The daily business briefing: June 15, 2021
California officially reopens with lifting of COVID-19 restrictions, S&P 500 and Nasdaq set records ahead of Fed meeting, and more
California officially reopens
California officially reopened on Tuesday, lifting business-capacity limits and most other COVID-19 restrictions. The state, one of the last to fully reopen its economy, celebrated the milestone with state-subsidized vacation giveaways and $15 million in vaccine lottery prizes. The state had already relaxed many restrictions, and will not fully phase out some until fall. But the formal reopening of the nation's most populous state marked a significant step in the recovery from the pandemic. California generates 14.5 percent of U.S. gross domestic product. "There is no American recovery without California's recovery," Gov. Gavin Newsom told The New York Times on Monday. "The good news is the state's economic recovery is well underway." The pandemic has killed more than 63,000 people in the state and infected 3.8 million. Two attempts to dial back restrictions before widespread vaccinations ended with infection surges.
S&P 500, Nasdaq climb to record highs
The S&P 500 and the tech-heavy Nasdaq rose to record highs on Monday ahead of the start of the Federal Reserve's two-day policy meeting, which starts Tuesday. The S&P 500 gained 0.2 percent, while the Nasdaq rose by 0.7 percent. The Dow Jones Industrial Average fell by nearly 0.3 percent. The Nasdaq's gains came as falling bond yields prompted investors to begin buying growth stocks again. The Fed isn't expected to make any policy changes this week, but traders are focusing on the central bank's meeting in search of clues on whether inflation is causing Fed leaders to consider easing their policies to boost the economic recovery from the coronavirus pandemic. Stock futures were flat early Tuesday ahead of the start of the meeting.
Oil prices touch highest level in 2 years
U.S. crude oil prices reached $71.78 per barrel on Monday, their highest level in more than two years, before closing at $70.88. Oil prices have doubled since October as demand rebounded after the downturn induced by the coronavirus pandemic, and some investors bet that the green-energy fever would drive down spending on oil drilling, potentially resulting in tighter supply and higher prices. Spending on oil extraction fell to $330 billion in 2020, less than half record set in 2014, according to research firm Wood Mackenzie. Leigh Goehring, managing partner at commodities-focused investment firm Goehring & Rozencwajg Associates, said consumption could outpace production in coming years, a first. "This is the basis for the next oil crisis," he said. "We're in uncharted territory."
EU, U.S. to end fight over Boeing, Airbus
European Union leaders said they expected to announce a truce in their 17-year feud with the United States over subsidies to U.S. aircraft maker Boeing and its European rival, Airbus. "I am very positive that we will find an agreement on the Airbus-Boeing issue today in conversation with our American friends," European Commission chief Ursula von der Leyen said in a Tuesday news conference. The two sides have been pursuing cases against each other at the World Trade Organization since 2004, and Trump-era tariffs added to the tensions between the allies. The two sides planned to announce an agreement to end the conflict during President Biden's summit with EU leaders as they shift focus to the threat both companies face from China's growing commercial aircraft industry.
Texas power-grid operator urges conservation in heat wave
The Texas power-grid operator blamed for deadly winter blackouts on Monday asked customers to conserve energy for the rest of the week as the state faces the potential for record-breaking electricity use due to a heat wave. The Electric Reliability Council of Texas (ERCOT) announced Monday that the company, which operates the state's electric grid, had already seen a "significant number of forced generation outages" as the summer heat pushes June power use toward a record. Much of the state faces temperature forecasts in the mid to high 90s this week. ERCOT is conducting an analysis to "determine why so many units are out of service," ERCOT Vice President of Grid Planning and Operations Woody Rickerson said in a statement Monday. "This is unusual for this early in the summer season."