as it seeks to provide credit access to middle-market firms through its $600 billion Main Street Lending Program. As the Fed moves into the politically sensitive area of private sector lending, there are concerns that the Fed may maintain an overly risk averse position, diminishing the overall effectiveness of the program. WSJ

According to the Financial Times, the coronavirus pandemic is hastening the decline of the U.S. coal industry as overall demand for electricity falls amid the ongoing decline of coal’s share of the U.S. energy mix. Employment in coal mining decreased 12% in April despite coal mines being deemed an essential business, further stressing state finances in heavy coal producing states including Wyoming, Kentucky, and West Virginia. FT