Business News Live: Elon Musk, Bitcoin and Jerome Powell

Treasury Secretary Janet L. Yellen said on Wednesday that she is grappling with a host of “thorny” issues related to a provision in the $1.9 trillion stimulus package that restricts states from using federal aid money to fund tax cuts, suggesting that the looming legal battle over the matter could be long and complicated.

At a Senate Banking Committee hearing, Ms. Yellen said her team at the Treasury Department was working on developing guidance on how the $200 billion allocated for states and cities can be used.

The Treasury Department has said the intent of the law is for the relief money to pay for matters related to the coronavirus pandemic, not to subsidize tax cuts.

But Ms. Yellen acknowledged that the issue is a “thorny” one.

“We will have to define what it means to use money from this act as an offset for tax cuts,” Ms. Yellen said. “Given the fungibility of money, it’s a hard question to answer.”

The Treasury Department has 60 days from when the law was enacted to craft guidance on how the money can be spent. Ms. Yellen said she believes that states and cities should have a lot of flexibility in how they deploy the funds.

Last week, the Ohio attorney general sought a preliminary injunction that would bar the federal government’s ability to enforce what he described as the “tax mandate.”

Several Republican governors and 21 Republican attorneys general have asked for clarification on the provision. Ms. Yellen wrote a letter to the attorneys general on Tuesday evening explaining why there are restrictions on the use of the funds. She foreshadowed the legal argument that Treasury might use if litigation moves forward.

“It is well-established that Congress may place such reasonable conditions on how states may use federal funding,” she wrote. “Congress includes those sorts of reasonable funding conditions in legislation routinely, including with respect to funding for Medicaid, education and highways.”

Senator Mike Crapo, Republican of Idaho, urged Ms. Yellen to provide clear guidance for states quickly.

“It seems to me the states are hamstrung right now. They can’t do anything,” he said.

America’s top two economic officials told senators on Wednesday that the economy is healing but still in a deep hole, and that continued government support is providing a critical lifeline to families and businesses.

Jerome H. Powell, the Federal Reserve chair, and Janet L. Yellen, the Treasury Secretary and Mr. Powell’s immediate predecessor at the Fed, are testifying before the Senate Banking Committee. Their prepared comments echoed their testimony before House lawmakers on Tuesday.

Mr. Powell said in his remarks that the government averted the worst possible outcomes in the pandemic economic recession with its aggressive spending response and super-low Fed interest rates.

“But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes,” he said.

Ms. Yellen, who pushed hard for the recently-passed $1.9 trillion relief package, said that responding to a crisis with a needed surge of temporary spending without paying for it was “appropriate.”

“Longer-run, we do have to raise revenue to support permanent spending that we want to do,” she said.

She said that expanded unemployment insurance, part of the recent relief package, does not seem to be discouraging work and is needed at a time when the labor market is not at full strength.

“While unemployment remains high, it’s important to provide the supplementary relief,” Ms. Yellen said, noting that the aid lasts until the fall. She said that as the economy recovers, the aid “should be phased out.”

The Biden administration is also making plans for a $3 trillion infrastructure package. The fact that the government is spending so much, and contemplating spending more, at a time when the economy is recovering has stoked concerns about inflation among some economists and lawmakers.

Some onlookers fear that the Fed, which has interest rates at rock-bottom and is buying bonds in big quantities to help the economy, might be too slow to react to higher prices.

“I do worry that the Fed may be behind the curve when inflation inevitably picks up,” Senator Patrick J. Toomey, Republican from Pennsylvania, said during his opening remarks.

But Mr. Powell has consistently pushed back on concerns about runaway inflation, and did so again on Wednesday.

“We think the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation,” Mr. Powell said. “We think those dynamics haven’t gone away overnight, and won’t.”

Asked specifically about potential supply and demand mismatches — particularly in the context of a ship that had gotten stuck in the Suez Canal, but also in general as the economy reopens — he struck a similarly unconcerned tone.

“A bottleneck, by definition, is temporary,” he said.

He also batted back concerns about a recent increase in market-based interest rates. The yield on 10-year Treasury notes, a closely watched government bond, has moved up since the start of the year.

“Rates have responded to news about vaccination, and ultimately, about growth,” Mr. Powell said. “That has been an orderly process. I would be concerned if it were not an orderly process, or if conditions were to tighten to a point where they might threaten our recovery.”

