May 29, 2024

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Economy News: Live Updates on Gamestop, Fry’s and Jerome Powell

17 min read
A Fry’s Electronics store in Renton, Wash. The retailer blamed the shutdown on “changes in the retail industry and the challenges posed by the Covid-19 pandemic.”
Credit…Ted S. Warren/Associated Press

Fry’s Electronics, a big-box retailer that nurtured a generation of do-it-yourself tech fans and Silicon Valley entrepreneurs, announced on Wednesday that it was shutting down operations, effective immediately.

The company, which is based in San Jose, Calif., replaced the contents of its website with a statement that said it had ceased operations and had begun winding down. The retailer, which built a cult following on the West Coast but was unable to compete with the rise of Amazon, blamed the shutdown on “changes in the retail industry and the challenges posed by the Covid-19 pandemic.”

“It is hoped that undertaking the wind-down through this orderly process will reduce costs, avoid additional liabilities, minimize the impact on our customers, vendors, landlords and associates, and maximize the value of the company’s assets for its creditors and other stakeholders,” the statement said.

The pandemic has taken a heavy toll on retailers, with restrictions meant to reduce the spread of the coronavirus causing foot traffic to nosedive. Several large retail chains, including Brooks Brothers, Neiman Marcus and JCPenney, have filed for bankruptcy since the pandemic hit. Macy’s, the department store chain with more than 700 stores, said on Tuesday that its sales last year plummeted 29 percent and that it posted a net loss of $3.9 billion, compared with a $564 million profit the prior year.

Fry’s has 31 stores across nine states and has been in business for nearly 36 years, according to the statement. Founded in 1985 by the three Fry brothers, the business was intended to “provide a one-stop-shopping environment for the high-tech professional,” the company wrote on its LinkedIn profile. The stores ranged in size from 50,000 square feet to more than 180,000 square feet, each stocked with an eclectic assortment of gadgets and parts.

The chain was famous for its elaborate store themes. Its location in Phoenix had an Aztec temple, for instance; its store in Burbank, Calif., was inspired by 1950s science fiction movies; and the Fry’s in Woodland Hills, Ca., was a page out of Alice in Wonderland, decorated with figurines as tall as 15 feet of the story’s characters.

The retailer was particularly beloved by Silicon Valley executives, who found the stores to be a nostalgic haven and source of creative inspiration.

“Going to a Fry’s store is entertainment in itself; for a geek, it could be recuperative,” Jean-Louis Gassée, a former Apple executive, wrote in a blog post in 2019.

Fans took to Twitter on Wednesday to mourn the store’s closing.

“RIP Fry’s Electronics,” wrote one user. “u were my favorite Aztec-themed electronics superstore with a random movie theatre, and I will always cherish the memories of loitering there so me & my friends could play rock band after school.”

“It was a piece of heaven for me,” wrote another fan. “I was there for hours.”




‘Limit Lasting Damage,’ Powell Says in Economic Recovery Testimony

On Wednesday, Jerome H. Powell testified for a second day to congress about the Federal Reserve’s role in limiting inflation and stabilizing the economy.

At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Since the beginning of the pandemic, we’ve taken forceful actions to provide support and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to households, businesses and communities. Regarding our employment goal, we emphasize that maximum employment is a broad and inclusive goal. This change reflects our appreciation for the benefits of a strong labor market, particularly for low- and moderate-income communities. The economy is a long way from our employment and inflation goals, and it’s likely to take some time for substantial further progress to be achieved. We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases. Since the onset of the pandemic, the Federal Reserve has been taking actions to support more directly the flow of credit in the economy, deploying our emergency lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. Although the CARES Act facilities are no longer open to new activity, our other facilities remain in place. Finally, we understand that our actions affect households, businesses, and communities across the country — everything we do is in service to our public mission. We’re committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.

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On Wednesday, Jerome H. Powell testified for a second day to congress about the Federal Reserve’s role in limiting inflation and stabilizing the economy.CreditCredit…Pool photo by Susan Walsh

Jerome H. Powell, the Federal Reserve chair, said on Wednesday that it could take years for the central bank to coax weak inflation sustainably higher and reiterated that the labor market would take time to fully heal from the pandemic downturn.

