National

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

The nation's biggest banks are healthy enough to withstand a severe economic downturn, the Federal Reserve said on Thursday announcing the results of its annual stress test.

Why it matters: The banks proved they had enough capital to continue lending in a hypothetical scenario that saw unemployment skyrocket and commercial real estate prices and stocks collapse. The results of the yearly checkup open the door for banks to return billions of dollars to investors.

Details: All 34 of the biggest banks tested — including Goldman Sachs, J.P. Morgan and Citigroup — had more than the minimum amount of capital required by regulators after projected losses of over $600 billion under the Fed's made-up economic scenario.

That scenario was more extreme than last year since the economic baseline was healthier: the unemployment rate rises to 10%, commercial real estate prices fall 40% and stock prices drop 55%. 

How the banks do in the test determines how much capital they are required to set aside for a rainy day. Excess cash can be paid out to shareholders via dividends and stock buybacks.

The backdrop: The annual stress test, which the Fed started conducting after the 2008 financial crisis, comes as the nation grapples with heightened economic uncertainty. Inflation is rising at the fastest clip in over 40 years and the Fed has undertaken an aggressive interest rate hiking campaign to try to contain it, prompting fears of a coming recession.

Trade groups representing the big banks applauded the results: "Amidst increased economic headwinds, today’s outcome should serve as a welcome reminder that no matter the challenges ahead, banks are ready and willing to help weather the storm," Richard Hunt, CEO of the Consumer Bankers, said in a statement.

Fed stress test finds big banks can weather extreme economic shock

The banks proved they had enough capital to keep lending during a hypothetical economic meltdown.

Pedestrians pass a Chase bank branch in New York. Photo: Victor J. Blue/Bloomberg via Getty Images

Banks

Stock market

Axios Closer

CANNES, France — Netflix continues to project confidence despite a downshift in its business.

Why it matters: Investors have been abandoning the stock as conditions which propelled stay-at-home stocks disappear. But co-CEO Ted Sarandos said they have been here before.

Driving the news: "We've gone through these experiences where the market disconnects from the core business and you have to prove to the market that the thesis still works and the thesis is going to work long term," Sarandos said on stage today at the Cannes Lions advertising festival.

And despite having spent the past decade-and-a-half in streaming, he still sees Netflix as being in the early days of the format's popularity.

"Today we’re about 10% of what people do on TV … [There's] a lot of room to grow," he said.

Netflix is readying to launch an ad-supported option by as early as the end of the year to combat slowing user growth.

On Thursday, Variety also reported the company is laying off about 300 people, mostly in the U.S. It's the second round of cuts in the past two months. 

And fast-moving competition from the likes of Disney+ and Apple TV+ is pushing "the bar for great content" higher, said Sarandos.

What they're saying: "The content itself is working in the way that people want to see us working," he said.

What to watch: What's slowing down growth are macroeconomic issues that the company could have foreseen had the pandemic recovery been slower, he added.

Netflix sees 90% of TV viewing as untapped potential

Investors have hammered the stock, but co-CEO Ted Sarandos said the company has been here before.

Ted Sarandos onstage during the Netflix's Ted Sarandos on the Future of Entertainment session at the Lumiere Theatre in Cannes.

Ted Sarandos onstage during the Netflix's Ted Sarandos on the Future of Entertainment session at the Lumiere Theatre in Cannes; Photo by Eamonn M. McCormack/Getty Images for Cannes Lions

Netflix

Airlines are crying uncle. Reeling from staffing shortages, they are responding to a sudden upswing in demand by cutting flights and reducing their commitments to regional airports.

Why it matters: Americans are eager to travel again, and regional airports make it easier to reach some of the nation's far-flung hotspots.

Driving the news: American Airlines said Wednesday it plans to end service to Islip, New York; Ithaca, New York; Toledo, Ohio; and Dubuque, Iowa. 

And United Airlines is cutting 50 flights a day from Newark Liberty International Airport in New Jersey — a major hub for New York City area travelers.

30 airports have lost "at least half the departures they had in 2019," the Wall Street Journal reported earlier this month.

JetBlue and Spirit Airlines previously announced cuts to their summer schedules.

What they're saying: "The big loser, if you will, in the whole shakeout are folks who either live in small communities or are traveling to small destinations," Scott Keyes, founder of Scott's Cheap Flights, tells Axios. 

By the numbers: Airlines canceled 793,018 flights in North America in the first 23 weeks of the year, up 21% from the same period in pre-pandemic 2019, according to flight data tracker OAG.

There were 5,883 delays on Wednesday alone on flights within, into or out of the U.S., according to FlightAware.

Transportation Secretary Pete Buttigieg last week warned that his department could pursue enforcement action against airlines that don't adhere to consumer protection standards.

