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Downtown Nashville last week. Changes to the Paycheck Protection Program would attempt to steer more pandemic loans to the smallest businesses.Credit…Brett Carlsen/Getty Images
Aiming to steer more federal aid to the smallest and most vulnerable businesses, the Biden administration is altering the Paycheck Protection Program’s rules, increasing the amount sole proprietors are eligible to receive and imposing a 14-day freeze on loans to companies with 20 or more employees.
The freeze will take effect on Wednesday, the Small Business Administration planned to announce on Monday. Also, President Biden is expected to speak shortly after noon on Monday to make an announcement about small businesses.
In December’s economic relief package, Congress allocated $284 billion to restart the aid program. Banks and other financiers, which make the government-backed loans, have disbursed $134 billion to 1.8 million businesses since lending resumed last month. The money is intended to be forgiven if recipients comply with the program’s rules.
Companies with up to 500 workers are generally eligible for the loans, although second-draw loans — available to those whose sales dropped 25 percent or more in at least one quarter since the coronavirus pandemic began — are limited to companies with 300 or fewer employees. The 14-day moratorium is intended to focus lenders’ attention on the tiniest businesses, according to administration officials, who spoke to reporters at a news briefing on Sunday on the condition that they not be named.
Most small businesses are solo ventures, employing just the owner. For such companies, including sole proprietorships and independent contractors, one major impediment to getting relief money was a program rule that based their loan size on the annual profit they reported on their taxes. That made unprofitable businesses ineligible for aid, and left thousands of applicants with tiny loans — some as small as $1.
The new formula, which Small Business Administration officials said would be released soon, will focus instead on gross income. That calculation, which is done before many expenses are deducted, will let unprofitable businesses qualify for loans.
The agency is also changing several other program rules to expand eligibility. Those with recent felony convictions not tied to fraud will now be able to apply, as will those who are delinquent or in default on federal student loan debt. The agency also updated its guidance to clarify that business owners who are not United States citizens but lawful residents are eligible for loans.
Stocks on Wall Street dropped on Monday, following European and Asian indexes lower. U.S. government bond yields continued to climb as investors anticipated faster economic growth and inflation.
Yields on 10-year Treasury notes rose as high as 1.36 percent, the highest in a year, before pulling back. The yield has risen each of the past three weeks, about 30 basis points so far this month.
The sharp rise in yields and inflation expectations in markets has led to a debate about whether the Federal Reserve will respond by pulling back some monetary stimulus, reducing the easy-money policies that have helped keep stock markets buoyant for much of the pandemic.
“Investors are increasingly confident of a ‘V’ shape global recovery, so much so that the emerging concern is not growth, but inflation,” analysts at ING Bank wrote. “Increasingly, parallels are being drawn to similar events in 2013,” they wrote, when traders panicked in a “taper tantrum” about the easing of asset purchases by the central bank, sending yields surging higher.
Fed policymakers have indicated they will look past a short-term rise in inflation and keep monetary policy loose. But not everyone is buying this message, especially as the Biden administration is pushing a $1.9 trillion economic relief package.
“The bond market continues to telegraph an increasingly confident message on the global economy and skepticism of Fed guidance,” analysts at JPMorgan Chase wrote in a note over the weekend.
Stocks
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The S&P 500 index fell 0.5 percent in early trading.
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Boeing’s shares recovered from early losses to climb slightly. The plane maker said 128 of its 777 jetliners should be grounded worldwide until they can be inspected following an engine failure on a United Airlines flight over Colorado. Boeing has only recently emerged from an 18-month ban of the 737 MAX.
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European stock indexes also slipped, with the Stoxx Europe 600 down 0.4 percent.
Commodities
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Oil prices rose on Monday. Futures of West Texas Intermediate, the U.S. benchmark, climbed more than 2 percent to over $60 a barrel after last week’s volatility when a winter storm disrupted oil production in Texas.
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Natural gas futures for March delivery dropped 3.8 percent. The price of natural gas jumped a week ago when the storm hit as demand for surged. Natural gas is the largest source of electricity in Texas.
The price of Bitcoin set another record over the weekend, briefly rising above $58,000. And Elon Musk tweeted about it, cementing his status as one of crypto’s most prominent backers.
Tesla is set to make more profit from buying Bitcoin than selling electric cars, according to a research note by Daniel Ives at Wedbush Securities. A few weeks ago, the company said it had bought $1.5 billion in Bitcoin to diversify its balance sheet. The rapid rise in Bitcoin since then implies a gain, on paper at least, of roughly $1 billion; that’s more than Tesla earned from selling cars last year, the first time it turned a full-year profit. (Tesla also made more from another tangential business, selling renewable energy credits to other automakers.)
Will more companies now follow Tesla’s lead? Gaudy numbers like this might make finance chiefs think twice about the cash and low-yielding bonds on their balance sheets.
“It’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Mr. Ives wrote. He expects less than 5 percent of public companies will shift corporate cash into cryptocurrency, which would still be a big jump.
Skepticism of the Bitcoin rally abounds, including from the president of the Federal Reserve Bank of Boston and Citadel’s chief executive, Kenneth C. Griffin. And even as he tweeted approvingly of cryptocurrencies, Mr. Musk noted that prices “do seem high.” Last May, he said the same of Tesla’s shares (“too high”) — they have since risen more than 400 percent.
The U.S. economy remains mired in a pandemic winter of shuttered storefronts, high unemployment and sluggish job growth. But on Wall Street and in Washington, attention is shifting to an intriguing if indistinct prospect: a post-Covid boom.
