Daily Business Briefing
Aug. 1, 2021, 1:11 p.m. ET
Aug. 1, 2021, 1:11 p.m. ET
Alphabet, Google’s parent company, just made in three months what it took until recently an entire year to earn. That is a level of growth that companies of its size rarely if ever achieve, but the pandemic has erased all the limits for tech firms.
The search and advertising company on Tuesday reported record profits and revenue for the second quarter, vindicating the enthusiasm of investors who doubled its value on the stock market since early last year. The stellar results pushed shares up modestly in aftermarket trading.
Alphabet said it made a profit of $18.5 billion, or $27.26 a share, for the quarter. As recently as 2015, it made less than that all year. Analysts did not see it coming, estimating on average that the company would earn only $19.14 a share in profit. Even the most optimistic analyst only forecast $24.43.
Sundar Pichai, Google’s chief executive, credited “a rising tide of online activity” for the results. Revenue rose 62 percent to $61.88 billion from a year ago, a level of increase unseen since the company’s rapid growth around 2005, when it was still a start-up.
With a market capitalization nearing $2 trillion, Alphabet is about as far from a start-up as is possible. Like Amazon and Facebook, it is frequently criticized for wielding its power unfairly, a charge the companies deny. Bills introduced in the U.S. House would restrict the big tech firms, and President Biden has named critics of Big Tech to key regulatory positions.
The pandemic profits the companies are making will likely only increase calls for action.
“Regulators at the moment are probably the biggest potential roadblock for Alphabet,” said Dave Heger, a communications analyst for the brokerage Edward Jones. “But antitrust lawsuits will take years. In the interim the company will continue to grow and add value to advertisers. History is probably in its favor.”
Alphabet, like the other big tech companies that offer tools to communicate, shop, be entertained and work remotely, initially was seen as vulnerable to the pandemic. In the second quarter of 2020, the first full quarter in which the virus was rampant, Alphabet’s revenue was off a bit as advertisers recalibrated. But it wasn’t down by much and it didn’t last.
As advertisers realized the world would not end, they returned in force. This helped not only Google’s main search engine but also the YouTube video division. YouTube’s ad revenue was up 84 percent in the second quarter from the same period in 2020. In a conference call on Tuesday, Google executives talked about how the pandemic had pushed YouTube into becoming more of an e-commerce site.
Even the cloud storage business, where Alphabet is a perennial also-ran to Amazon and Microsoft, did well: Revenue jumped 50 percent and losses slowed.
The growth took a few more workers. Alphabet hired more than 16,000 people over the last year, bringing its total employment to 144,000.
Apple’s profits nearly doubled in the latest quarter, showing that the world’s richest and most valuable public company is exhibiting little sign of slowing down.
Apple said on Tuesday that its profits increased 93 percent to $21.7 billion in its fiscal third quarter compared with a year earlier, while sales rose 36 percent to $81.4 billion, both outpacing analysts’ expectations.
The company has posted growth rates in recent quarters that resemble a much smaller upstart rather than a corporate titan worth nearly $2.5 trillion. It has been fueled by people buying even more of its devices than usual during the pandemic, as they became more reliant on technology to work, study and socialize. Apple also makes billions of dollars each quarter by collecting a commission on other companies’ app sales, a rapidly growing part of its business that has attracted lawsuits and the attention of regulators.
Apple said its iPhone sales grew 50 percent to $39.6 billion over the quarter from a year ago, an increase that was high by even its lofty standards. The increase was particularly surprising considering the company is set to release new phones in September, which often causes many people to wait to buy new iPhones.
Sales of iPhones had declined in recent years in a saturated smartphone market, but the pandemic mostly changed that. The April-through-June period was the third consecutive quarter of double-digit increases in iPhone sales, with much of the growth coming from existing customers upgrading their phones.
Apple also sold more of all of its other products, including iPads, Macs and wearable devices such as the Apple Watch and AirPods. The company’s sales increased in every geographic area, led by its Greater China region, with 58 percent growth, the third consecutive quarter in which sales increased by more than 50 percent there.
Apple’s reliance on China to sell and manufacture its products has forced the company to make compromises there, including by storing its users’ data on Chinese government servers and censoring certain apps.
The company also posted one of its largest gross profit margins ever, at 43.3 percent, showing how efficient its enormous business has become.
In an earnings call, Luca Maestri, the company’s finance chief, attributed the widening margin to cost savings and a greater reliance on revenue from its internet-services business, which includes its take of other companies’ app sales and has an unusually high profit margin.
