doc518690234_557957144.pdf - FRIDAY ~ VOL CCLXXV NO 149 DJIA 25745.60 \u00c0 299.66 1.2 NASDAQ 10017.00 \u00c0 1.1 STOXX 600 359.74 \u00c0 0.7 10-YR TREAS \u00c0 3\/32

doc518690234_557957144.pdf - FRIDAY ~ VOL CCLXXV NO 149...

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Unformatted text preview: FRIDAY, JUNE 26, 2020 ~ VOL. CCLXXV NO. 149 * * * * * * DJIA 25745.60 À 299.66 1.2% NASDAQ 10017.00 À 1.1% STOXX 600 359.74 À 0.7% 10-YR. TREAS. À 3/32 , yield 0.674% WSJ.com OIL $38.72 À $0.71 GOLD $1,762.10 g $3.70 Somber Homecoming on 70th Anniversary of Korean War What’s News Business & Finance he Fed said a prolonged economic downturn could saddle the biggest U.S. banks with up to $700 billion in losses on soured loans and ordered them to cap dividends and suspend share buybacks to conserve funds. A1  U.S. agencies moved to roll back some financial regulations, potentially freeing up tens of billions of dollars for major lenders. B10 T  Administration officials have talked about inserting the government deep into the private sector to stiffen global competition against China’s Huawei. A1  U.S. stocks rose, with the Dow advancing 1.2%, while the S&P 500 and Nasdaq both gained 1.1%. B11  The federal Paycheck Protection Program to help small businesses faces a significant risk of fraud, the GAO said. A2  Macy’s is laying off roughly 3,900 corporate staffers, or about 3% of its total workforce, as the retailer faces a slow economic recovery. B1  Wirecard filed for insolvency proceedings days after revealing that more than $2 billion in missing cash probably didn’t exist. B1  Facebook is working to persuade top advertisers not to pause spending as it tries to keep a limited boycott from becoming a broad revolt. B1  The House approved a Democratic bill to overhaul the nation’s law-enforcement practices, but the prospects for any legislation becoming law remained dim. A4  The Senate passed a bipartisan bill that would put sanctions on Chinese officials who erode Hong Kong’s limited autonomy. A7  The Supreme Court ruled that a noncitizen apprehended shortly after crossing the border has no constitutional right to challenge immigration officials’ expedited removal orders in federal court. A5  IAFF President Harold Schaitberger, a supporter of Democratic Party causes, is mired in an internal financial dispute with the firefighters union. A5  South Korea’s president warned North Korea against conducting armed attacks on his country. A10  A White House-hosted Serbia-Kosovo peace summit was postponed after an international tribunal said Kosovo’s leader could be charged for war crimes. A9 CONTENTS Business News.. B3,5 Crossword.............. A13 Heard on Street. B12 Life & Arts...... A12-13 Mansion.............. M1-12 Markets..................... B11 Opinion.............. A15-17 Sports....................... A14 Streetwise............. B10 Technology............... B4 U.S. News............. A2-7 Weather................... A13 World News..... A8-10 > s 2020 Dow Jones & Company, Inc. All Rights Reserved Millions More Got Virus in U.S. Than Thought By Jennifer Calfas, Brianna Abbott and Andrew Restuccia third quarter. Most of the largest banks had previously agreed to halt buybacks during the second quarter. Buybacks are the main way U.S. banks return capital to shareholders. In a sign of the uncertainty facing the industry, the Fed rePlease turn to page A7 more than 20 million people in the U.S. might have contracted the virus, far exceeding diagnosed infections. Based on data from antibody testing, the federal Centers for Disease Control and Prevention estimates that only about one in every 10 Covid-19 cases in the U.S. has been identified, its director, Robert Redfield, said on Thursday. He added that most people are still susceptible to the virus. “This outbreak is not over. This pandemic is not over,” Dr. Redfield said. “Greater than 90% of the American public hasn’t experienced this virus yet.” A number of states, including Arizona, Texas, South Carolina and Florida, saw confirmed cases rise by more than Please turn to page A6  FDIC lifts curbs on swaps and investing..................................... B10  Banks ignite late turnaround for stocks.................................... B11  Texas halts some nonessential surgeries......... A6  Orders jump for drug used against virus.............................. A6 PAYING RESPECT: South Korean honor guards carry the remains of soldiers killed inside North Korea during the Korean War, at an event Thursday commemorating the 70th anniversary of the start of the war in 1950. A10 Fed Sets Caps on Bank Payouts Amid $700 Billion Loss Threat BY BEN EISEN AND ANDREW ACKERMAN bounce back for a few quarters, the 33 largest U.S. banks would suffer heavy loan losses that would erode the capital buffers meant to keep them on stable financial footing, the Fed said Thursday when it made public the results of its annual stress tests. Designed to gauge the health of the nation’s banking system, the stress tests