The daily business briefing: January 28, 2021
The Fed vows to keep interest rates near zero through coronavirus recovery, Biden signs sweeping climate orders, and more
Fed vows to keep interest rates low through coronavirus recovery
Federal Reserve policy makers on Wednesday vowed to keep interest rates near zero to boost the economy even after it recovers from damage from the coronavirus pandemic. The Fed also said it planned to continue buying Treasury and mortgage bonds to pump more money into the economy. The U.S. central bank's leaders said at the end of their two-day policy meeting that the improvement in the economy and job market had slowed in recent months as COVID-19 cases surged. Fed Chair Jerome Powell said the recovery largely hinges on getting Americans vaccinated quickly so that bars, restaurants, and other businesses can get back on track. "We have not won this yet," Powell said. "We need to stay focused on it as a country and get there."
Biden signs climate orders, promising job creation
President Biden on Wednesday signed several executive orders focused on confronting "the existential threat of climate change" while promoting job creation and fighting racial inequity. "We've already waited too long to deal with this climate crisis. We can't wait any longer," Biden said. The orders called for halting new oil-drilling leases on federal land, and using the federal government's enormous purchasing power to buy zero-emission vehicles, which Biden said would "mean one million new jobs in the American automobile industry." Biden's international climate envoy, John Kerry, said the United States would host an international climate change summit on Earth Day, April 22, to ensure "that 2021 is going to be the year that really makes up for the lost time of the last four years."
GameStop, AMC continue wild fluctuations
GameStop and AMC Entertainment shares fell sharply in overnight trading before rallying in pre-market trading on Thursday, as small-time investors continued their battle against hedge funds betting that the shares would fall. GameStop, a troubled brick-and-mortar video game retailer, gained more than 130 percent in regular trading on Wednesday, then fell by 16 percent in extended trading before bouncing back early Thursday with a 30 percent gain. Movie-theater chain AMC's shares, which skyrocketed by 300 percent in regular trading Wednesday, dropped by 26.6 percent overnight and jumped by 13 percent early Thursday. Both stocks have been the focus of discussion in the "Wallstreetbets" Reddit chat room, where at-home investors target heavily shorted stocks.
2020 economic contraction expected to be worse since 1946
Economists are forecasting that the U.S. economy shrank by as much as 3.6 percent in 2020 as the coronavirus pandemic ravaged businesses, Reuters reported Thursday. The contraction would amount to the country's worst economic performance since 1946. The Commerce Department releases figures on fourth-quarter gross domestic product Thursday that are expected to confirm that the recovery from the pandemic's damage lost momentum late in the year as COVID-19 cases surged and the federal government's nearly $3 trillion in relief spending ran out. President Biden has proposed a $1.9 trillion recovery plan, but lawmakers are balking at the size of the plan after approving nearly $900 billion in new stimulus spending at the end of December.
Stock futures under further pressure after Wednesday's plunge
U.S. stock index futures were mixed early Thursday, with the tech-heavy Nasdaq on track to extend Wednesday's sharp losses. Futures for the Dow Jones Industrial Average were up by 0.1 percent several hours before the opening bell, while those of the S&P 500 and the tech-heavy Nasdaq were down by 0.1 percent and 0.6 percent, respectively, after climbing back from steeper earlier losses. All three of the main U.S. indexes plunged by more than 2 percent on Wednesday. The drop followed a strong start to 2021 that analysts said left some shares overpriced. Some stocks, including GameStop and AMC Entertainment, have seen wild swings. Apple fell by 3.3 percent in extended trading after the tech giant released its quarterly earnings report. Tesla dropped by 5.1 percent after posting worse-than-expected earnings.