Mr. Maestri said Apple effectively keeps 70 cents for every dollar it earns in its services business, before accounting for certain operating expenses, such as research and development. He said Apple’s gross margins on its devices were 36 percent in the quarter.
One of the few challenges for Apple is the global shortage in computer chips, which its devices rely upon. The shortage is affecting the production of a wide array of products, from cars to washing machines. Mr. Maestri said that while Apple had mostly avoided a major impact so far, the company expected a lack of chips to hurt its iPhone and iPad sales in the current quarter.
Partly as a result, he said, Apple expected its sales growth to be slower in the current quarter, though it would still be in the double digits. That forecast sent Apple shares down 1.5 percent in after-hours trading.
With the pandemic accelerating the turn to cloud computing, Microsoft continued its string of strong financial results.
Sales in the three months ending in June hit $46.2 billion, up 21 percent from a year earlier, and profits rose 47 percent to $16.5 billion, producing its most profitable quarter, Microsoft said on Tuesday. The results surpassed analyst expectations.
Investors have become so accustomed to the company beating estimates that shares of the stock fell about 2.5 percent in aftermarket trading.
“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth,” Satya Nadella, the company’s chief executive, said in a statement.
With the pandemic moving people online to a greater extent and the economy rebounding, companies have accelerated their spending in key areas where Microsoft has invested, including security and cloud services. Sales of Azure, the company’s flagship cloud-computing product, were up 51 percent.
Almost 250 million people use Teams, Microsoft’s workplace collaboration tool, each month, according to Kyle Vikstrom, a director of investor relations. It was the first time the company had disclosed how many people use that tool, which it introduced in 2016 to compete with Slack.
Revenue in its commercial cloud business, which includes Office 365, Azure and other offerings, grew 36 percent in the quarter to $19.5 billion. While the pandemic battered some industries more than others, bookings for future commercial cloud business were up 30 percent, with commitments across industries and geographic markets.
Microsoft has been moving customers to subscription services for Office products like Word, Excel and Teams. The products produce recurring revenue and opportunities for the company’s sales people to meet with customers on upgrades and other services. The company recently unveiled Windows 11, the first update to Microsoft’s flagship operating system in six years; it also follows a subscription model.
That strategy has paid off during the pandemic, with more people relying on their computers for work and school. Revenue from Microsoft’s personal computing business grew 9 percent to $14.1 billion. Sales of new Windows installations fell slightly, as chip and supply chain shortages have impeded the number of new computers entering the market. While Xbox console sales increased, revenue from gaming content decreased by 4 percent, reflecting how a year ago customers stayed home and played more online.
Starbucks said Tuesday that its same-store sales in the United States climbed 83 percent in the three months that ended in June compared with a year earlier, as it reaped the benefits of store reopenings.
The results were better than expected despite the company’s announcement last month that it was experiencing “temporary supply shortages.” Various locations have run out of items including iced and cold-brew coffee, breakfast foods and utensils.
Starbucks raised its forecasts and now expects U.S. same-store sales to climb 22 percent to 25 percent in the current quarter ending in September (not in the fiscal year, as previously reported here).
The airline industry took the unusual step on Tuesday of asking federal regulators to help increase jet fuel supplies at the Reno-Tahoe International Airport, one of several smaller airports in the West that have been hit by shortages.
In a petition, Airlines for America, a trade association, and World Fuel Services, a company that supplies airlines with fuel, warned the Federal Energy Regulatory Commission that the shortage of jet fuel had become so dire that it could force airlines to cancel passenger and cargo flights. The trade group predicted low fuel inventories through Labor Day.
The airline industry wants the commission to mandate that pipeline operators deliver more jet fuel to the Reno airport by temporarily prioritizing those supplies over other fuels like gasoline and diesel.
The shortages at smaller airports, mainly in the West, have been caused by several factors, among them the post-pandemic travel boom, a shortage of truck drivers and heightened demand for jet fuel by firefighting crews that are trying to put out several large wildfires with aircraft.
At the same time, airlines have increased flights to destinations like Reno above 2019 levels because of the popularity of domestic vacation spots like Lake Tahoe, the northern shore of which is less than an hour from the Reno airport by car.
Tom Kloza, global head of energy analysis at the Oil Price Information Service, said another factor in the shortages is problems at refineries in Western states that process crude oil into jet fuel, gasoline and diesel. Many are not operating at full capacity because of unscheduled maintenance and because recent heat waves have made it difficult for those industrial plants to operate normally.
