Newsletter: What Are Markets Saying About the U.S. Recovery?

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Money Talks

The dollar is on track to close out its worst month since April 2011 as a rise in coronavirus infections across the U.S. threatens to damp the economic recovery and keep low interest rates in place for longer. The ICE U.S. Dollar Index, which measures the greenback against a basket of other currencies, fell Monday to its lowest level since June 2018, according to FactSet. Investors have sold the dollar and bought currencies of countries with lower infection levels in recent weeks. That has erased 3.8% of the currency’s value in July, putting it on track for its worst one-month performance in over nine years. The recent surge in cases in parts of the U.S. has prompted local authorities to halt or rewind plans to let business activity resume, raising doubts about the prospects for the economy. California, Texas and Florida, which are among the hardest-hit states, together account for more than a quarter of U.S. gross domestic product, Caitlin Ostroff reports.

Gold spiked to a new intraday high. The precious metal has been buoyed by a gloomy global economic outlook, falling interest rates, rising U.S.-China tensions and a weakening of the dollar. In Tuesday-morning trading in Asia, gold prices hit an intraday record of $1,974.70 a troy ounce, before paring gains to trade flat at Monday’s closing of $1,931, Chong Koh Ping reports.

WHAT TO WATCH TODAY

The S&P/Case-Shiller 20-city home-price index for May is expected to rise 4.4% from a year earlier. (9 a.m. ET)

The Conference Board’s consumer confidence index for July is expected to fall to 94.3 from 98.1 a month earlier. (10 a.m. ET)

The Richmond Fed’s manufacturing survey for July is expected to rise to three from zero a month earlier. (10 a.m. ET)

The Federal Reserve begins a two-day meeting.

TOP STORIES

How Long Will Covid-19 Stick Around? Let Me Google That for You

Google will keep its employees home until at least next July, making the search-engine giant the first major U.S. corporation to formalize such an extended timetable in the face of the coronavirus pandemic. The move will affect nearly all of the roughly 200,000 full-time and contract employees across Google parent Alphabet. Alphabet Chief Executive Sundar Pichai made the decision himself last week, swayed in part by sympathy for employees with families to plan for uncertain school years that may involve at-home instruction. It also frees staff to sign full-year leases elsewhere if they choose to move, Rob Copeland and Peter Grant report.

U.S. states are relying on their own public-health indicators when deciding whether to reclose portions of their economies to try to stop rising coronavirus infections—much as they did during the lifting of restrictions earlier in the summer. The Centers for Disease Control and Prevention in the spring issued reopening guidelines, which few states followed, but hasn’t provided guidance on when to crack down after reopening. The CDC’s criteria included a downward trend in new Covid-19 cases over 14 days, a decrease in the rate of positive tests and availability of intensive-care beds, Ted Mann and Allison Prang report.

Taking Stock

Toys are flying off the shelves as parents look for ways to entertain their children during the coronavirus pandemic. But retailers haven’t rushed to restock their inventory, causing financial pain at toy makers. Mattel said Barbie’s sales rose 35% at the retail level, but only increased 7% on a wholesale basis. Hasbro said its games business, which includes Monopoly and Nerf, posted a 50% increase in retail sales, five times higher than revenue growth for the company. The wide split between point-of-sale trends and financial performance reflects the extreme retailing conditions during the global pandemic. About 30% of stores were closed globally at the start of the quarter halting sales and any follow-on orders to replenish inventory. As stores have opened, retailers have been cautious to stock up, amid uncertainty from the virus and precarious financial situations at some chains, Paul Ziobro reports.

Orders for long-lasting U.S. factory goods rose in June as the economy continued its climb back from disruptions related to the coronavirus pandemic, though a summer surge in infections could damp future gains. The auto sector was a big driver of new orders for durable goods—demand for motor vehicles and parts jumped 85.7% from the previous month. Underlying figures were more modest. New orders for nondefense capital goods excluding aircraft—a closely watched proxy for business investment—rose 3.3%.

Civil unrest and worries about personal safety have driven U.S. firearm sales to record highs. That hasn’t been enough to save Remington Arms. The firearm maker filed for bankruptcy protection for the second time since 2018, weighed down by more debt than it can repay, Andrew Scurria reports.

Rain in Spain

A surge in new coronavirus cases in Spain is threatening the recovery of its vital tourism sector and underscoring the fragility of the country’s hard-fought gains in bringing the virus under control. The increase in infections—and the U.K.’s abrupt decision to impose a two-week quarantine on travelers arriving from Spain—points to the economic costs if the virus begins to spread widely again as Europeans begin to shop, dine out and travel over the summer and fall following lengthy spring lockdowns, Giovanni Legorano and María Martínez report.

The price of carbon credits in Europe has rebounded from a pandemic low, reflecting government stimulus efforts and the reopening of economic activity. The bounceback is bad news for coal. The rising value of carbon credits means many coal-fired power plants aren’t profitable, even though the price of the fossil fuel has edged down this year, Joe Wallace reports.

WHAT ELSE WE’RE READING

Swedish company after Swedish company has beaten expectations during the latest earnings season. “The bumper crop begs the question of how many of the positive surprises are due to Sweden’s more controversial approach to managing coronavirus. … ‘Keeping society open, schools open, doesn’t mean that we haven’t been hit. But it does mean that we haven’t suddenly not been able to leave our homes. That has undoubtedly helped companies,’ Alrik Danielson, chief executive of Swedish bearings manufacturer SKF, told the Financial Times.”

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