Lenders call on Washington for more clarity on small business rescue program a day before Friday launch


Lenders are still grappling with the U.S. government’s rollout of its $350 billion rescue lending program that aims to start shoring up small businesses battered by the coronavirus pandemic as soon as Friday.

Trump administration officials have said they want to get aid in the hands of small businesses within days of Friday’s planned rollout, as part of a broader $2 trillion stimulus package passed last week by Congress to help bolster Main Street and the larger U.S. economy.

But efforts to quickly get working capital out to small businesses, which in turn aims to staunch already skyrocketing unemployment, are being complicated by what some lenders have criticized as a chaotic process.

On Thursday, the Illinois Bankers Association added to a chorus of concerns from lenders about the outlines of the programs, saying in a statement that its members stand ready to assist clients with emergency funding, but that banks remain in a holding pattern until Washington completes rules for the Paycheck Protection Program, a cornerstone of the government’s small business rescue effort.

“Banks across the nation are waiting for instructions from the government on how to move forward, and Illinois banks stand ready to help as soon as they receive this information,” Illinois Bankers Association President and CEO Linda Koch said in the statement. “Until the rules are final, we are simply in a waiting game.”

Asked about the criticism at a White House briefing, Treasury Secretary Steven Mnuchin said he was confident the program was ready to start Friday.

“I’ve been assured the banks will be in the process starting tomorrow,” he said.

The Paycheck Protection program will offer up to $10 million to hard-hit businesses to help cover wages for employees, sick pay and eligible mortgage and other immediate debt payments. The loans are for two-year terms at a low 1% fixed rate of interest, require no collateral and come with debt forgiveness options for eligible expenses. The 1% rate was changed late Thursday from 0.50%.

JPMorgan Chase & Co.

JPM, +3.73%

 said in a statement late Thursday that it probably will not be ready to start accepting applications by Friday for the Paycheck Protection Program as hoped.

The Western Bankers Association, which covers lenders in 13 states including California, also said its members were in a holding pattern “less than 24 hours before these loans are to be made available,” in a statement.

Mnuchin said Wednesday in an interview with CNBC that he’s already prepared to ask Congress for more money beyond the initial $350 billion facility to support businesses, even before the first batch of funds are allocated.

“One of the things I’ve heard is this small business program is going to be so popular that we’re going to run out of our $350 billion,” he told the network.

Wall Street has been nervous about how the government will manage the coronavirus crisis. U.S. stocks on Thursday bounced higher along with crude oil prices, with the Dow Jones Industrial Average

DJIA, +2.24%

 gaining 2.2%, even as the global cases of the coronavirus topped 1 million.

Meanwhile, business owners struggling with coronavirus fallout can still apply online for the Paycheck Protection Program or for an advance of up to $10,000 to help cover lost revenue from the pandemic through the Small Business Administration’s website. The SBA also is offering low-interest disaster loans of up to $2 million for businesses to help cover payroll, fixed debts or other bills at an interest rate of 3.75%, and other debt relief measures.

But while the government has touted aid to approved business owners in as quickly as three days, the hitch is that the SBA still needs a roster of banks and credit unions willing to start disbursing funds to their clients.

Calls and emails to the Treasury Department and the SBA seeking comment on the rollout of the rescue programs weren’t immediately returned.

One assistant branch manager at a regional bank on Thursday told MarketWatch she expected to hear more on Friday about if her bank gets approval to participate in the SBA programs. If signed off, the bank then plans to go through its client list to see which businesses might be eligible for emergency funding, she said.

“We’re waiting for the green light.”



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Fitch sees ‘deep global recession’ just 10 days after predicting slow economic growth


In a chilling reminder of how fast the coronavirus epidemic has spread around the world, Fitch Ratings changed its 2020 view on the global economy to “deep global recession” from slow growth in just 10 days.

“The speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to our [gross domestic product] forecasts,” Fitch said in a research report.

The credit rating agency said it now expects world economic activity to decline by 1.9% this year. On March 22, Fitch had projected global GDP growth of 1.3%.