“It’s unusual but it’s really limited to the Western geography,” Mr. Kloza said.
Airlines operating out of several airports in Nevada, on the Pacific Coast and in and around the Rocky Mountains have been forced to delay and cancel flights in recent days. The Oil Price Information Service has reported that the situation is expected to worsen, particularly if the wildfires persist into August. The information service reported that other airports that have experienced “hand-to-mouth supplies of jet fuel” include those serving Sacramento; Boise, Idaho; and Spokane, Wash.
“Transporters stress that every regional airport that is not supplied via pipeline is struggling to get enough fuel to handle robust summer demand,” Mr. Kloza said.
U.S. consumers who reined in their purchases because of the coronavirus are trying to borrow money again as much as they used to.
Applications for mortgages, auto loans and credit cards have mostly recovered to normal prepandemic levels, according to a report released Tuesday by the Consumer Financial Protection Bureau.
Since May of last year, inquiries for new home loans have surpassed their normal weekly volume by as much as 30 percent, reflecting an unusually hot housing market. And requests for car loans jumped in March, when the last round of government stimulus payments landed.
Credit card applications were the slowest to recover. They dropped to about 30 percent below normal levels in September, before recovering to typical levels in March, according to the report.
But the recovery isn’t hitting all borrowers evenly.
Credit card and auto loan inquiries from so-called superprime borrowers, with credit scores above 780 (out of 850), have remained subdued because those consumers were most able to curb their spending and work from home.
Borrowing by those with poor credit — subprime borrowers with scores of 600 or lower — also hasn’t rebounded, the agency said.
“Despite the overall trend towards a recovery, we find that consumers with deep subprime and subprime scores still have not recovered to their prepandemic levels, likely in part due to a tightening of credit for these consumers,” the report said.
Lawsuits and trials involving claims that talc in Johnson & Johnson’s baby powder caused cancer are ramping up again, with a new complaint filed on Tuesday on behalf of the National Council of Negro Women.
The group accused the company of “knowingly deceptive marketing to Black women” for decades — with free samples at beauty salons, radio campaigns and other efforts — despite internal concerns that the product might be harmful.
At the heart of the accusations against Johnson & Johnson, in this case and others, is that the company was aware that its products might cause cancer even as it marketed them. Johnson & Johnson is facing more than 25,000 lawsuits related to the talc products and to claims that they caused ovarian cancer and mesothelioma, and set aside nearly $4 billion last year to handle the legal battles.
Some of the suits blame asbestos-contaminated talc for health problems; internal company documents show that executives knew for decades of such concerns. Contamination of the talc by asbestos — a known carcinogen — can occur during the mining process.
With the latest suit, the National Council of Negro Women highlighted the racial overtones of Johnson & Johnson’s selling strategy: focusing on a demographic that it knew was more likely to frequently use baby powder but that was at a disadvantage when dealing with potential consequences.
During a news conference in Washington on Tuesday, Janice Mathis, the group’s executive director, said Black women often received substandard medical counsel, were underinsured and were treated later compared with the treatment white women received.
“You’re in kind of a Catch-22 — without insurance, later in the disease, not getting good advice, and then add to that a corporation that is intentionally targeting you,” said Ms. Mathis, who was accompanied by the relatives of women who used baby powder and died of ovarian cancer.
One woman who spoke at Tuesday’s event, Wanda Tidline, said she was diagnosed with ovarian cancer in 2012 despite her family’s having no history of the disease. She said she had used Johnson & Johnson’s baby powder for “many, many years.”
“Because of the advertising, I felt that it was safe,” she said.
The lawsuit laid out several examples of Johnson & Johnson’s targeted advertising, including a 1992 internal memo that noted the “high usage” of baby powder among Black women, the “opportunities to grow the franchise” among the demographic and “negative publicity from the health community on talc.”
In a statement, Johnson & Johnson reiterated that its products were safe, did not contain asbestos and did not cause cancer.
“The accusations being made against our company are false, and the idea that we would purposefully and systematically target a community with bad intentions is unreasonable and absurd,” the company said.
Since 2000, Johnson & Johnson has tried to reach Black women through promotions at concerts, churches, beauty salons and barbershops and considered signing Patti LaBelle or Aretha Franklin as a spokeswoman, according to the lawsuit. A radio campaign in 2010 targeted “curvy Southern women 18-49 skewing African American,” the legal filing said, citing Johnson & Johnson documents.
