Credit…Gabby Jones for The New York Times

The credit rating firm Fitch left the United States’ AAA rating untouched, but downgraded its outlook on what is effectively the national credit score, suggesting the country’s status as one of the world’s most trustworthy borrowers could be put at risk by the enormous deficits the federal government is running to combat the fallout from the pandemic.

“The outlook has been revised to negative to reflect the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” Fitch analysts wrote on Friday in a report announcing the decision.

Cratering tax revenues and surging expenditures have driven record levels of red ink for the federal government in recent months. The United States’ budget deficit hit a record $864 billion in June as the government continued pumping money into the economy to support workers and businesses slammed by the pandemic. Some analysts expect monthly deficits to soon top $1 trillion.

Ballooning deficits have led to an explosion of new borrowing. Fitch noted that the Treasury Department borrowed just under $3 trillion dollars from the end of February to the end of June.

Much of the supply of new government bonds was, essentially, purchased by the Federal Reserve, which has bought $2.6 trillion in financial assets since the middle of March, Fitch noted.

The presence of the Federal Reserve, which can essentially create whatever money it wants and use it to buy assets, such as U.S. government debt, has depressed yields on government bonds even as debts and deficits rise sharply.

On Friday, the yield on the 10-year note fell to 0.53 percent, one of the lowest levels in recorded history, suggesting there is virtually no concern among investors about the country’s ability to service its growing debts.

Stocks rallied to end Friday as investors looked past gnawing concerns about the economic toll of the pandemic and instead were cheered by a surge in profits reported by America’s largest tech companies.

The S&P 500 rose more than three-quarters of a percent, and ended July with a gain of more than 5 percent. The index has climbed for four consecutive months — rising more than 26 percent since the end of February.

A big factor behind that rally has been the success of big technology companies, which were well positioned to benefit from a shift to remote work and limits on public activity.

On Thursday, investors heard just how much they benefited. Amazon, Apple and Facebook reported surging profits. The blockbuster earnings seemed to briefly put aside the uncertainty and pessimism surrounding the economic impact of the pandemic, but also perhaps underscored the concerns of lawmakers, expressed on Wednesday, that American’s tech giants have gotten too big.

Apple gained nearly 10.5 percent on Friday, reaching a record, as the company announced a four-for-one stock split, and shares of Amazon and Facebook also rose. Alphabet, the parent company of Google, which reported its first-ever decline in quarterly revenue on Thursday, ended Friday down more than 3 percent.

Microsoft also climbed late in the day, erasing its earlier losses after reports that it is in talks to buy TikTok, the popular video sharing app. The gains helped lift the Nasdaq composite by about 1.5 percent.

But the virus continues spreading, and its damage is mounting. On Thursday, the United States reported that its economy fell 9.5 percent in the second quarter, compared with the previous quarter, the most on record. On Friday, the authorities reported that the eurozone contracted 12.1 percent in the second quarter. Both the United States and Europe are in deep recessions caused by shutdowns in economic activity to curb the spread of the disease.

Credit…Joe Burbank/Orlando Sentinel, via Associated Press

United Airlines plans to add more than 25 international routes to its September schedule, a sign of limited optimism in a battered industry at a time when coronavirus cases continue to rise across the country.

Many of the new routes include destinations in Europe and Asia, where governments restrict or limit American visitors. United said it would adjust its schedule as necessary to deal with travel and quarantine restrictions.

“We continue to be realistic in our approach to building back our international and domestic schedules by closely monitoring customer demand and flying where people want to go,” Patrick Quayle, United’s vice president of international network and alliances, said in a statement.

Many people are still flying for essential business, to visit friends and family or to return home. Some of the shorter international flights United is adding will serve limited demand for leisure travel.

The airline said it would launch a new route connecting Chicago and Tel Aviv if it could obtain government approval. The airline will also resume service between some of its American hubs and Amsterdam, Frankfurt, Munich, Sydney, Costa Rica, St. Thomas, Ecuador and several destinations in Mexico. United also plans to continue to fly to New Delhi and Mumbai and between Chicago and Hong Kong, pending government approval.

Overall, the airline plans to operate about 37 percent of the flights it flew last September, a relative increase from August. The Transportation Security Administration has only screened about 26 percent as many people at its checkpoint in recent days as it did on the same days a year ago.