were expanded this year to study the effect of the coronavirus downturn. The The Federal Reserve said a prolonged economic downturn could saddle the nation’s biggest banks with as much as $700 billion in losses on soured loans and ordered them to cap dividends and suspend share buybacks to conserve funds. In a worst-case scenario, where unemployment remains high and the economy doesn’t Fed said U.S. banks are strong enough to withstand the crisis and restricted dividend payouts and buybacks to make sure they stay that way. Banks, which will make public their dividend plans for next quarter as soon as Monday, won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters. The Fed also barred them from buying back shares in the New Jobless Claims Hold at High Level, Signaling Long Slog World-Wide BY SARAH CHANEY NICHOLAS PFOSI/REUTERS  The Trump administration filed a legal brief urging the Supreme Court to invalidate the Affordable Care Act, backing GOP governors’ efforts to strike down the law. A3 YEN 107.19 Texas paused reopening plans as new coronavirus cases and hospitalizations increased in a number of states, and a government estimate showed  Nike sales fell 38% in the quarter as stores closed because of the pandemic. B1  Texas paused reopening plans as new coronavirus cases and hospitalizations rose in a number of states, and a CDC estimate showed more than 20 million Americans may have contracted the virus, many more than initially thought. A1, A6 EURO $1.1219 Government estimate comes as Texas halts reopening, California declares emergency YONHAP/AGENCE FRANCE-PRESSE/GETTY IMAGES  New jobless-benefits claims have held steady at about 1.5 million each week so far in June, signaling a slow U.S. economic recovery. A1 HHHH $4.00 A memorial to George Floyd in Minneapolis, whose death sparked national protests against police abuse. Many Minnesota Police Officers Stay on Job Despite Misconduct Arbitration practices have come under scrutiny since the Floyd killing BY COULTER JONES AND LOUISE RADNOFSKY Minnesota police officers who are fired for misconduct or charged with criminal behavior often end up back on the force. Law-enforcement officers in the state who appealed terminations since 2014 were reinstated half the time, according to a Wall Street Journal review of records from the Minnesota Bureau of Mediation Services, which maintains a database of arbitration awards. A Journal review of a different data set found that officers in the Minneapolis police department who faced criminal charges during the past 15 years have been routinely allowed to return to the force, and half of them are working there today. Those who still have their jobs, according to the data sets, include an officer who punched a handcuffed suspect and a sheriff’s deputy who was drunk and beat his canine partner. Please turn to page A4  Pressure grows for charges in Taylor killing...... A3 The Covid 15 Have Made Our Clothes Too Tight i i INSIDE i Apparel shoppers upsize after quarantine; ‘Holy moly, I gained 11 pounds’ BY SUZANNE KAPNER Amanda Ponzar knew she had gained weight from all her baking while sheltering at home in Alexandria, Va., but she hadn’t realized how much until she ordered shorts online from Walmart Inc. They had an elastic waist but were still too tight. “You need smaller thighs to wear those,” her 12-year-old son told her. She is now buying bigger sizes as a stopgap until her old clothes fit. “I will have to buy more clothes,” said Ms. Ponzar, 43, who works for a health-care nonprofit, “but I’m determined to lose weight before I go back to the office this fall.” People spent the spring sheltering at home in sweatpants, perfecting banana-bread recipes and indulging in pandemic-induced stress-eating. Please turn to page A11 MANSION Designer’s search for a home with high ceilings nabs former London church hall. M1 The number of workers seeking jobless benefits has held steady at about 1.5 million each week so far in June, signaling a slow recovery for the U.S. economy as states face new infections that could impede hiring and consumer spending. Applications for unemployment benefits were slightly below 1.5 million last week, at 1.48 million, the Labor Department reported Thursday. While weekly totals have gradually eased from a late March peak of nearly 7 million, they also remain well above the prepandemic record of 695,000 in 1982. Meanwhile, the number of people receiving benefits, an indicator for overall layoffs, totaled 19.5 million in the week ended June 13, down slightly from previous weeks. Economists said the sluggish improvements dim prospects for a quick recovery. Further, a recent increase in coronavirus cases could affect efforts to reopen the economy—and get people back to work and spending money. “We’re seeing a slowdown in layoffs, but hiring hasn’t picked up a tremendous amount,” said Nick Bunker, economist at the job site Indeed. “The recovery from this is going to potentially be a very long slog if we can’t get Please turn to page A2  Macy’s to cut 3% of total positions........................................ B1  Heard on the Street: Jobs recovery risks stalling out... B12 White House Seeks to Bolster Huawei Rivals BY DREW FITZGERALD AND SARAH KROUSE Trump administration officials have talked about inserting the federal government deep into the private sector to stiffen global competition against Chinese telecom giant Huawei Technologies Co. The ideas, discussed intermittently with U.S. tech giants, private-equity firms and veteran telecom executives, include prodding large U.S. technology companies like Cisco Systems Inc. to acquire European companies Ericsson AB or Nokia Corp., according to people familiar with the matter. In more than one case, they said, the company wasn’t interested in buying into lowmargin businesses. Policy makers have also discussed shoring up Ericsson and Nokia with tax breaks and export-bank financing, or sup- porting a private-equity group that would take one of the European equipment makers private. Other proposals would support “open” network technology that would make it easier for U.S. startups to develop new technology for 5G equipment. The ideas show how far the U.S. is willing to go in its fight with China over who will supply the world with advanced technologies. The pandemic has complicated an already knotty planning process. The White House postponed a planned April 1 meeting on 5G technology with Mr. Trump and executives from U.S. wireless carriers, equipment makers and major tech companies including Dell Technologies Inc., Intel Corp., and Microsoft Corp. after the virus shut down most travel. Please turn to page A11 A2 | Friday, June 26, 2020 U.S. NEWS * * THE WALL STREET JOURNAL. The U.S. is considering raising levies on European wines to 100% from 25% BY JOSH ZUMBRUN Harry Root’s business distributing imported wine from Europe was already reeling from a sales slump brought on by coronavirus lockdowns when he was hit with another gut-punch: a $25,000 tariff on a shipment of rose, “fun whites” and beaujolais wines at the Port of Charleston. “We had gone two weeks with effectively zero revenue, yet still had to figure out how to make payroll and make that container payment as well,” said Mr. Root, whose business is also based in Charleston, S.C. “It really brought back into focus to us, just how honestly cruel and inefficient these tariffs are.” More pain may be in store for European wine importers. The U.S. Trade Representative’s office, which imposed 25% tariffs on wine, cheeses, olives and other products from the European Union in October, is now considering raising levies to 100%, citing a lack of progress in negotiating a set- tlement and eliminating subsidies for Airbus SE. In a public filing, the USTR said that it could raise the tariffs on or about Aug. 12, and that it anticipated opening a comment process in late June. Importers, restaurateurs and others who buy European wines say higher tariffs would devastate an industry floored by months of lockdowns. The tariffs were imposed in response for trade practices in an entirely different industry—aviation. After a long-running dispute, the World Trade Organization ruled last year that the EU had given improper subsidies to the aircraft manufacturer Airbus, a rival to Boeing Co. The WTO ruling allowed the U.S. to impose as much as $7.5 billion in tariffs, but didn’t restrict the products on which the U.S. can impose the tariffs. The USTR hit Europeans on culturally significant exports— putting the 25% tariffs on the food products and just 10% on aircraft. The U.S. later raised the airplane tariff to 15%, despite opposition by U.S. airlines. For U.S. wine importers and retailers, mitigating the tariffs is a challenge because of a thicket of rules and regula- AUSTIN BEEMAN/CUTTING EDGE SELECTIONS Wine Sellers Brace for Higher Tariffs Cutting Edge Selections of Cincinnati hasn’t been able to absorb the increased cost from the tariff due to Ohio laws. tions that can leave few options on how to respond. Take Eric Faber, the chief executive of Cutting Edge Selections, a Cincinnati-based wine distributor. Ohio laws require a markup of at least 25% between wholesaler and retailer and an additional 33% between retailer and customer. That means he can’t absorb the increased cost from the tariff. “We saw a slowdown in sales for virtually every item that took a price increase,” said Mr. Faber. Even before the pandemic hit, Mr. Faber estimates he lost between 8% and 13% of his sales. During the pandemic, Mr. Faber took a loan from the Paycheck Protection Program so that he wouldn’t have to lay off workers. But the salesmen in his business work on commission and the sales environment is difficult. “There’s absolutely no reason to drag in small businesses, particularly in the United States, because of a dispute between two of the largest aircraft companies in the world,” Mr. Faber said. The wine industry has mounted a vigorous opposition. In January, the last time the USTR