Mr. Powell’s comments, delivered during testimony before the House Financial Services Committee, reinforced that the central bank would be extremely patient in slowing down its policy support as it tried to help to fuel a complete recovery. The Fed chief had soothed the stock market on Tuesday by delivering a similar message during testimony before Senate lawmakers.

Mr. Powell has been pledging for the past 11 months that the Fed would do whatever it could to get the economy through the pandemic, but his comments have become noteworthy at a time when some lawmakers — in particular Republicans — have become worried that big government spending could fuel economic overheating that leads to rapid inflation.

Fed officials have been clear that weak price gains, not out-of-control ones, are the problem of the modern era. Mr. Powell doubled down on that message Wednesday. Central bankers try to keep price gains from slipping ever lower, because disinflation can be economically damaging. The Fed targets low, but stable, increases, shooting for 2 percent annual gains on average over time.

“We live in a time when there are significant disinflationary pressures around the world,” Mr. Powell said on Wednesday, and so officials are trying to bolster prices. “We believe we can do it, we believe we will do it. It may take more than three years.”

That’s consistent with the Fed’s published economic expectations, but it reinforces how patient the central bank is likely to be in the years ahead. Economists broadly expect a temporary pop in prices this year, but Mr. Powell has been clear that a short-term jump is different from sustained higher inflation.

“We know that inflation dynamics evolve over time, but they don’t tend to change overnight,” he said. “What I see is an economy where there is still a great deal of slack.”

The Fed is using its policies to try to guide the economy back to health. Besides buying huge quantities of bonds, the Fed has also held interest rates near-zero since last March. The central bank has said it wants to see specific progress toward its two goals — maximum employment and stable prices — before removing that support.

“We’ve been very specific with liftoff,” Mr. Powell said. “We’d need to see labor market conditions that are consistent with maximum employment, inflation at 2 percent, and inflation expected to move moderately above 2 percent for some time.”

He acknowledged that the criteria for slowing bond purchases was more subjective and based on whether the Fed saw “substantial” further progress.

Workhorse hand-builds most of its vans at its factory in Union City, Ind.

Workhorse, a start-up striving to be a major producer of electric delivery vans, got bad news on Tuesday: It lost out on a $482 million deal to make tens of thousands of vehicles for the United States Postal Service. And now investors are punishing its stock.

The company’s shares fell by almost 50 percent on Tuesday after the Postal Service announcement and were down an additional 10 percent in afternoon trading on Wednesday.

Workhorse, an Ohio-based company with a factory in Indiana, was counting on the postal contract to provide a surge in revenue. By early February, its shares had risen from under $2 to more than $40 in less than a year, largely on hopes it would win all or part of the postal contract. Instead, the Postal Service awarded the work to Oshkosh Defense, a subsidiary of the Oshkosh Corporation of Wisconsin that makes military vehicles and mobility systems.

Under an initial deal for what the Postal Service is calling its next-generation delivery vehicle, Oshkosh is to complete the design and then assemble 50,000 to 165,000 vehicles over 10 years.

The Oshkosh vehicles will be equipped with either fuel-efficient gasoline engines or electric batteries, and they will be retrofitted to keep pace with advances in electric vehicle technology, the Postal Service said. Workhorse proposed delivering an all-electric order.

Workhorse Group, which employs about 130 people and had sales of less than $1 million in the first nine months of last year, was a bit of a David to the Goliath of Oshkosh, whose corporate revenue was $8.4 billion in the 2019 fiscal year.

On Wednesday, Workhorse said in a statement that “pursuant to the bid process rules,” it had asked the Postal Service for more information, and that it “intends to explore all avenues that are available” to an unsuccessful finalist in a government bidding process.

“More than 10 million fewer Americans are working today than when the pandemic began,” the business leaders wrote in their letter to Congress.
Credit…Harisson Weinstein for The New York Times

More than 150 corporate executives in New York — including a steadfast Trump supporter, Stephen A. Schwarzman of the Blackstone Group — have signed a letter urging Congress to pass President Biden’s $1.9 trillion coronavirus bill over Republican objections.

