News : America back-sliding — Fed in a bind — WH under pressure on evictions

Wednesday, July 28, 2021

America back-sliding — Fed in a bind — WH under pressure on evictions

Jul 28, 2021

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Quick Fix

America back-sliding — Thursday will almost certainly bring a blockbuster GDP growth number around 8 or 9 percent. But the durability of the economic recovery is now seriously in question as relatively low vaccination rates and the rise of the delta variant bring back mask requirements around the country and remind everyone that we are not done with this virus.

Masks are back in the White House and House office buildings and places like Kansas City, Mo. President Joe Biden is considering a vaccine mandate for all federal employees. And the CDC is once again recommending Americans wear masks indoors in delta hot-spots.

The bullish case on the economy holds that the delta surge will be far less lethal than the initial Covid waves. But the U.S. (and the world) remain vulnerable to further variants that can evade vaccinations.

This vulnerability that will persist as long as so many resist vaccination. The bull case for the economy may well be correct. But assets and economic projections are so priced for upside perfection that the risk of sharp and politically significant correction is significant.

And into this mess comes the Fed — The latest Covid developments will make it easier for Chair Jerome Powell and the rest of the FOMC to fully stand pat this afternoon, making no changes to rates or the pace of asset purchases. Powell in his press conference may suggest the central bank is considering tapering asset buys given inflation rates.

But he will almost certainly stick closely to the script that price hikes will be "transitory." Like everyone else, the Fed is now stuck in an excruciating unknown zone where economic overheating looks like a threat as does economic decline.

GOOD WEDNESDAY MORNING — If you went to bed early, Simon Biles is now OUT for the all-around competition on Thursday. No decision yet on the individual events next week.

Whatever the case, a truly great champion who made what must have been an excruciating decision. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

A message from Altria:

Helping prevent youth access. Kids shouldn't use any tobacco products. While underage use of traditional tobacco products is at historic lows, more must be done to address underage vaping. That's why Altria strongly supported legislation to raise the minimum age for all tobacco products to 21. See how we're moving.

Driving the Day

FOMC at 2:00 p.m. is expected to leave policy unchanged. Powell at his 2:30 p.m. press conference is likely to suggest that asset purchase reduction discussions are underway but otherwise stick close to the "transitory" inflation script …

President Biden heads to Allentown, Pa. where he will visit the Mack - Lehigh Valley Operations Manufacturing Facility and deliver remarks around 2:00 p.m. on "the importance of American manufacturing" … House Financial Service will vote on multiple bills at 10:00 a.am. …

MORE FED PREP — Scott Ruesterholz, Portfolio Manager at Insight Investment: "We expect the Fed to announce no change in policy and offer no formal guidance on tapering … Powell will likely seek to use his press conference to emphasize the Fed's data dependence as well as its patience while reiterating the view that elevated inflation is transitory.

"While the delta variant is unlikely to spark new lockdowns in the U.S. given the level of vaccination, it may slow growth somewhat. This development likely strengthens the hand of the doves on the FOMC who do not want to remove policy accommodation prematurely. "

Pantheon's Ian Shepherdson: "Today's FOMC meeting is unlikely to be consequential; no policy changes will be announced, and the tone of … Powell's press conference will be little changed from June 16.

"The Fed will acknowledge the ongoing increase in economic activity, but we expect the statement to note that the rapid spread of the Delta variant poses a threat, especially in states where vaccination rates remain low. The variant still has the potential to cause wider problems, because almost every state is short—and in many cases, far short—of the 85% immunity needed to drive cases down permanently."

FLASH: TRUMP CANDIDATE LOSES IN TEXAS — Worth noting, via Texas Tribune's Patrick Svitek: "State Rep. Jake Ellzey of Waxahachie beat fellow Republican Susan Wright on Tuesday to succeed her late husband, U.S. Rep. Ron Wright, R-Arlington, and pull off a major upset against a candidate backed by former President Donald Trump.

"With 93% of precincts reporting, Decision Desk HQ called the race for Ellzey late Tuesday, when he had 52.92% of votes to 47.08% for Wright, a longtime GOP activist. … Trump endorsed Susan Wright in the final days before the May 1 election. He got more involved in the runoff, issuing three statements reiterating his endorsement, starring in a robocall for her and headlining a telephone rally for her on Monday night."

WH UNDER PRESSURE ON EVICTION BAN — Our Katy O'Donnell and Kellie Mejdrich: "The White House is facing increasing pressure from Democrats in Congress to extend the federal eviction ban before it expires this weekend amid persistent bottlenecks in the distribution of rental aid.

"House Financial Services Chair Maxine Waters (D-Calif.) said she is pushing the Biden administration to renew the moratorium beyond a Saturday deadline despite concerns that an extension would rest on shaky legal footing. A majority of Supreme Court justices signaled late last month that they believed the Centers for Disease Control and Prevention exceeded its authority when it imposed the ban."