The news comes a day after United dealt what appeared to be a fatal blow to ExpressJet, a regional carrier that operates under the United Express brand. United has a 49.9 percent stake in ExpressJet. In a note to staff on Thursday, ExpressJet’s chief executive, Subodh Karnik, said that the two airlines would work together to wind down ExpressJet’s operations after United decided to make another regional carrier, CommutAir, the sole operator of United Express flights aboard the small Embraer ERJ145 jet.




Percentage change from previous quarter

Percentage change from previous quarter


The European economy tumbled into its worst recession on record, as quarantines in countries across the continent brought business, trade and consumer spending to a grinding halt in the second quarter.

From April to June, economic activity fell 12.1 percent from the previous quarter among the countries that use the euro currency. It was sharpest contraction since 1995, when the data was first collected, according to Eurostat, the European Union’s statistics agency.

Compared to the same period a year ago, the decline was sharper: Economic activity shrank 15 percent from the 2nd quarter of 2019.

The collapse marks the severe economic disruption caused by the pandemic. Governments ordered lockdowns that silenced many cities, and residents were told to stay home to prevent the virus’s spread. On Thursday, the United States announced its economy contracted 9.5 percent in the 2nd quarter compared to the previous three-month period.

But there are signs the worst may have passed since then, and that a tentative recovery is gaining some traction as European governments unleashed enormous stimulus spending. The lengthy lockdowns have helped curb a widespread resurgence of the pandemic in most countries.

The data was especially grim for nations on Europe’s southern rim, which were among the worst affected by the virus and which faced longer quarantine periods than northern European countries.

In Spain, which has had one of Europe’s highest death tolls, the economy shrank by a staggering 18.5 percent from the previous quarter. France, the eurozone’s second-largest economy, shrank by 13.8 percent; and Italy, the third-largest economy in the zone, contracted by 12.4 percent. France is officially in recession, with three straight quarters of contraction.

On Thursday, the authorities reported that the German economy, Europe’s largest, shrank by 10.1 percent from the previous quarter.

European Union leaders last week agreed to a landmark stimulus of 750 billion euros, or about $884 billion, to rescue their economies and to anchor a mild turnaround that had started to take hold after lockdowns began to be lifted.

But risks abound as surges in new cases are reported, increasing the possibility of more quarantines.

“The hard part of this recovery is set to start about now,” Bert Colijn, senior economist for the eurozone at ING Bank, said in a note to clients.

Credit…Kamil Zihnioglu/Associated Press

European countries have, for the most part, contained the spread of coronavirus. But the outbreak, which was early and widespread, has left a deep scar on the region’s economy:a 12 percent contraction in the second quarter of the year compared with the first quarter. Different government interventions and infection rates means the impact has been uneven. Here are snapshots from the region’s largest economies in the three months that ended in June.

Though France’s 13.8 percent decline is stark, a mild rebound in consumer spending and business activity after quarantines were lifted has helped the country avoid a far sharper decline. In fact, the nation’s central bank recently revised its economic forecasts, expecting slightly less damage in the next few years.

The government’s largess has been key: It spent over 100 billion euros ($118 billion) to pay businesses not to lay off workers; it delayed deadlines for business taxes and loan payments; and it deployed over 300 billion euros in state-guaranteed loans to struggling companies.

The 10.1 percent drop in Germany’s G.D.P., the largest since the country began keeping quarterly records, might already be painting a darker picture of the economy than is warranted. Separate data released Thursday showed the labor market stabilized in July and surveys of business activity indicate a quick rebound.

But the continuation of this recovery is at risk. Germany was in a better position than other European Union countries because the government was effective in containing the spread of the coronavirus. However, there is now an increase in new infections as Germans return from holidays abroad, stoking fear of a second wave.

The devastating economic impact of Italy’s outbreak and lockdown, the first in Europe, was a 12.4 percent drop in G.D.P. While the central bank estimates that two government relief packages mitigated the contraction, a slow return in tourism, consumer spending, and business investment is dragging the recovery down.

“At least for Italy, the possibility of a V-shaped recovery is not what we have in front of us,” Bank of Italy’s governor, Daniele Franco, said. One slice of the economy is experiencing a stronger rebound: industrial production. During the first phase of the lockdown, which ended in early May, half of the Italian companies that were forced to shut managed to reopen, the central bank said.