As courts reopen, several talc trials have been scheduled, starting on July 12 with a case filed on behalf of an Illinois resident who died in 2016 after being diagnosed with ovarian cancer.
Tuesday’s lawsuit, filed in state court in New Jersey, where Johnson & Johnson is based, seeks legal costs from the company and support for “equally targeted corrective outreach to the Black community” and medical monitoring and early detection services focused on ovarian cancer.
Last year, the company said it would remove talc-based baby powder from sale in North America, citing slumping demand amid changing consumer habits and concerns about the product.
Johnson & Johnson has prevailed in some talc cases but lost others. The company sought to overturn a multibillion-dollar verdict awarded to 22 customers, but the Supreme Court declined to hear its appeal in June. Many other cases have been consolidated into a bundle known as multidistrict litigation being handled in federal court in New Jersey, with the first case ordered by the presiding judge to go before a jury by April.
The Washington Post will require all employees to show that they are vaccinated against the coronavirus, the newspaper’s publisher said on Tuesday.
The Post’s publisher, Frederick J. Ryan Jr., said in an email to staff that the company had decided to require proof of vaccination as a condition of employment, starting when workers return to the office in September, after hearing concerns from many employees about the emergence of coronavirus variants.
“Even though the overwhelming majority of Post employees have already provided proof of vaccination, I do not take this decision lightly,” Mr. Ryan wrote in the email, which was viewed by The New York Times. “However, in considering the serious health issues and genuine safety concerns of so many Post employees, I believe the plan is the right one.”
The Post, which is owned by the Amazon founder Jeff Bezos and employs more than 1,000 journalists, is planning for a Sept. 13 office return. Contractors and guests to the office would also be required to provide proof of vaccination, Mr. Ryan said. He said the company would provide accommodations for those with “documented medical conditions and religious concerns.”
Mr. Ryan said in the email that all employees would come into the office three days a week in September in the first phase of the company’s return-to-office plan.
Companies across the United States are wrestling with how to safely transition workers back to offices after nearly 18 months of remote work. The rising number of infections from the Delta variant has prompted many companies to rethink the return-to-office plans they announced in the spring.
Many large companies have been resistant to mandating vaccines, wary of litigation, backlash and, in some instances, the risk of losing key employees. But as the vaccine has become more readily accessible, more companies have edged closer to some sort of requirement. CNN has mandated full vaccinations for all employees working in its various offices and in the field, a spokeswoman said on Tuesday.
The investment bank Morgan Stanley said in June that, effective this month, visitors and employees in its New York offices would need to be vaccinated. Saks will require employees to be fully vaccinated when they start going to the office this fall. And Delta Air Lines is requiring new hires to be vaccinated.
Lauren Hirsch and Michael M. Grynbaum contributed reporting.
With coronavirus case counts rising, officials are imposing vaccine mandates on government workers in hopes that the private sector will follow suit. “We’re leading by example,” Mayor Bill de Blasio of New York said Monday, in announcing the city is mandating vaccines or testing for all municipal employees. “A lot of times, private sector employers say that’s what they need.”
On Tuesday, the Centers for Disease Control and Prevention recommended that vaccinated people begin wearing masks indoors again in certain areas of the country, a reversal from its earlier guidance.
Some major New York employers, notably Morgan Stanley, have already moved toward mandating vaccination for workers returning to its offices in the city. Many others haven’t taken that step, even after the mayor’s urging.
Facebook, which has 4,000 employees at its New York office, said Monday that it would continue to encourage, rather than require, coronavirus vaccines for workers. “We understand that some people may not or cannot get the Covid-19 vaccine for a variety of reasons, so the vaccine is not required to work from a Facebook office, though we encourage employees to get the vaccine to protect themselves and the communities we live in,” said Jamila Reeves, a Facebook spokeswoman.
Goldman Sachs declined to comment. The New York Times reported in June that the bank, which has roughly 10,000 New York employees, was requiring its bankers to log their vaccination status before being allowed in the office. It has been requiring regular testing for unvaccinated employees.
JPMorgan Chase, which employs about 20,100 people in New York, declined to comment. The bank has so far only strongly encouraged vaccinations, but its chief executive, Jamie Dimon, warned employees in a memo last month the bank “may mandate that all employees receive a Covid-19 vaccination consistent with legal requirements and medical or religious accommodations.”
Citigroup, which has 17,000 New York-area employees (not 7,000 as previously reported), is requiring unvaccinated employees to use an at-home rapid test three times a week and to wear masks in the office. Those who show proof of vaccination can bypass those requirements.