The letter, released on Wednesday, calls on congressional leaders from both parties to “act swiftly and on a bipartisan basis” to enact the sweeping package, which Mr. Biden is pushing through Congress using a procedural loophole called reconciliation to bypass a possible Republican filibuster.

“Previous federal relief measures have been essential, but more must be done,” the executives wrote, bolstering the White House message that passing the measure quickly was justified by the magnitude of the crisis.

The business leaders represent a cross-section of prominent chief executives, including Sundar Pichai of Google, David M. Solomon of Goldman Sachs, Laurence D. Fink of BlackRock and Pat Gelsinger of Intel, as well as Mr. Schwarzman and another longtime friend of former President Donald J. Trump, the New York developer Richard S. LeFrak.

“More than 10 million fewer Americans are working today than when the pandemic began, small businesses across the country are facing bankruptcy, and schools are struggling to reopen,” the executives wrote in the letter, an effort organized by the Partnership for New York City, a business advocacy group.

“The target audience is Republicans,” said the partnership’s president, Kathryn S. Wylde, who said the loss of 500,000 jobs in the New York area during the pandemic spurred her to act. “This should be a bipartisan effort.”

The letter comes as opposition to the Biden package among Republicans in the Senate stiffened after the White House politely but emphatically rejected efforts, led by Senator Susan Collins of Maine, to negotiate a much smaller compromise.

“We have indicated a willingness to come up from our $618 billion, but unfortunately the White House seems wedded to a figure that really can’t be justified,” Ms. Collins told reporters at the Capitol on Tuesday. “I would be surprised if there was support in the Republican caucus if the bill comes out at $1.9 trillion even if we’re able to make some beneficial changes.”

Mr. Biden’s proposal includes $1,400 stimulus checks for taxpayers making less than $75,000 a year, $400 billion for coronavirus vaccinations, an increase in unemployment benefits and hundreds of billions more in relief for local governments.

The House is expected to vote on the measure, which is expected to pass on a mostly party-line basis, on Friday or over the weekend, according to Democratic aides.

From there, it will head to the Senate, where Republicans will have an opportunity to add amendments. Democrats, who control an upper chamber deadlocked at 50-50 with the tiebreaking vote of Vice President Harris, cannot afford a single defection.

A Volvo assembly line in Gothenburg, Sweden. the plan to merger Volvo with Geely Auto raised concerns across the country that Volvo would lose its Swedish identity.
Credit…Jonathan Nackstrand/Agence France-Presse — Getty Images

The owners of Volvo Cars called off plans to merge the company with a Chinese automaker, a relief to workers and others in Sweden who feared that the country’s only major carmaker would lose its independence.

Volvo Cars has been under Chinese ownership since 2010 when Zhejiang Geely Holding bought it from Ford Motor. Investment by Geely Holding revived Volvo as well as the city of Gothenburg, Sweden, where the carmaker is based.

But the Chinese owners generally kept a low profile. Volvo, which sold about 660,000 cars last year, continued to be managed by Swedes and remained a source of national pride and a symbol of Swedish engineering and design.

Many Swedes were dismayed last year when Li Shufu, chairman of Geely Holding, announced a plan to tighten control of Volvo by merging it with Geely Auto of China. Geely Holding is the largest shareholder in Geely Auto. The plan set off a nationwide debate and raised fears that Volvo would lose its Swedish identity.

Mr. Li is also the largest shareholder in Daimler, the German car and truck maker, with a 9.7 percent stake. His incursions into the European auto industry have highlighted Europe’s ambivalent attitude toward Chinese money. Chinese investment has helped European companies to remain competitive and in some cases rescued them from oblivion, but also raised fears that the continent was becoming beholden to China’s authoritarian government.

Geely Holding said Wednesday that Geely Auto and Volvo Cars would cooperate more closely in areas such as electric vehicle technology and purchasing, but would preserve “their existing separate corporate structures.”

“Geely Holding sees significant benefits from deeper partnerships and alliances whilst maintaining independence,” Mr. Li said in a statement.