“A deep global recession in 2020 is now Fitch Ratings’ baseline forecast according to its latest update of its Global Economic Outlook (GEO) forecasts,” Fitch said. The new baseline forecast incorporates full-scale lockdowns across Europe, the U.S. and many other countries, something the forecast in March didn’t assume. Read MarketWatch’s coronavirus update.

“The forecast fall in global GDP for the year as a whole is on par with the global financial crisis, but the immediate hit to activity and jobs in the first half of this year will be worse,” said Brian Coulter, Fitch’s chief economist.

In the U.S., Fitch said it expects the lockdowns to result in an “unprecedented peacetime” one-quarter GDP decline of 7% to 8% in the second quarter, or 28% to 30% on an annualized basis.

Also read: Jobless claims leap record 6.6 million at end of March as coronavirus triggers mass layoffs.

See related: U.S. manufacturers see biggest plunge in new orders and employment in 11 years — ISM finds.

For the year, Fitch is projecting U.S. GDP to decline 3.3%. Last week, Fitch said if its baseline GDP forecast deteriorated further, U.S. GDP could fall by “almost” 1%, which means the effects of the coronavirus outbreak is much worse than Fitch had imagined it could be at the time. See Economic Report.

Fitch isn’t alone in predicting a deep recession, as Bank of America Global Research said it expects the COVID-19-related recession in the U.S. to be the “deepest recession on record,” nearly five times worst than the postwar average.

Fitch also now expects eurozone GDP to fall by 4.2% this year and the U.K.’s GDP to decline 3.9%, while China’s GDP is expected to grow by less than 2%. Last week, the expectation was for Europe’s GDP to fall “by more than 1.5%” and China’s GDP to slow to growth of “slightly higher” than 2%, if its baseline forecast deteriorated.

While there is some optimism that in the second half of the year, government stimulus could help contribute to a recovery, and that the health crisis will likely be broadly contained, Fitch warned not to expect a V-shaped economic bounce, as the negative impacts on consumer behavior are likely to linger into next year.

“Our [new] baseline forecast does not see GDP reverting to its pre-virus levels until late 2021 in the U.S. and Europe,” Coulton said.

The Dow Jones Industrial Average

DJIA, +1.80%

 has lost 26% year to date. That includes a first-quarter decline of 23.2%, which was the worst one-quarter performance for the index since the fourth quarter of 1987.



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Here are the best bets for investors seeking income, according to Goldman Sachs


Getty Images

Home Depot is one of Goldman Sachs’ best bets for dividends.

It’s hard times for anyone relying on income investments. The stimulus bill signed into law Friday keeps any companies that borrow from the government from paying dividends to shareholders for at least a year after the loan is repaid — even as bond yields have collapsed to to near all-time lows.

That makes it critical for investors focused on income to “consider stocks with both high dividend yields and the capacity to maintain the distributions,” Goldman Sachs strategists wrote in an analysis out Monday.

Earlier coverage: Dividend ETFs may lose out under the $2 trillion coronavirus relief bill

The provisions of the CARE Act likely exacerbate a trend of companies trying to keep as much cash on hand as possible as the economic downturn worsens. The Goldman strategists estimate dividends for S&P 500 stocks will decline 25% to $44 per share in 2020, and note 12 companies, ranging from Apache Corp.

APA, +9.70%

  to Old Dominion Freight Line

ODFL, -1.43%

, have already reduced or suspended their shareholder payouts.

“We expect significantly more dividend cuts are likely to be announced during April in conjunction with the release of quarterly financial results,” the analysts wrote.

The Goldman team screened the Russell 1000 for companies with an annualized dividend yield greater than 3%, ample cash on hand, healthy balance sheets, and what they call “reasonable payout ratios.” Each of the stocks they identified have not under-performed the rest of the market since the peak, are rated by S&P as at least BBB+.

“The typical stock on our list has paid its dividend for 90 quarters (23 years) without reducing its distribution,” the Goldman strategists wrote. Their full list contains companies from 10 of the 11 S&P 500 sectors; energy is the only one missing. We’ve listed the top — highest-yielding — stock from each of the 10 sectors below.

Company Annual dividend yield Consecutive quarters with no dividend cut Sector
Omnicom Group Inc.

OMC, +0.93%

 

5% 50 Communication services
Home Depot Inc.