In recent weeks, economists have begun to talk of a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth, Ben Casselman reports for The Times.
There are hints that the economy has turned a corner: Retail sales jumped last month. New unemployment claims have declined from early January, though they remain high. Measures of business investment have picked up.
Economists surveyed by the Federal Reserve Bank of Philadelphia this month predicted that U.S. output will increase 4.5 percent this year, which would make it the best year since 1999. Economists at Goldman Sachs forecast that the economy will grow 6.8 percent this year and that the unemployment rate will drop to 4.1 percent by December, a level that took eight years to achieve after the last recession.
The growing optimism stems from several factors. Coronavirus cases are falling. The vaccine rollout is gaining steam. And largely because of trillions of dollars in federal help, the economy appears to have made it through last year with less structural damage — in the form of business failures, home foreclosures and personal bankruptcies — than many people feared last spring.
Lastly, consumers are sitting on a trillion-dollar mountain of cash, a result of months of lockdown-induced saving and successive rounds of stimulus payments.
“There will be this big boom as pent-up demand comes through and the economy is opening,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “There is an awful lot of buying power that we’ve transferred to households to fuel that pent-up demand.”
It’s the first day of the DealBook DC Policy Project, in which top policymakers and business leaders gather to debate the priorities for moving the country — and the world — forward. Today, speakers consider the shape of the economic recovery, how to hold power to account, the future of travel and where to focus stimulus funds. Register here to attend, free of charge from anywhere in the world.
Today’s lineup (all times Eastern):
9 a.m. – 9:25 a.m.
Treasury Secretary Janet Yellen on the road to recovery
On top of the $1.9 trillion economic aid plan that is working its way through Congress, the White House is raising the prospect of another big spending package focused on infrastructure. Although the economy is recovering faster than expected, it remains fragile and uneven. Navigating this path is Janet Yellen, the former Federal Reserve chair who took over as Treasury secretary last month.
2:30 P.m. – 3 P.m.
Attorney General Letitia James of New York on the power of accountability
Letitia James has more prominent cases and investigations on her plate today than most lawyers will manage in a lifetime. The way she uses her power — from suing Amazon over worker safety to uncovering the underreporting of nursing home deaths, investigating former President Donald J. Trump’s business dealings and many other actions — also highlights how states can shape national policy.
3:30 P.m. – 4 P.m.
Ed Bastian of Delta on the future of travel
Last year was “the toughest year in Delta’s history,” according to Ed Bastian, the airline’s chief executive. The carrier reported a loss of more than $12 billion as travel ground to a halt during the pandemic. In addition to feeling the pandemic’s economic effects, the airline industry is at the center of health policy debates, like whether to make masks mandatory and require coronavirus tests before travel.
4 P.m. – 4:30 P.m.
Steve Ballmer of USAFacts on stimulus by the numbers
Since stepping down as Microsoft’s chief executive in 2014, Steve Ballmer has kept busy as an National Basketball Association team owner and founder of USAFacts, a nonprofit group dedicated to presenting data about the United States in easy-to-read formats. The group aims, in his words, to “figure out what the government really does” with taxpayers’ money, and highlight the areas where spending may have the greatest effect.
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The Federal Reserve chair, Jay Powell, testifies before Congress on Tuesday and Wednesday, and is likely to emphasize the need for more economic stimulus.
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On Tuesday, HSBC reports earnings, and the bank may also announce steps to move top executives from London to Hong Kong, The Financial Times reports.
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Other earnings highlights include Home Depot on Tuesday, Nvidia on Wednesday, Airbnb and Salesforce on Thursday, and Berkshire Hathaway on Saturday, when Warren Buffett’s widely followed annual letter on the state of business, markets and politics is also expected.
Olivier Véran, the French health minister, second from right, in Nice on Saturday. He said the consulting giant McKinsey & Company had helped with the vaccine rollout but played no role in policy decisions.Credit…Valery Hache/Agence France-Presse — Getty Images
McKinsey & Company has become a magnet for controversy in France after the public learned of millions of euros worth of contracts to help plan vaccine distribution that has been derided for being far too slow, Liz Alderman reports for The New York Times.
The contracts — totaling 11 million euros ($13.3 million), of which €4 million went to McKinsey — were confirmed by a parliamentary committee last week. The government of President Emmanuel Macron, which has been under fire for months for stumbling in its handling of the pandemic, was forced to admit it had turned to outside consulting firms for help managing the response.
called for McKinsey to help define distribution routes for the Pfizer and Moderna vaccines, which must be kept as cold as minus 80 degrees Celsius during transport and storage. The company would benchmark France’s performance against other European countries. McKinsey experts would also help coordinate a vaccination task force comprising officials from numerous agencies, with some decision chains involving up to 50 authorities.
In early January, France had vaccinated only “several thousand people,” according to the health minister, compared with 230,000 in Germany and more than 110,000 in Italy.
Other contracts provided for Accenture, the global information technology consultancy, to roll out the campaign’s monitoring systems, and for two French consultancies, Citwell and ILL, to help with “logistical support and vaccine distribution.”
The government’s strategy focused on delivering the vaccines to 1,000 distribution points in France, from which the doses would be sent in supercooled trucks to nursing homes, clinics and local mayors’ offices. In Germany, the program was simpler: Authorities decided to administer the vaccine in 400 regional centers.
By the first week of January, France had one million vaccine doses in hand, but the delay in getting them into peoples’ arms was becoming public knowledge. The pace has recently picked up. But with 4.7 doses administered per 100 people, according to a New York Times database, France still trails neighbors like Germany and Italy.