SBA LOOKS TO SPEED UP END OF PPP — Our Zachary Warmbrodt: "The Small Business Administration this week will begin a push to accelerate the end of the nearly $1 trillion Paycheck Protection Program by making it easier for millions of employers to have emergency payroll loans forgiven.

"The SBA on Wednesday plans to outline a new initiative aimed at encouraging borrowers with loans of $150,000 or less — accounting for more than 90 percent of the pandemic-era program — to apply for loan forgiveness. The ability to convert PPP loans into grants in exchange for maintaining payroll was a critical feature of the small business rescue. Nearly 7 million of those loans have not been forgiven."

Markets

END OF 'AMERICA FIRST' STOCK TRADE POSTPONED — AP's Damian J. Troise and Alex Veiga: "Stocks closed lower on Wall Street, pulling major indexes back slightly from the records they set a day earlier. Weakness in big technology companies was the biggest factor for the decline Tuesday.

"The S&P 500 fell 0.5 percent while the tech-heavy Nasdaq fell 1.2 percent. Markets have been choppy as investors try to get a clearer picture of how well the economy is recovering from the pandemic and when the Federal Reserve will eventually ease up on its support for the economy. The central bank will release its latest report on Wednesday. The yield on the 10-year Treasury note fell to 1.24 percent."

And stocks keep climbing, avoiding routine pullbacks — WSJ's Karen Langley: "The stock market has been relatively quiet lately. The benchmark S&P 500 hasn't suffered a 5 percent pullback since October and has advanced 35 percent since the end of that month."

CHINESE TECH STOCK SELLOFF DEEPENS — WSJ's Quentin Webb and Chong Koh Ping: "A massive selloff in Chinese technology stocks accelerated on Tuesday, as investors unnerved by China's widening crackdown on Internet companies and other industries sold down their holdings of many popular stocks.

"The Hang Seng Tech Index in Hong Kong, which includes stocks such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd., tumbled 8 percent, registering its third day of declines. The city's flagship Hang Seng Index dropped 4.2 percent."

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

A message from Altria:

Kids shouldn't use any tobacco products. Today, underage use of traditional tobacco products is at historic and generational lows, but more must be done to address underage vaping rates.

Raising legal age restricts access. In addition to our longstanding efforts to keep tobacco out of kids' hands, we strongly supported legislation to raise the minimum age of purchase for all tobacco products to 21, nationwide. And we are offering retailers incentives for using age verification technology that can make sure retail remains a trusted place to responsibly sell tobacco products.

Continuing our commitment to responsibility. Operating responsibly is our number one priority. We are committed to continue our work with multiple stakeholders to drive down underage use and maintain the opportunity in potential harm reduction that non-combustible tobacco products hold for adult smokers 21+.

See how we're moving.

Fly Around

CLYBURN VOWS TO INVESTIGATE EVICTION PRACTICES BY CORPORATE LANDLORDS — NYT's Matthew Goldstein: "Just days before the federal moratorium on evictions is set to expire, lawmakers scrutinized the actions of corporate landlords that have filed tens of thousands of actions seeking the removal of tenants during the pandemic.

"Representative James E. Clyburn, the chairman of the House Select Subcommittee on the Coronavirus Crisis, said the hearing was the opening salvo of an investigation into what he called 'unjustified eviction practices' by some large landlords."

IMF: GLOBAL RECOVERY GAP WIDENS ON UNEQUAL VACCINE ACCESS — Bloomberg's Augusta Victoria Saraiva: "The International Monetary Fund maintained its outlook for the biggest rebound in global economic growth in four decades while changing underlying regional forecasts, with unequal access to vaccines further widening the recovery gap between advanced and developing economies."

CONSUMER CONFIDENCE HITS 17-MONTH HIGH — Reuters' Lucia Mutikani: "U.S. consumer confidence inched up to a 17-month high in July, with households' spending plans rising even as concerns about higher inflation lingered, suggesting the economy maintained its strong growth clip early in the third quarter.

"The economy's prospects were further brightened by other data on Tuesday showing a solid increase in new orders for manufactured capital goods in June despite supply constraints hampering production at some factories, indicating that business spending on equipment could remain strong for a while."

ROBINHOOD IPO ASKS CUSTOMERS TO PLAY BIG ROLE AS INVESTORS — AP's Alex Veiga: "Robinhood is disrupting another stock market norm — and taking a big risk — by giving ordinary investors access to a huge slice of its initial public offering.

"The popular online brokerage is taking the unusual step of allowing users of its trading app to buy up to a third of its IPO shares before they begin trading on the Nasdaq Thursday under the 'HOOD'' ticker symbol. Typically, only institutional investors and company insiders can buy shares in companies before they go public."