Spain’s recession is the deepest of all the European countries that have reported second-quarter G.D.P. so far. The economy contracted 18.5 percent compared to the first three months of the year, and the outlook for the rest of the year is grim. Spain officially ended its Covid-19 state of emergency on June 21, but it has since been struggling with an increase in the number of new cases and over 300 local outbreaks, particularly severe in the northeast.

Tourism is a substantial component of the Spanish economy but hopes of a tourism-led economic recovery this summer have been undermined by quarantine restrictions placed on the nation and its islands by Britain and other countries.

Credit…Loren Elliott/Reuters

Exxon Mobil announced a record-breaking quarterly loss of $1.1 billion, blaming the coronavirus pandemic for lowering oil and gas prices and sales volumes.

The results from the largest American oil producer were further evidence of the deepest downturn for the industry in the modern era. Oil prices have recovered in recent weeks to around $40 a barrel, but that is still roughly a third below the oil price of the beginning of the year.

Chevron, the second largest U.S. oil company, also posted disappointing results for the quarter on Friday and said it was writing off its $2.6 billion investment in Venezuela because of the country’s political instability and American sanctions against its government.

Exxon’s oil production was down 3 percent and natural gas output was down 12 percent, compared to the quarter a year ago, a reflection of the crippling of global demand for energy due to a worldwide recession.

Darren W. Woods, Exxon’s chairman and chief executive, attempted to put the best face on the results.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results,” he said. “We responded decisively by reducing near-term spending and continuing work to improve efficiency. The progress we’ve made to date gives us confidence that we will meet or exceed our cost-reduction targets.”

The $1.1 billion loss compares to a profit of $3.1 billion a year ago. At the same time the company’s capital and exploration expenditures were down to $5.3 billion from $8.1 billion in the quarter last year.

Chevron said it lost $8.3 billion in the quarter; a year earlier it reported a $4.3 billion profit.

The company reported an adjusted quarterly loss of $3 billion, excluding one-time items, compared to adjusted earnings of $3.4 billion in the same quarter of 2019. In addition to the $2.6 billion Venezuelan write down, Chevron also took a $1.8 billion write down based on the company’s oil and gas price outlook.

Chevron reported sales and other revenue of $16 billion, compared to $36 billion in the same period a year earlier.

“We’re focused on what we can control,” Michael K. Wirth, Chevron’s chairman and chief executive, said in a statement. “We’re transforming our company to be more efficient, agile and innovative.”

Exxon and Chevron said they would maintain their dividends.

Credit…Washington Alves/Reuters

Fiat Chrysler reported a net loss of 1 billion euros ($1.2 billion) in the second quarter, but said it expects improving economic conditions to lift its fortunes in the second half of the year.

Forced to shut down operations in Europe and North American for much of the quarter because of the pandemic, Fiat Chrysler said revenue dropped 56 percent, to 11.7 billion euros. It also used some 5 billion euros in cash.

In a conference call, the automaker’s chief executive, Mike Manley, said auto sales are recovering faster than had been expected, and the company has been able to ramp production back to normal levels in North America. Its European plants should return to typical production levels in the third quarter, the company said.

“We expect significant improvement in profitability and cash flows,” he said. “We expect a much, much better second half.”

The automaker also plans to introduce five new electric vehicles in the coming months, including plug-in hybrid versions of three different Jeep models.

Fiat Chrysler is in the process of merging with French automaker PSA Group, maker of the Peugeot and Citroën brands. The combined company will be called Stellantis.

Credit…Hiroko Masuike/The New York Times

Government payments played a critical role in propping up the American economy, data released Friday shows.

Consumer spending rose 5.6 percent in June, the Commerce Department said, the second straight monthly increase after a record-setting plunge in April.

But the end of some benefits, namely the $1,200 payment made to many individuals, also meant that personal income fell 1.1 percent last month. Incomes could fall further now that the federal government’s additional unemployment benefits have ended, at least temporarily.

To understand what’s happening, it helps to go back to the beginning of the pandemic. When businesses began shutting their doors and furloughing workers in March, both incomes and spending fell. Congress then stepped in with a multi-trillion-dollar rescue package, which included sending $1,200 checks to most American families and expanding the unemployment insurance system.

As a result, personal incomes rose a record 12.1 percent in April, despite a big drop in wage and salary earnings. But spending still fell, at least in part because people had fewer opportunities to go shopping and dine out. (Other data suggests spending fell sharply among the wealthy, while rebounding more quickly for other income groups once government checks began arriving.)