The fashion retailer H&M is facing a potential boycott by millions of consumers in China after a statement by the company expressing deep concerns over reports of forced labor in Xinjiang stirred a social media storm this week.

The statement, which can be found on the website of the Swedish retailer, was posted last September after growing global scrutiny around use of Uyghur forced labor in the Xinjiang region of China.

In it, H&M said that it was “deeply concerned by reports from civil society organizations and media that include accusations of forced labor and discrimination of ethno-religious minorities” in Xinjiang and that it had ended sourcing cotton from growers in the region.

More than eight months later, and in the wake of sanctions by Western countries against China for its treatment of Uyghurs, H&M is now facing an angry online backlash from Chinese consumers. The outrage has been stoked by comments from celebrities and groups like the Communist Youth League, an influential Communist Party organization.

“Want to make money in China while spreading false rumors and boycotting Xinjiang cotton? Wishful thinking!” the group said in a post, echoing one of the People’s Liberation Army’s statements that called H&M’s statement “ignorant and arrogant.”

By Wednesday evening, at least three major Chinese e-commerce platforms — Pinduoduo, Jingdong and Tmall — had removed H&M from search results and withdrawn its products from sale, underscoring the pressures faced by foreign companies doing business in China while navigating political and cultural debates ranging from the country’s sovereignty to its checkered human rights record.

On Wednesday night, H&M China responded with a post on the Sina Weibo microblogging site, saying that the company did not “represent any political position.”

“H&M Group respects Chinese consumers as always,” the statement said. “We are committed to long-term investment and development in China.”

H&M is the world’s second-largest fashion retailer by sales, and China is its fourth-biggest market.

On Monday the European Union, United States, Britain and Canada announced sanctions on Chinese officials in an escalating row over the treatment of Uyghurs, in Xinjiang. Roughly one in five cotton garments sold globally contains cotton or yarn from the region, where authorities have used coercive labor programs and mass internment to remold as many as one million Uyghurs, Kazakhs and other largely Muslim minorities into model workers obedient to the Communist Party.

State broadcaster CCTV criticized H&M, and said that it was “a miscalculation to try to play a righteous hero.” H&M, it said, “will definitely pay a heavy price for its wrong action.”

Claire Fu contributed reporting.

Journalists at Stat, the medical and science news website lauded for its pandemic coverage, will join the Boston Newspaper Guild, union representatives said in a statement Wednesday.

Stat, headquartered in Boston, focuses on science, health and biotech journalism and has close to 40 editorial staff members. It was one of the first outlets to extensively cover the outbreak of the coronavirus in January 2020 and saw a boost in traffic and revenue in the past year as its ambitious coverage gained attention. Helen Branswell, Stat’s infectious disease reporter, won the 2020 George Polk public service award for her work covering the pandemic.

Damian Garde, a biotech reporter for Stat, said in an interview that workers hoped union protections would help make Stat an even more attractive and competitive employer.

“When people look at the Stat trajectory, they point to my colleague Helen Branswell’s very prescient coverage ahead of the Covid-19 pandemic really becoming what it would become,” he said. “And I think one of the lessons there is: If you invest in people like Helen Branswell, you, too, can have prescient coverage.”

Stat, which was started in 2015 by the Boston Red Sox owner John W. Henry, is produced by Boston Globe Media Partners, the parent company of The Boston Globe newspaper, which is owned by Mr. Henry and his wife, Linda Pizzuti Henry. The two publications have separate staffs.

Scott Steeves, the president of the Boston Newspaper Guild, said in a statement that the addition of Stat workers would mean a stronger voice for the union.

“At a time when independent journalism is so important, Guild members strive to deliver the highest-quality news product possible while also standing together to ensure economic and workplace protections,” he said.

Mr. Garde said the union eligibility of certain Stat employees was still under discussion as part of the ongoing negotiations between the Boston Newspaper Guild and Globe management. Globe union employees have been without a contract for more than two years as a standoff over a new contract continues.

Globe management did not immediately respond to a request for comment.

The Boston Newspaper Guild is affiliated with the NewsGuild, which also represents New York Times employees.

Elon Musk, the chief executive of Tesla who recently added “Technoking” to his title, said on Wednesday that the company would accept Bitcoin as payment for cars in the United States, a move that is at odds with the company’s image as an environmentally friendly electric-car maker.

Tesla will hold the digital currency, rather than convert payments to dollars, and handle the crypto transactions internally, Mr. Musk said.

“Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency,” Mr. Musk explained in a tweet. That means when someone buys a Tesla with Bitcoin, the price of the car could well rise — or fall — over time. In other words, Tesla is turning one-time payments into assets with shifting value, or, essentially, investments.

Buyers outside the United States will have the option to use Bitcoin “later this year,” Mr. Musk said.

Mr. Musk’s embrace of Bitcoin is hailed by many cryptocurrency enthusiasts, but the digital currency’s affect on climate change has come under increasing scrutiny.

“Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing,” Bill Gates recently told The New York Times. Depending on the study, the annual carbon emissions from the electricity required to mine Bitcoin and process its transactions are equal to the amount emitted by all of New Zealand. Or Argentina.

There is also an electronic waste problem associated with bitcoin mining, argues Alex de Vries, an economist who created the Bitcoin Energy Consumption Index and tracks the unintended consequences of digital trends. Bitcoin mining is done with highly specialized equipment that has a short life span, and the tools cannot be repurposed, making investment in the digital currency even more problematic from an environmental perspective, he told The Times.

Mr. Musk said last month that the company bought $1.5 billion in Bitcoin for its treasury. The announcement on Wednesday confirms speculation in the crypto community that Tesla would not simply contract out payments to a third-party processor and treat Bitcoin like dollars.

Since Tesla’s Bitcoin purchase in February, the price of Bitcoin and other cryptocurrencies has soared to record highs, but trading has been volatile.

Analysts are pleased with the symbolism at least. “This is a seminal moment for Tesla and for the crypto world,” wrote Daniel Ives and Strecker Backe, analysts at the investment firm Wedbush. “This morning’s news formalizes the strategy of Musk and Tesla diving into the deep end of the pool of bitcoin and crypto from a transactional perspective.”

The comedian John Cleese is selling a digital sketch that comes with a nonfungible token, or NFT, to authenticate its authorship via blockchain technology. It’s a joke, sort of.

Evoking a classic con, the sale of the Brooklyn Bridge, the Monty Python actor is auctioning an image of the bridge by “The Unnamed Artist John Cleese,” with bidding running through April Fools’ Day. “I don’t make the jokes,” Mr. Cleese told the DealBook newsletter. “I just point them out.”

The project highlights the hyper-commodification of art in a frenzied market. Christie’s recently held its first NFT auction, selling the work of an artist known as Beeple for $69,346,250. That’s how much Mr. Cleese is asking for the sketch (plus 50 cents) if a bidder wants to “buy it now.” He’ll split the proceeds evenly with his partners: a comedy writer, an animator and a law professor doubling as crypto consultant.

The highest bid for Mr. Cleese’s work is now about $36,000. “I think it’s very funny,” Mr. Cleese said. “At the same time, we might make some money.”

“Some things are worth pointing out, and some are not,” Mr. Cleese said. The Beeple sale was notable because it revealed a “mad world,” he added, with people disconnected from meaningful emotional experiences, like seeing a painting at a gallery. Yet the 81-year-old also conceded that someone younger, for whom the line between the physical and digital worlds is more blurred, could have feelings about an NFT.

The art world can’t afford to dismiss NFTs, Mr. Cleese said. Nor can he. By mocking the craze, he is now implicated in the thing he finds absurd — just how he’s made a living as a comedian.

Robinhood, the stock-trading app, said on Tuesday that it had filed a draft registration to go public, joining a wave of financial technology companies that plan to list on the stock market or that have raised new funding.

The exact timing or price of the offering has not been set. Private market investors have valued Robinhood at roughly $12 billion and some have speculated its initial public offering could top $20 billion. It is working with Goldman Sachs on its offering, a person familiar with the company said.

Robinhood used a process known as filing confidentially that allows it to keep some details under wraps in the early part of going public.

Financial technology companies have been booming. Coinbase, a cryptocurrency start-up, is expected to list its shares in the coming weeks, with investors estimating that it could be worth as much as $100 billion. Stripe, a start-up that offers payment processing services, raised funding this month that valued it at $95 billion, making it the most valuable start-up in the United States.

Robinhood began making plans to go public last year after its growth spiked in the pandemic, with some people using their stimulus checks to day trade.

But it paused those plans in January when a group of online traders banned together to drive up the stock prices of so-called “meme stocks” like GameStop, causing short-sellers to lose money and forcing the exchanges to halt trading of some stocks.