State of play: Airlines say they're straining to keep up in part because they don't have enough staff to deal with a surge in leisure travelers.

"I really want to underscore how drastic of a step it is to cut flights from a summer schedule," Keyes says. "It would be akin to Walmart saying we’re not going to open on Black Friday. To see them trimming the schedule in these summer months really underscores what a difficult position they’re in."

Yes, but: The airline industry had 751,165 employees as of April, according to the Department of Transportation, up from a pandemic low of 673,663 in November 2020.

That's the second-highest monthly total in the last 21 years, trailing only February 2020’s 753,382.

Keep in mind: TSA is also straining to keep up with the increase in travelers as it deals with the sort of labor shortages that other employers are grappling with.

"It’s just an ongoing train wreck," Keyes says.

The bottom line: Brace yourself for travel disruption this summer.

Summer travel mess: Flight cancellations pile up as airlines struggle to keep pace

Airlines are increasingly reducing flights to regional airports and canceling other flights as they deal with staffing shortages and increased bookings.

Illustration of an airport control tower with a giant sweat drop

Airlines

More dogs are heading to work each day with their pet parents, whether it's remotely in the home office or company headquarters.

The big picture: Remote work has grown dramatically during the pandemic and pet ownership has boomed with more than 23 million households adding a pet, a survey from Cesar Canine Cuisine found.

Friday is the annual National Take Your Dog to Work Day, a made-up day that was created in 1999. 

Companies are hosting in-person and virtual celebrations for their furry coworkers Friday, said Pet Sitters International, who created the day.

Context: More than half of dog owners said in a Cesar brand survey that they felt bringing their dogs to work would encourage them to take breaks (55%) and foster more social interaction in the workplace (52%).

89% said it's important for them to continue spending time with pets during the workday.

Two-thirds of pet parents would bring their pets to work if allowed.  

Mars Petcare launched the "Cesar Hire My Dog" program in March to inspire more businesses to become more pet-friendly and "help pet parents advocate for their dogs in the workplace."

By the numbers:  More businesses have voluntary pet insurance with 35.1% of private employers offering policies compared to 24.1% in 2020, according to preliminary survey data from the Wisconsin-based International Foundation of Employee Benefit Plans.

The foundation’s survey is still ongoing but preliminary data shows that 5% of workplaces allow pets at work compared to 4.5% in 2020.

A 2019 survey of employers by The Society for Human Resource Management found that 11% of companies allowed dogs.

What they're saying: “Now, more than ever, employers are looking for ways to boost employee morale,” Beth Stultz-Hairston, Pet Sitters International president, said in a statement. 

“With research showing what a positive impact dogs had on their owners during the pandemic, celebrating that special human-animal bond seems even more important this year,” Stultz-Hairston added.

Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans, said in an interview with Axios that some employers are looking at programs that allow workers to bring pets with them "as ways to attract and retain their employees."

"It's something that employees want because sometimes your pet is like your family," Stich said, adding some employers offer "pawternity" leave.

Meanwhile, the challenges of remote work are getting harder to ignore with a growing number of corporate executives wanting to put an end to the work-from-home revolution, Axios’ Javier E. David reports.

7.4% of American workers are teleworking because of COVID, down from a pandemic era high of around 35%, according to federal data. 

Kraft Macaroni and Cheese is changing name to "Kraft Mac & Cheese"

Where to get COVID vaccine appointments for children under 5

Biden outlines plan to lower gas prices by $1 a gallon

Editor's note: This article has been updated with new details about Mars Petcare's "Cesar Hire My Dog" program.

More companies allow dogs to come to office in remote work era

Companies are hosting in-person and virtual celebrations for Take Your Dog to Work Day Friday.

Dog sits on lap of person typing on computer

Dogs

Artist Amber Vittoria's step into the nonfungible token world helped her go "fully abstracted." Think ribbons of color or shapes scattered across the page.

Why it matters: The NFT boom of 2021 fed creatives. As coin prices took off, a marketplace where those coins could be spent blossomed. A downturn in coin values threatens what Vittoria refers to as "the digital art renaissance" — also the name of the panel she led at NFT NYC.

Catch up fast: The soon-to-be LA-based artist started selling her work as nonfungible tokens, or NFTs, in March 2021. Now, she can support herself from it.

Earlier this week her collaboration with LA-based streetwear brand The Hundreds resulted in shirts with a Vittoria-ized version of the words "JPEG Collector" as well as the Adam bomb logo. (Their pop-up shop downtown has already sold out, according to Vittoria.) 

Of her journey into NFTs, Vittoria tells Axios: "It was very surprising. I went from struggling to find freelance work to prioritizing art." 

"I try to remind myself—in times of uncertainty we as humans forget how resilient we are," she said, acknowledging that people may be less willing to spend on NFTs amid a crypto crunch.