In May and June, those patterns began to reverse. Spending picked back up as the economy reopened. Wage and salary incomes rose too, as companies began rehiring furloughed workers. Government payments fell with the end of the $1,200 checks, but remained high.

The net result: Overall personal income was higher in June than in February. But without government intervention — especially the expanded unemployment benefits, which are injecting money into the economy at a rate of $1.4 trillion a year — incomes would be lower now than when the crisis began.

Spending has rebounded but remains almost 7 percent below its precrisis level, even with the government help. And now, that help is in danger of running out: The $600 a week in extra unemployment benefits expires today, and senators have left for the weekend.

The Trump administration announced new sanctions Friday on two Chinese officials and one government entity, citing human rights abuses against predominantly Muslim ethnic minorities in the Xinjiang region in China’s far west.

The sanctions, administered by the Treasury Department’s Office of Foreign Assets Control, effectively cut the Xinjiang Production and Construction Corps and two of its former officials, Sun Jinlong and Peng Jiarui, off from American property and the financial system. The Xinjiang Production and Construction Corps is an economic and paramilitary organization in charge of economic development in the region.

“The United States is committed to using the full breadth of its financial powers to hold human rights abusers accountable in Xinjiang and across the world,” Steven T. Mnuchin, the Treasury Secretary, said in a statement.

Ties between the United States and China have been fraying as the Trump administration takes an increasingly critical posture on China’s handling of coronavirus, its growing influence over Hong Kong, its territorial disputes in the South China Sea and its treatment of a largely Muslim minority in Xinjiang.

The Chinese government has carried out a campaign of mass detentions in Xinjiang, placing one million or more members of Muslim and other minority groups into large internment camps intended to increase their loyalty to the Communist Party.

On July 20, the Trump administration added 11 new Chinese entities, including firms supplying major American brands like Apple, Ralph Lauren and Tommy Hilfiger, to a list that cuts them off from purchasing American products without a special license, saying the firms were complicit in human rights violations in Xinjiang. On July 1, the administration issued a warning to businesses with supply chains that run through Xinjiang to consider the reputational, economic and legal risks of doing so.

Credit…Clockwise from left: Jason Henry for The New York Times, Victor J. Blue for The New York Times, Philip Cheung for The New York Times, Jim Wilson/The New York Times

A day after lawmakers grilled the chief executives of the biggest tech companies about their size and power, Alphabet, Amazon, Apple and Facebook reported surprisingly healthy quarterly financial results, defying one of the worst economic downturns on record.

Even though the companies felt some sting from the spending slowdown, they demonstrated, as critics have argued, that they are operating on a different playing field from the rest of the economy.

Combined, the companies reported $28.6 billion in quarterly net profit, underscoring how regulatory scrutiny remains more background noise and a distraction for them rather than an imminent threat to their businesses.

“The strong continue to get stronger,” said Dan Ives, managing director of equity research at Wedbush Securities. “As many companies are falling by the wayside, the tech stalwarts continue to gain muscle and power in this environment.”

The editors and reporters for the DealBook newsletter sift through a lot of company reports and dial into many earnings conference calls. A huge number of companies reported their latest financial results on Thursday, and aside from the tech giants’ bumper profits these are some of the things that caught our notice, from lapsed cereal eaters to “coronabeards.”

🍺 “To put a finer point in the level of demand we’re seeing, we eclipsed July 4 week shipment days in the United States four times already this year. That’s unheard of.” — Gavin Hattersley, the C.E.O. of Molson Coors

🇯🇵 “We would be in Tokyo right now under normal circumstances. So it’s a total bummer for our company that we don’t have the Olympics.” — Jeff Shell, the C.E.O. of NBCUniversal

🥣 “Special K gained share in quarter two as did Mini-Wheats and Raisin Bran. We are also excited about the consumer trial and rediscovery we are seeing from new and lapsed users in cereal.” — Steven Cahillane, the C.E.O. of Kellogg’s

🧔 “As people go back to work in offices and outside the home, we’ll see a pickup in the wet shave rate.” — David Taylor, the C.E.O. of Procter & Gamble, in response to an analyst question about the rise of mullets and “coronabeards” during lockdowns

🍩 “I love when we really get on our doughnut mojo, but look, we are leaning into beverages in a big way.” — David Hoffmann, the C.E.O. of Dunkin’ Brands



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