Pfizer, which employs roughly 2,700 employees and contractors in its Manhattan headquarters, does not generally require vaccinations as condition to enter its offices. “There may be certain circumstances in the future in which we impose a vaccination requirement in the interest of colleague health and wellness,” said Faith Salamon, a Pfizer spokeswoman.
Just days before the federal moratorium on evictions is set to expire, lawmakers scrutinized the actions of corporate landlords that have filed tens of thousands of actions seeking the removal of tenants during the pandemic.
Representative James E. Clyburn, the chairman of the House Select Subcommittee on the Coronavirus Crisis, said the hearing was the opening salvo of an investigation into what he called “unjustified eviction practices” by some large landlords. Mr. Clyburn, Democrat of South Carolina, said he was disturbed by reports that some large property owners had moved to evict renters for failing to pay rent, even as the government works to distribute tens of billions of dollars in emergency rental assistance funds.
Last week Mr. Clyburn sent letters to four corporate landlords that he said were particularly aggressive in going after lower-income tenants and Black and Latino renters. “Evictions by corporate landlords have been widespread in minority communities,” he said.
Representatives for those landlords did not speak at the hearing, but several housing advocates did.
Jim Baker, the executive director of the Private Equity Stakeholder Project, a nonprofit that has been tracking eviction filings in a handful of large counties, said that corporate landlords, rather than so-called mom-and-pop landlords, had accounted for the majority of eviction filings. Corporate landlords had filed at least 75,000 evictions across the half-dozen large counties the group has tracked since the Centers for Disease Control and Prevention imposed a nationwide eviction moratorium in September, Mr. Baker said.
The moratorium is credited with cutting the number of eviction actions filed by landlords roughly in half, according to the Eviction Lab at Princeton University.
But the effects have been mixed: State and local courts have been divided on the details of the moratorium, with some ruling that landlords could file eviction actions for nonpayment of rent and were prohibited only from removing such tenants. Other courts have permitted evictions if they are for violations of a housing complex’s rules and regulations.
With the moratorium expiring this week, housing advocates estimate that roughly 11 million adult renters are vulnerable to being evicted because they are behind on their rent. Nearly a half-million people are behind in New York City alone, according to an analysis of census data by the National Equity Atlas, a research group associated with the University of Southern California.
Housing advocates fear there will be a rush of eviction filings once the moratorium ends. Some are concerned about how slow the federal government has been to dole out roughly $45 billion in federal rental assistance. A little over $1.5 billion has been paid out nationwide, the Treasury Department said last week.
Emily A. Benfer, a professor at Wake Forest University who specializes in health and housing law, said in an interview that the relief had been slow to trickle out partly because many local governments had had to build rental assistance programs from scratch. The process for applying can be cumbersome because of language and technology barriers, she added.
Diane Yentel, the president of the National Low Income Housing Coalition, told the subcommittee that Congress should consider extending the moratorium to allow more time for the emergency rental money to be disbursed. She said some states had allocated less than 5 percent of the money they had gotten from the federal government.
Republicans on the subcommittee criticized the C.D.C. moratorium, calling it an unconstitutional power grab that imposed financial hardships on landlords. Joel Griffith, a researcher with the Heritage Foundation, a conservative policy group, said the moratorium “eroded private property rights” and interfered with the ability of local courts to enforce local housing laws.
The committee has asked the corporate landlords to respond to Mr. Clyburn’s letter by Aug. 3.
A global tech stock sell-off helped push stocks back from record highs on Tuesday, as investors waited for more positive news from a string of earnings reports due from American tech giants after the close of trading.
The S&P 500 was fell 0.5 percent.
The Centers for Disease Control and Prevention recommended on Tuesday that people vaccinated for the coronavirus resume wearing masks indoors in certain parts of the country, reversing a decision made just two months ago.
Alphabet, Apple and Microsoft will provide updates on their financial performance on Tuesday. The reports come during a time of growing scrutiny of Big Tech with President Biden signing an executive order earlier this month intended to increase competition within the nation’s economy and to limit corporate dominance. Alphabet fell 1.6 percent and Apple fell 1.5 percent. The tech-heavy Nasdaq composite index fell 1.2 percent.
The tensions between governments and technology are increasingly global. Chinese stocks plunged again on Tuesday, as a crackdown by the authoritarian state continued on its homegrown tech titans.