Amid the frenzy, Robinhood restricted the trading of some stocks, outraging many of its users and drawing nearly 50 lawsuits and multiple probes from regulators. Vlad Tenev, the company’s chief executive, was called to testify in front of Congress about the market frenzy and Robinhood’s role in it.

Despite the anger, the GameStop incident boosted Robinhood’s name recognition and led to more downloads of its app, which is popular because it charges no fees for stock trading. Robinhood has been criticized for making day trading into a gambling-like game, where investors don’t always understand the risk they are taking on.

Private investors have stood by the Menlo Park, Calif.-based company. During the frenzy, Robinhood raised two rounds of emergency funding totaling $4.4 billion in a matter of days.

Stocks on Wall Street rebounded on Wednesday, while shares in Europe were slightly lower. Oil prices climbed, also rebounding from a recent decline, after a container ship blocked traffic in the Suez Canal.

United States

• The S&P 500 index rose about half a percent in early trading, while the Nasdaq composite was flat.

• Yields on government bonds ticked higher. The yield on 10-Year Treasury notes was at 1.64 percent. Yields had declined on Tuesday after Jerome H. Powell, the Federal Reserve chair, continued to play down the prospects of high sustained inflation.

• Intel rose about 2 percent in early trading. The company said on Tuesday that it planned to spend $20 billion on two new chip factories near facilities in Arizona amid a global shortage.

• GameStop dropped about 20 percent after quarterly earnings released on Tuesday missed expectations and the company said in a filing it could sell additional shares.

• Tesla’s shares were slightly lower after Elon Musk said the carmaker would accept Bitcoin, the cryptocurrency, as payment for cars in the United States.

Europe

• The eurozone purchasing managers’ index for manufacturing and services for March was above 50 — the line between contraction and expansion — for the first time since October. Germany manufacturing output was at a record high and the index for British services rose to 56.8, well above expectations for a reading of 51.

• The benchmark Stoxx Europe 600 index was 0.2 percent weaker, after opening 0.7 percent down. The FTSE 100 index in Britain was down 0.3 percent.

• Data showed that inflation in Britain unexpectedly fell to an annual rate of 0.4 percent in February from 0.7 percent the month before. Analysts at RBC said they still expected inflation to rise in coming months, but the lower-than-expected February data reflected the pandemic’s disruption to normal seasonal price patterns. For example, clothing prices didn’t rise in the new year after the traditional sales period.

Oil Prices

• Oil prices rose after a container ship got stuck in the Suez Canal, blocking traffic in one of the world’s busiest shipping arteries. The canal is important for the movement of oil as it travels from the Persian Gulf region to Europe and North America. Brent crude futures rose as much as 3.3 percent, to just under $63 a barrel, but then eased slightly after reports that the vessel had been refloated and workers were hoping to clear a space for shipping to resume.

• Intel’s new chief executive is doubling down on chip manufacturing in the United States and Europe, a surprise bet that could please government officials worried about component shortages and dependence on factories in Asia. Patrick Gelsinger, who took the top job in February, said on Tuesday that he planned to spend $20 billion on two new factories near existing facilities in Arizona. He also vowed that Intel would become a major manufacturer of chips for other companies, in addition to producing the processors that it has long designed and sold.

• Walt Disney Studios on Tuesday pushed back the release dates of six movies, including “Black Widow,” a hotly anticipated Marvel prequel. In addition, “Black Widow,” now scheduled for July 9 instead of May 7, and another major Disney movie, “Cruella” (May 28), will premiere on Disney+ at the same time they arrive in theaters. Disney pulled “Luca,” the next Pixar film, from theatrical release entirely, saying it would debut exclusively on Disney+ on June 18. The other movies that were delayed include “Free Guy,” an action-comedy starring Ryan Reynolds as a bank teller who finds himself inside a video game; “Shang-Chi and the Legend of the Ten Rings,” a Marvel extravaganza starring Simu Lieu alongside Awkwafina; and “Death on the Nile,” an all-star remake based on the Agatha Christie mystery.

• Shares of GameStop tumbled in after-hours trading on Tuesday as quarterly earnings missed expectations and the company said in a filing it could sell additional shares. The company’s stock was down roughly 12 percent shortly after 6 p.m. The stock began to slide after the company said in a separate filing with the Securities and Exchange Commission that it was evaluating whether to sell additional stock “primarily to fund the acceleration of our future transformation initiatives.”