HD, -1.79%

  

3.1% 128 Consumer discretionary
Archer-Daniels-Midland

ADM, +0.29%

 

4.3% 23 Consumer staples
Wells Fargo & Co.

WFC, -0.04%

  

6.7% 39 Financials
Bristol-Myers Squibb

BMY, -1.07%

  (tied with Merck & Co. Inc.

MRK, +0.58%

 )

3.4% 114 Health care, pharmaceuticals
3M Co.

MMM, -0.56%

  (tied with Emerson Electric Co.

EMR, +1.17%

 )

4.4% 156 Industrials
IBM

IBM, +1.30%

 

6.0% 102 Tech
Nucor Corp.

NUE, +0.03%

 

4.8% 41 Materials
Regency Centers

REG, +0.38%

 

5.9% 39 Real estate
CenterPoint Energy

CNP, +1.03%

 

7.1% 55 Utilties
Source: Goldman Sachs

About one-third of the stocks that wound up on Goldman’s list of 40 are financials. The strategists wrote that their bank equity research analyst colleagues had modelled stress scenarios and found that “banks are in a position to maintain dividends at or close to the current run rate.”

That’s an important caveat given the particularly precarious position for financials now. It’s not just the economic fall-out from the coronavirus pandemic that’s troubling them, but an expected wave of defaults and bankruptcies from the collapse in oil prices.

Related: American businesses are tapping their credit lines at the fastest pace ever



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An April Fools climate hoax in the middle of a pandemic


A previous version of this report incorrectly attributed to Google a new approach to climate-change policy that the company had not undertaken. A third party, posing as Google, made the announcement.

Bloomberg News

MarketWatch and other technology and investing sites misreported earlier Wednesday that Google parent Alphabet will cut ties with lobbyists and think tanks that deny accelerating man-made climate change.

The search giant

GOOGL, -5.15%

GOOG, -4.92%

  also reportedly announced plans to cut ties with fossil fuel sources. Except, it did not make that announcement.

The posting was a prank put out by the New York City arm of a climate protest group, which has called out Google’s practices before.

News sites generally believed that amid the coronavirus pandemic, April Fools’ Day parody releases would be rare or nonexistent this year given everyone’s attention on the rising U.S. death toll. At the same time, attention remains fixed on technology firms and their sustainability efforts after Microsoft

MSFT, -3.55%

 and others have announced zero- or net-positive carbon emissions and other initiatives.

And: Microsoft aims to be ‘carbon negative’ by 2030

Still, MarketWatch should have given more scrutiny than usual to any release of this nature, no matter its apparent seriousness. Such coverage is not fair to readers who are trying to discern the science-based facts on both coronavirus and the long-run effects of climate change. We can all be more responsible.

Read: Amazon has ‘ambitious but achievable’ plan to hit Paris climate goals 10 years early and go carbon neutral by 2040

Late last year, more than 1,000 Google workers signed a public letter calling on their employer to commit to an aggressive “company-wide climate plan” that includes canceling contracts with the fossil fuel industry and halting its donations to climate-change deniers, including those in Wednesday’s protest release. That letter had urged neutral emissions by 2030.

Google does also use some renewable energy, announcing in 2018 that it purchases more renewable energy than it consumes as a company.

Read: Trump to meet with CEOs of oil companies over helping the industry

Alphabet shares are down 17% in the year to date and down nearly 9% over the past year. The S&P 500

SPX, -4.41%

 is down 23% in the year to date and down 14% over the past year.



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Zoom Video lurches from boom to backlash amid privacy issues


For weeks, Zoom Video Communications Inc. basked in the glow of surging shares, enthusiastic research reports and insatiable demand among consumers and enterprises.

But in recent days, the one-time darling of Wall Street and Main Street has faced a backlash from regulators and politicians. Hackers have targeted the video-conferencing service because of its popularity, leading to a warning to consumers from the FBI about so-called “Zoom-Bombing” incidents. And a lawsuit filed Monday in California claims Zoom

ZM, -6.24%

 allegedly gave users’ personal data to Facebook Inc.

FB, -4.32%

 and other outside companies without fully informing customers.

What a difference a week makes.