considered raising the wine tariffs as high as 100%, and expanding it to other countries, about 26,000 individuals and companies wrote in, overwhelmingly opposed to the tariffs. The USTR kept the tariffs at 25%, rather than raising them to 100%. But on Wednesday, the USTR again filed paperwork that would allow tariffs to be raised to 100%, sparking a new round of anxiety in the industry. U.S. Trade Representative Robert Lighthizer defended the tariffs at a congressional hearing June 17. “We lost a lot of jobs because Europe was subsidizing Airbus,” Mr. Lighthizer said. “We will continue those tariffs in place until we resolve that issue.” Officials with the EU trade mission in Washington didn’t return a call seeking comment. The EU trade commissioner has said that the U.S. has stepped back from settlement talks. Monthly U.S. wine imports from countries hit with tariffs $200million October 2019 Tariffs imposed 150 100 50 France Spain Germany U.K. 0 2019 '20 Note: Wine of fresh grapes other than sparkling wine Source: Trade Data Monitor Small-Business Aid Program Has Fraud Risk, GAO Says BY YUKA HAYASHI WASHINGTON—The $670 billion Paycheck Protection Program to help struggling small businesses survive fallout from the coronavirus pandemic faces a “significant risk” of fraud because of confusing rules and lack of safeguards, a Government Accountability Office report has found. In its haste to get money to businesses quickly, the Small Business Administration allowed banks to rely on borrowers’ own certifications to determine their eligibility for loans, which can be forgiven if borrowers meet certain conditions, the report noted. Shortcomings in the program were compounded by rules issued by the Treasury Department and the SBA after the program had been launched, leaving borrowers and lenders further confused and increasing the likelihood Jobless Claims Stay High IRS Paid $1.4 Billion To Dead Taxpayers WASHINGTON—The Internal Revenue Service paid nearly $1.4 billion in stimulus checks to dead people, according to a Government Accountability Office report that provides the first tally of such payments. Citing data from the tax agency’s inspector general through April 30, GAO said Thursday that the IRS made almost 1.1 million such payments before Treasury Department officials determined that de- ceased people were ineligible and began asking recipients to return the money. The GAO report says IRS lawyers initially determined that the agency couldn’t deny payments to people who filed a 2019 return but have since died. The report says IRS officials raised the issue to Treasury officials while Congress was drafting the legislation. The law authorizing the stimulus payments based the amounts—up to $1,200 per adult—on past tax returns. People who died in 2018 or 2019 may have filed returns before they died or had heirs file final income tax returns for them afterward. The IRS didn’t use death records from the Social Security Administration as a computerized filter in the first three rounds of payments, according to GAO. The tax agency then reversed that decision after Treasury Department officials read media reports about payments to dead people. The report also includes new data showing that many low-income families were shortchanged on payments. According to GAO, IRS is working to get the money to those households by the end of July. —Richard Rubin that funds are misused, the GAO said. “Because of the number of loans approved, the speed with which they were processed and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved,” the GAO said in the report released Thursday. “In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness.” The GAO, which was mandated to monitor spending of public funds under the Cares Act legislation to counter eco- Leveling Off New applications for jobless benefits and the count of workers receiving them have eased from record peaks, but remain at historically high levels. Initial jobless claims Recipients of jobless benefits 7 million 28 million 6 Continued from Page One the virus under control quickly.” U.S. stocks were volatile on Thursday as investors faced a cloudy economic outlook and slowed-down reopenings in several states, including Texas. An afternoon rally erased the morning’s declines, and the Dow Jones Industrial Average ended the day up 299.66 points, or 1.2%. States where the coronavirus is spreading the most are experiencing a slowdown in economic activity, according to Jefferies. The number of hours worked at small businesses hit its most recent peak in mid-June and has since dropped off in places including Texas and Arizona, according to scheduling and hiring software provider Homebase. Visits to restaurants, shopping centers and other recreational locations have been rising nationwide but seem to have peaked or plateaued in states with rising infection rates, according to Google Mobility data. “It is clear that the public is not psychologically ...
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