A Tesla factory in Fremont, Calif. A global shortage in semiconductors — a crucial component in cars and electronic devices — has forced several major American auto plants to close or scale back production.
Credit…Justin Kaneps for The New York Times

President Biden is expected to sign an executive order on Wednesday that will kick off a review of the supply chains that support several crucial American manufacturing industries, including automobiles, pharmaceuticals and clean energy.

The order will not target imports from any specific country, senior Biden administration officials said Tuesday in a conference call previewing the move, but it is widely seen as the next step in an effort to counter the economic rise of China and to promote factory growth in the United States. The officials cast it as a successor to the “Buy American” order that Mr. Biden signed last month.

The president’s order comes as a global shortage in semiconductors — a key component in cars and electronic devices — has forced several major American auto plants to close or scale back production and sent the administration scrambling to appeal to allies like Taiwan for emergency supplies.

The officials said the order would not offer a quick fix for that shortage. Instead, it would start an effort to insulate the American economy from future shortages of critical imported components.

Mr. Biden plans to order yearlong reviews of six sectors and a 100-day review of four classes of products where American manufacturers rely on imports: computer chips, high-capacity batteries, pharmaceuticals and their active ingredients, and critical minerals and strategic materials, like rare earths.

Subsequent actions to strengthen those supply chains will depend on the vulnerabilities that each review finds, the officials said.

The order is an early salvo in the administration’s economic battle with China. China’s dominance of global supply chains for critical products like medical masks and for raw materials has prompted deep concerns that Beijing’s authoritarian government could cut off the United States at a whim.

China has periodically moved to ban the export of rare earth materials that are crucial for manufacturing electronics, fighter jets and weaponry. Early in the coronavirus pandemic, Beijing halted exports of surgical masks and protective gear as it diverted supplies to its own local governments and hospitals.

Beijing has also sought to expand its foothold in certain emerging technologies by investing heavily in research and subsidizing new factories, raising concerns that China could dominate the supply of electric vehicles, advanced telecommunications gear and semiconductors in the same way it has cornered other global markets.

A GameStop store in the Koreatown area of Los Angeles. Jim Bell, the company’s chief financial officer, who joined the company in mid-2019, is leaving.
Credit…Philip Cheung for The New York Times

GameStop’s chief financial officer, Jim Bell, is leaving the company in late March, following a stock-trading frenzy that briefly sent shares in the video game retailer surging.

The company gave no reason for Mr. Bell’s departure in its announcement on Tuesday, but noted it would look for a successor “with the capabilities and qualifications to help accelerate GameStop’s transformation.” Mr. Bell joined GameStop less than two years ago.

GameStop jumped into the headlines in late January when amateur investors used trading apps to buy options and pump up its share price, defying hedge funds that had bet the price would fall. The chaotic trading led to congressional hearings last week, but executives from GameStop, which was essentially caught in the middle, were not called to testify.

GameStop’s share price closed at about $45 on Tuesday. It reached $483 on Jan. 28 after starting the year at $19.

The wild swings in share price were detached from what was happening at the company, where a major stockholder has been trying to force a turnaround. In early January, Ryan Cohen, the manager of RC Ventures and a large stockholder, joined the GameStop board. He has been pressuring the company’s executive team to overhaul GameStop’s strategy and focus on digital growth. The company has more than 5,000 stores, many in American malls and shopping strips, but has steadily lost sales to major online retailers like Amazon.

Mr. Bell joined the company in June 2019 at the age of 51 from Wok Holdings, which owns the restaurant chain P.F. Chang’s. In a short statement, GameStop thanked Mr. Bell “for his significant contributions and leadership, including his efforts over the past year during the Covid-19 pandemic.”

Stocks on Wall Street climbed on Wednesday, a second day of gains that came even as government bond yields ticked higher.

After recovering from an early decline, the S&P 500 rose about 1 percent. Stocks have been through a turbulent stretch recently amid fears that stronger economic growth and higher inflation would prompt the Federal Reserve to withdraw some monetary support.

On Wednesday, yields on U.S. bonds resumed their march higher. The yield on 10-year notes jumped to as high as 1.42 percent.