The Chinese tech conglomerate Tencent tumbled 9 percent after it closed its WeChat app to new users to “align with all relevant laws and regulations.” The delivery service Meituan tumbled 18 percent after the government published new regulations requiring such services to pay at least minimum wage. Alibaba fell more than 6 percent in Hong Kong.
Hong Kong’s Hang Seng plunged more than 4 percent. And the CSI 300 index of stocks listed on mainland indexes dropped more than 3.5 percent. The Hang Seng has lost more than 14 percent over the last month.
The Federal Reserve is also holding a two-day meeting starting on Tuesday during which policymakers are expected to start discussing if and when to start winding down the central bank’s emergency bond-buying measures.
The International Monetary Fund warned on Tuesday that the gap between rich and poor countries was widening amid the pandemic, with low vaccination rates in emerging economies leading to a lopsided global recovery.
The I.M.F. maintained its 2021 global growth forecast of 6 percent in its latest World Economic Outlook report, largely because advanced economies, including the United States, expect slightly faster growth than the global body previously forecast. Economic growth in developing countries is expected to be more sluggish, and the global body said the spread of more contagious variants of the virus posed a threat to the recovery. It called on nations to work together to accelerate the protection of their citizens.
“Multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics and therapeutics,” Gita Gopinath, the I.M.F.’s chief economist, wrote in the report. “This would save countless lives, prevent new variants from emerging and add trillions of dollars to global economic growth.”
The I.M.F. projected that the U.S. economy will expand 7 percent in 2021. The euro area was projected to expand 4.6 percent and Japan 2.8 percent. Rapid expansion was expected for China, at 8.1 percent, and India, 9.5 percent, but both of their outlooks have been downgraded since April. The outlook in China was lowered because of a scaling back of public investment, while India was downgraded because of a severe second wave of the virus slowing the recovery.
The global expansion in 2022 was projected to be stronger than previously forecast, with growth of 4.9 percent. That, too, will be led by advanced economies, the I.M.F. predicted.
More than a year after the coronavirus emerged, economic fortunes are closely tied to how successfully governments have been at providing fiscal support and acquiring and deploying vaccines. The I.M.F. said about 40 percent of the population in advanced economies had been fully vaccinated, while that figure is just 11 percent or less in emerging markets and low-income developing economies. Varying levels of financial support from governments are also amplifying the divergence in economic fortunes.
The I.M.F.’s executive board announced this month that it had approved a plan to issue $650 billion worth of reserve funds that countries could use to buy vaccines, finance health care and pay down debt. If finalized in August, as expected, the funds should provide additional support to countries that have been lagging behind in combating the health crisis.
Concerns about price increases have grabbed headlines in the United States and elsewhere, but the I.M.F. said it continued to believe that the recent bout of inflation was “transitory.” The organization noted that jobless rates remained below their prepandemic levels and that long-term inflation expectations remained “well anchored.” Ms. Gopinath said that predicting the path of inflation was subject to much uncertainty because of the unique nature of the economic shock that the world had faced.
“More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation,” Ms. Gopinath said.
As the Federal Reserve prepared to meet on Tuesday and Wednesday, she advised central banks to be nimble in setting monetary policy and urged them not to raise interest rates too soon.
“Central banks should avoid prematurely tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of de-anchoring,” Ms. Gopinath added.
During a press briefing on Tuesday, I.M.F. officials said they had been observing how supply shortages were depressing manufacturing activity and hurting sectors such as the automobile industry.
While the I.M.F. expects inflation in the United States to remain high this year and normalize by next year, it is looking for signs that rising prices could “de-anchor” from the Fed’s 2 percent target. That will become clear, it said, if medium-term inflation expectations begin to rise and if higher prices become locked into wages and business contracts. Officials are also watching to see if the recent sharp increase in house prices continues to lead to higher rents, which would lift the inflation outlook.
Mutations of the virus remain the most daunting challenge facing the global economy. The I.M.F. projected that highly infectious variants, if they emerged, could derail the recovery and wipe out $4.5 trillion in gross domestic product by 2025.
The brunt of that pain would most likely be felt in the poorest parts of the world, which have been hardest hit by the initial waves of the pandemic.
“It was already diverging, and that has exacerbated in this period,” Ms. Gopinath said of global inequality. “It is a reflection of some very big fault lines that are growing.”
Louise Story, who oversaw digital strategy and technology at The Wall Street Journal, has decided to leave the paper after less than three years.
Her departure was announced on Tuesday by Matt Murray, the editor in chief, in an email to the staff that was obtained by The New York Times.
