Illustration: Sarah Grillo/Axios

Big Tech was buoyed by the exact thing that prevented the dreadful GDP report from being even worse in the second quarter: the pandemic stimulus measures.

Why it matters: The stimulus is in the spotlight as its key expanded unemployment benefits provision is set to lapse despite coronavirus cases surging across the country, reimposed lockdown measures and more businesses shuttering.

What's happening: Personal income soared by a staggering 7.3% in the second quarter from the prior three months — a phenomenon that doesn't typically happen in the middle of a recession.

  • It was made possible by measures like the extra $600 in weekly unemployment benefits and the one-time stimulus checks, which made up for the collapse in wages.
  • Strip out government support programs and personal income fell 6.1%.

The big picture: Big Tech executives, whose companies have become a symbol for the deep divide between the soaring stock market and the downward spiraling economy, touted these stimulus measures as a reason why their businesses thrived in the second quarter.

  • What they're saying: The increase in demand for Apple products came down to a range of factors — including economic stimulus in the U.S, Apple CEO Tim Cook said during an analyst call on Thursday.

Worth noting: As the pandemic raged, these companies have come to represent a whopping 22% of the S&P 500.

  • Their combined market value jumped by $250 billion in late trading after their earnings were released, giving these companies a bigger hold on the stock market.
  • It's also a win for traders who have bet these so-far Teflon-protected companies would come out even bigger in the midst of the economic collapse caused by the pandemic.

Yes, but: Big Tech companies, along with others, are expressing concerns about what happens to the economy — and their business — after the stimulus runs dry.

  • "We don’t know what the subsequent economic stimulus will look like. And to the extent that stimulus decreases in the future and recession lingers, that could impact consumer purchasing power for advertisers in areas like e-commerce," Facebook CFO Dave Wehner said on the company's analyst call.

Driving the news: The enhanced employment benefits millions of Americans are relying on will lapse.

  • The Senate adjourned until next week, without a deal to extend the benefits (or even replace them with an alternative amount).
  • There's also little progress on negotiations so far on a broader, supplemental stimulus package.

The bottom line: Hopes for a swift economic rebound are being downgraded, with analysts paring back estimates for Q3 growth as additional stimulus hangs in limbo.

Go deeper

Dion Rabouin, author of Markets
Sep 16, 2020 - Economy & Business

2020 results won't much change companies' plans for the future

Adapted from PwC; Chart: Naema Ahmed/Axios

The stock market has shown limited reaction to changes in polling on the presidential election and PwC's latest survey of top executives show most have largely similar plans for the future regardless of who wins in November.

Watch this space: The PwC survey also showed that execs are almost uniformly in support of additional stimulus measures, with 95% saying some type of fiscal policy is needed and 78% saying their own business needs further fiscal policy support.

Fed upgrades expectations for pandemic-hit economy

Jerome Powell testifies before Congress in June. (Photo: Tasos Katopodis/Pool/ AFP via Getty Images)

The Federal Reserve said Wednesday that the economy will shrink by 3.7% this year — a rosier outlook than the 6.5% contraction initially projected in June.

Why it matters: The economy is still wrecked by the coronavirus pandemic, but has rebounded faster than some anticipated. Signs still suggest the recovery could stall out. The August unemployment rate is already lower than where the Fed, in June, said it would be by year-end.

Updated 1 hour ago - Politics & Policy

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Illustration: Sarah Grillo/Axios

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