Shares of Zoom toppled 6% on Wednesday, its third straight day of declines — and the longest such streak since late January. Since March 27, Zoom’s stock has tumbled 10%.

See also: Zoom, Microsoft cloud usage are rocketing during coronavirus pandemic, new data show

Zoom’s rash of problems in some ways parallels those of Facebook: High-flying companies whose popular services have access to mountains of personal information that have made them both high-valued stocks as well as targets of lawmakers and scammers.

Ironically, the COVID-19 pandemic has both helped and now hurt Zoom, brand experts say.

“People who found the ease of Zoom as a new toy may change their opinion in 10 days when all this bad news sinks in,” John Durham, chief executive of Catalyst, a brand-strategy firm that works with tech companies, told MarketWatch in a phone interview. “And today, in this social-media climate, it’s harder to regain trust. Some Zoom customers might shift to known and trusted brands like Microsoft

MSFT, -3.55%

 or Cisco Systems”

CSCO, -2.49%

 for video-conferencing tools, he said.

Indeed, Zoom may find itself in the same position as Facebook, following the 2016 presidential election in particular. A slew of privacy- and data-related problems prompted the company to spend billions of dollars shoring up its security and regaining the trust of customers.

“Two thoughts on the developments we have seen with #Zoom over the past couple of days,” Carolina Milanesi, an analyst at Creative Strategies, tweeted. “It’s clear that changing perception takes much longer is much harder than making your tools Enterprise class. Just look at Google. Security & Privacy are not the same — Zoom must address both.”

“Zoom was caught out in not thinking about some of the exploits people might be using,” Milanesi told MarketWatch in a message.

Case in point: “Zoom Bombing,” in which a hacker essentially hijacks a video conference to post pornographic or hate images. There have been reports of trolls breaking into AA meetings and taunting recovering alcoholics, and of a virtual meeting of black students at the University of Texas being interrupted with racist slurs. The FBI’s Boston office on Monday advised users not to make Zoom meetings public or share links to the video conference on social media.

“The millions of Americans now unexpectedly attending school, celebrating birthdays, seeking medical help, and sharing evening drinks with friends over Zoom during the coronavirus pandemic should not have to add privacy and cybersecurity fears to their ever-growing list of worries,” Sen. Richard Blumenthal, D-Conn., wrote in a letter to Zoom CEO Eric Yuan on Tuesday. “Zoom has a troubling history of software design practices and security lapses that have posed significant risks to the privacy and safety of its users.”

The data-sharing lawsuit, on the heels of New York Attorney General Letitia James’ look into Zoom’s security practices, underscores the myriad issues facing Zoom. And, like Facebook, it is attempting to respond quickly and minimize the damage to its brand. (Zoom did not respond to an email seeking comment on Wednesday.)

Shortly after details over its data-sharing practices surfaced in a Vice Media report, Zoom officials acknowledged its data sharing in blog posts and said they had changed those practices. “Our customers’ privacy is incredibly important to us, and therefore we decided to remove the Facebook SDK [Software Development Kit] in our [Apple-based] client and have reconfigured the feature so that users will still be able to log in with Facebook via their browser,” Yuan said in a March 27 blog post.

Separately, a Zoom spokesperson said company officials would fully comply with James’ request for specifics on how the company will safeguard users’ data. The AG’s inquiry came after a Consumer Reports investigation that found Zoom — while outlining in its privacy policy that it collects personal information about its users — failed to disclose details about how that information is used for advertising, marketing or other business purposes.

“There is a huge shift in how we are using these tools,” Bill Fitzgerald, a Consumer Reports privacy researcher, told MarketWatch in a phone interview. “A month ago, most people had never heard of Zoom. They may have heard of Skype or Google Hangouts. But shelter-in-place policies changed that.”

Zoom has been among the biggest beneficiaries of the novel coronavirus outbreak, which has forced millions of Americans to work remotely. The company’s daily active users have catapulted 378% year-over-year, as of March 22, according to market researcher Apptopia.

Gains had been most pronounced on Wall Street. While the S&P 500 index

SPX, -4.41%

 has plunged 27% since its record high Feb. 19, Zoom stock has improved 32% since then because investors are betting Zoom will become a corporate and consumer staple after COVID-19 dissipates.





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