“I’m personally grateful to Louise and will miss her strong work ethic, strategic mind, commitment to high-quality journalism, keen news judgment, and unique ability to connect text, video and audio, product, design, engineering and audiences,” Mr. Murray said in the note.
Ms. Story, a seasoned journalist who joined The Journal as one of the most senior women in its newsroom after a decade at The New York Times, had been entangled in a power struggle between Mr. Murray and the newly appointed publisher, Almar Latour. Mr. Murray hired Ms. Story with the aim of updating The Journal for the digital age, but Mr. Latour had his own vision.
Ms. Story had amassed a large team that over the course of a year assessed the newsroom’s workings, resulting in a 209-page report, “The Content Review.” It was more than just an audit — it made sweeping recommendations for how the paper should operate.
It noted that “in the past five years, we have had six quarters where we lost more subscribers than we gained,” and it said addressing the paper’s slow-growing audience called for significant changes in everything from social media strategy to which subjects were deemed newsworthy.
The report argued that the paper should attract new readers — specifically women, people of color and younger professionals — by focusing more on topics such as climate change and income inequality. Among its suggestions: “We also strongly recommend putting muscle behind efforts to feature more women and people of color in all of our stories.”
But the report was never officially shared with the newsroom, and only parts of it were adopted.
“Louise has played a central role in advancing our digital transformation and broadening the reach and impact of our journalism,” Mr. Murray said in his Tuesday note.
The Wall Street Journal did not immediately reply to a request for comment.
In her farewell note to the staff, Ms. Story said, “It’s been an honor editing your journalism, developing strategies and tactics with you to make our work more impactful and building new teams here that are helping the WSJ grow.”
She said she would be working on a book.
Facebook on Tuesday unveiled changes to Instagram’s advertising and privacy policies that it said would protect teenagers, following years of criticism that the photo-sharing site has not done enough to prevent underage users from sexual predators and bullying.
The social network, which owns Instagram, said it would change its advertising policy to reduce hyper-targeted ads to teens. Advertisers on both Instagram and Facebook, which previously used people’s interests and activity across other websites to target their ads, will now only be able to use age, gender and location to show ads to users under 18.
New Instagram accounts created by those under 16 will also be private by default, meaning the account’s posts can only be viewed by approved followers, the company said. Facebook said its research indicated that 80 percent of young users would remain in the default private setting.
Facebook also said it was also developing technology to stop accounts with “potentially suspicious behavior” from seeing or interacting with people under 18 on Instagram.
Lawmakers from both sides of the aisle have called for more online protections for children. A proposed bill with bipartisan support, the Children and Teens’ Online Privacy Protection Act, would ban targeted advertising aimed at children and require user consent to collect information from users younger than 15.
Even so, Facebook continues to move ahead with plans to create an Instagram for children under the age of 13, an expansion that has been opposed by attorneys general for 44 states and jurisdictions as well as an international coalition of 35 children and consumers’ groups. Facebook’s critics cited research showing that social media use has led to an increase in mental distress, body image concerns and suicidal thoughts.
In a blog post on Tuesday, Pavni Diwanji, Facebook’s vice president of youth products, said the company was using artificial intelligence to try to verify users’ ages. Birthday messages directed at a user, for example, can be used to detect their age, in addition to the age someone entered in Instagram and across other Facebook apps.
“This technology isn’t perfect, and we’re always working to improve it, but that’s why it’s important we use it alongside many other signals to understand people’s ages,” Ms. Diwanji wrote.
The Chinese internet giant Tencent said Tuesday that it had temporarily suspended new user registrations for its hugely popular WeChat app, raising fears of new regulatory pressures even as it insisted the outage was the result of a technical upgrade.
Tencent said in a statement that the shutdown, which affected only new users and groups registering for the app, would be over by early August and was part of a fix to its security technology.
The timing of the suspension left investors uneasy, with concerns mounting that a regulatory rampage aimed at the technology sector could heavily affect Tencent, China’s largest internet company. By far the company’s most important product, WeChat dominates Chinese social media, allowing users to do everything from share photos and chat to pay for coffee and pay bills.
Tencent’s shares closed down almost 9 percent in trading in Hong Kong. Overall, it was a rough day in Chinese stock markets, with the Hang Seng Index in Hong Kong dropping 4.2 percent and the Shanghai Composite down 2.5 percent, amid concerns over Beijing’s regulatory crackdown.