But stocks shook off the gain this time, as investors instead focused on recovery efforts and the prospects that a new vaccine, this one developed by Johnson & Johnson, to be approved by the Food and Drug Administration.

Investors also watched the Federal Reserve chief’s second day of testimony on Capitol Hill. On Tuesday, Jerome H. Powell, the Fed chair, reiterated the need to provide plenty of support for the economic recovery from the pandemic.

“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Mr. Powell told the Senate Banking Committee on Tuesday. He spoke to lawmakers in the House on Wednesday.

  • Most European stocks indexes gained and the Stoxx Europe 600 about half a percent. The fourth quarter growth of Germany’s economy was revised higher to 0.3 percent, from 0.1 percent.

  • Most Asian indexes fell. The Hang Seng in Hong Kong dropped 3 percent with financial and consumer stocks falling the most after the government announced a plan to increase a tax on stock trading. Shares in Hong Kong Exchanges & Clearing fell by nearly 9 percent, the most in the index.

  • Futures of West Texas Intermediate, the U.S. benchmark, rose more than 2 percent to above $63 a barrel.

  • This week, for the first time since 2011, copper prices climbed above $9,000 a metric ton in London.

  • HP said on Wednesday that it would buy HyperX, the maker of computer accessories like headsets that are popular among gamers. HP will pay Kingston Technology $425 million for HyperX’s peripherals portfolio, with Kingston retaining the storage and RAM products that are offered under the HyperX brand. HyperX, which also offers microphones, keyboards and computer mice, has built its brand in part through endorsement deals with professional gamers and other celebrities.

  • A federal judge on Tuesday cleared the way for California to enforce its net neutrality law, denying a request by telecommunications providers to delay state rules meant to ensure equal access to internet content. Net neutrality is the notion that all internet content should be accessible to consumers and that broadband providers cannot block or degrade content. The court’s ruling clears the way for California to enact its law, a move that is expected to be replicated by other states in the absence of a federal rule.

  • The Federal Aviation Administration said late Tuesday that Pratt & Whitney engines on Boeing 777 planes must be inspected before the jets can fly again in the United States. United Airlines is the only American airline that operates Boeing 777s equipped with the PW4000 engine series, and the company said it would ensure that those two dozen planes and 28 more in storage complied with the F.A.A.’s order. On Saturday, one of the engines caught fire during a United Airlines flight and showered debris over Colorado, the latest such episode involving that engine family in recent years.

A line at a San Antonio food distribution center on Sunday after a winter storm left millions without power.
Credit…Christopher Lee for The New York Times

A winter storm in Texas that pushed its power grid to the brink of collapse and left millions without electricity during a brutal cold snap has led to the resignations of five officials who oversaw the state’s electric grid.

The Electric Reliability Council of Texas, which governs the flow of power for more than 26 million Texans, has been blamed for the widespread failures. The governor, lawmakers and federal officials quickly began inquiries into the system’s failures, particularly its preparation for cold weather, reports Rick Rojas for The New York Times.

The five board members, who announced on Tuesday that they intended to resign after a meeting set for Wednesday morning, were all from outside of Texas, a point of contention for critics who questioned the wisdom of outsiders playing such an influential role in the state’s infrastructure. In a statement filed with the Public Utility Commission, four board members said they were stepping down “to allow state leaders a free hand with future direction and to eliminate distractions.” In a footnote, the filing added that a fifth member was also resigning.

Those departing are the chairwoman, Sally Talberg, a former state utility regulator who lives in Michigan; Peter Cramton, the vice chairman and an economics professor at the University of Cologne in Germany and the University of Maryland; Terry Bulger, a retired banking executive who lives in Illinois; and Raymond Hepper, who is a former official with the agency overseeing the power grid in New England. Another person who was supposed to fill a vacant seat, Craig S. Ivey, has withdrawn from the 16-member board.

The board became the target of blame and scrutiny after the winter storm last week brought the state’s electric grid precariously close to a complete blackout that could have taken months to recover from. In a last-minute effort to avert that, the council, known as ERCOT, ordered rolling outages that plunged much of the state into darkness and caused electricity prices to skyrocket. Some customers had bills well over $10,000. | Newsphere by AF themes.