Thus far, Tencent has managed to steer clear of the worst of a nine-month spree of government scrutiny on China’s high-flying tech sector that has led to multibillion-dollar fines, suspensions of app services and tumbling share prices for its rivals as well as companies it has invested in. Over the past month alone, Chinese officials have mandated security reviews for internet firms seeking to list their shares abroad and barred tutoring companies, many of which operate online, from making a profit.
Tencent’s worst scrape with Beijing has come through a company it has invested in, the ride-sharing business Didi. Regulators opened an investigation into the company this month, eventually ordering its apps off mobile stores until the investigation concluded. The company’s shares are down more than 40 percent from when they were listed at the end of last month.
In its statement Tuesday, Tencent sought to play down the suspension, but acknowledged the hand of the government, saying the security upgrade was “to align with all relevant laws and regulations.”
On Saturday, China’s market regulator separately took action against Tencent, invoking the country’s antimonopoly law. It issued the company a small fine, roughly $75,000, but also forced it to abandon exclusive deals it had with record companies for its music business, arguing that an acquisition had given it excessive market share. Shares in Tencent Music, which trades in the United States, fell 3 percent on Monday and nearly 5 percent more on Tuesday.
A trailblazer in chat apps, gaming and social media, Tencent’s soft-spoken founder, Pony Ma, has a track record of keeping the company out of the spotlight and away from government scrutiny.
Yet the company itself is renowned in Chinese tech circles for its aggressive competitive strategies, using its huge social media platforms first built more than a decade ago to overwhelm nascent rivals. Recently, it has taken stakes in a constellation of internet newcomers and then linked its services to them in an effort to compete with Alibaba, a rival e-commerce giant. It’s not clear whether the paltry fine over its music holdings and the quiet security rework are indications it will get off lightly or the worst is yet to come.
Alibaba shows how bad things could get. In April, Chinese officials fined the company $2.8 billion for monopolistic behavior. Last year, regulators suspended the blockbuster listing of Alibaba’s sister company, Ant Group, days before its initial public offering, most likely cutting more than $100 billion from its market share.
When Bono helped recruit Henry M. Paulson Jr., the former Treasury secretary and Goldman Sachs chief, to join TPG’s impact investing initiative, part of the pitch from the musician-activist-investor was that a private equity fund focused on fighting climate change could be big. He was right.
The TPG Rise Climate fund announced on Tuesday that it has raised $5.4 billion, which would make it the largest climate-focused fund in the world. The fund, which counts a TPG co-founder, Jim Coulter, as its managing partner, would rank as the 25th-largest private equity fund out of more than 1,200 raised this year, according to PitchBook. It has a cap of $7 billion, so it could get bigger by the time it closes in the fourth quarter of the year.
Unusually, Rise Climate’s investors aren’t simply the big pension funds. Investors include Apple, General Motors, Nike, FedEx, Honeywell and roughly three dozen other large corporations, which collectively are contributing about $1 billion. Corporations rarely invest in private equity funds, so their participation underscores the demand by both investors and companies to find climate solutions.
The companies that invested in the fund are likely to have access to many of the businesses that TPG invests in, helping them grow, and potentially validating them. TPG said Rise Climate would be focused on companies that can “enable carbon aversion in a measurable way.”
Earlier this year, Mr. Paulson told DealBook that for a fund focused on sustainability to sustain itself, it had to produce returns that were competitive with other private equity investments. “The market will not scale for concessionary or subsidized returns,” he said. He will have to prove the returns, but so far scale does not seem to be a challenge.
Tesla on Monday reported a big increase in profit for the three months ending in June because it sold more than twice as many cars in the period as it did a year earlier. The company said it made $1.1 billion, or $1 a share, in the second quarter, up from $104 million in the same period a year earlier. It reported revenue of $12 billion, up from $6 billion. Tesla sold 185,000 cars in the first quarter of 2021. A significant portion of Tesla’s profit comes from selling regulatory credits to other automakers that need them to meet emissions standards. In the second quarter, it took in $354 million from the sale of credits.
Lordstown Motors, a struggling electric pickup truck company, said Monday that it had reached a deal with an investment firm to raise $400 million over three years. The investment firm, Yorkville Advisors, has agreed to buy up to $400 million of Lordstown’s shares, which would provide badly needed cash to a company that this summer said it could go out of business without raising more money. Lordstown’s stock price has tumbled from a peak of almost $31 in February and is now trading at less than $10. The stock was down 2.5 percent at the close of trading on Monday.
Today in the On Tech newsletter, Shira Ovide writes that tech companies throw around nondisclosure agreements like confetti, but the agreements can hurt the rest of us.