"I'm not reminiscing about the bull run either," she added.

Vittoria's first NFT was a CryptoPunk she bought with her husband in 2021 using money meant to buy a car.

"Prices were stupid. We still don't have the car, but we have the CryptoPunk!" she said with a laugh. 

Before selling her first collection on OpenSea, a set of 25 NFTs meditating on and deconstructing the female form, she considered drawing for an NFT shop. But found out they were only hiring artists who draw cats. 

Flashback: Vittoria's inaugural NFTs sold out, but she took a months-long break after and "lurked" on the internet, because  "it didn't feel right continuing."

That collection involved physical works, which she would try to send to her collectors, only to learn that it was a bit of a crypto faux pas to ask for a home address.

"The barrier I ran into — physical pieces — I wanted to sell them. They were like 'no, I'm anonymous'," she said. "There's a learning curve."

State of play: Vittoria went fully digital after that, like her painted works, but created digitally. 

She sells numbered editions of her work in batches or lots. 

Other NFT artists might solely focus on what are called 1-of-1s, or limited edition pieces that suggest rarity because the probability of owning one are miniscule.

How it works: People can buy Vittoria's art on OpenSea with eth. 

Her Alphabet Collection comes with freebies. Those who collect a set of five lettered prints can message Vittoria directly on her Discord channel. 

She also combines these letters to create a separate word NFT and gives it to the collector, free of charge. 

What's next: Her next drop of 999 collages comes July 15.

A mini documentary from media outlet ONE37PM about her journey to Web3 is set to premiere June 28. 

She warns newcomers of using social media to sell, which can draw super fans as well as haters. 

"It’s really nice to meet so many of my collectors, especially this week at NFT NYC," Vittoria said, while saying the native-New Yorker in her cringes at the thought of being in Times Square. 

"The biggest difference in [engagement] is the difference between Web2 and Web3. Before it was like broadcasting, 'hello fam I hope you like.' Twitter feels like chatting with people who have become friends and have an interest in art in general," she said. 

There are plenty of less effusive reactions: "I was like 'here are my NFTs!' And people were like 'you’re a horrible person'.” There are a lot of hot takes on how NFTs are scams and Ponzi schemes," she said. 

Bottom line: "It's been life-changing," she said. 

Amber Vittoria, an artist freed by NFTs

The NFT boom of 2021 fed creatives, but a downturn in coin values threatens what she refers to as "the digital art renaissance"

Photo illustration of Amber Vittoria with abstract shapes.

Photo illustration: Aïda Amer/Axios. Photo: Amber Vittoria

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

Axios Pro Rata

In 2019 we wrote that Altria's $12.8 billion investment for a 35% stake in vaping products maker Juul was "at risk of becoming one of the worst corporate investments of all time."

June 2022 update: It is the worst corporate investment of all time.

Driving the news: The Food and Drug Administration on Wednesday issued a marketing denial order that bans sales of Juul products in the U.S., according to the WSJ. The FDA has not yet commented.

What to know: This is about Juul more than it is about vaping, as the FDA has allowed some Juul rivals to keep tobacco-flavored products on the market (fruit and mint-flavored vapes were banned in 2020).

Most of Juul's revenue comes from the U.S., even though its products are available in five other countries. Altria, which is best known for making Marlboro cigarettes, already had written down the value of its Juul investment to just $1.7 billion as of year-end 2021 (matching the year-earlier mark).

Former FDA commissioner Scott Gottlieb, who led the original charge against Juul, told Axios on Tuesday: "They've authorized three vaping products, so if they indeed deny Juul, it will likely be based, at least in part, on the legacy of abuse of that product. Juul will sue and argue that such a rationale is outside the scope of the application but I believe it's fully relevant. That product can't shake how it was abused in the market by children and how Juul positioned it for such abuse."

Elsewhere: Altria also continues to battle an FTC antitrust complaint related to its Juul investment, winning the first round back in February (FTC is appealing in full). The company and/or Juul also are defendants in more than 50 class-action lawsuits and more than 3,000 other vaping-related lawsuits, per securities filings.

Deal details: Altria, per terms of its Juul investment, isn't allowed to develop or market alternate vaping products until at least the end of 2024. The only caveat would be were Juul to be banned from U.S. sales, but that of course would wipe out almost all of Juul's remaining value.

The bottom line: Altria isn't a victim of bad luck here, even if it had ample reason to believe the FDA would let it keep selling tobacco and menthol-flavored vapes.

Juul already was hairier than a Yeti when Altria invested, but it nonetheless seemed to fetch a risk premium rather than a risk discount. Now, as the smoke begins to literally clear, Altria has very little more than lawsuits and regret to show for that decision.

Marlboro maker's bad bet on Juul

This looks like the worst corporate investment ever.

Illustration of a juul device forming a dissipating dollar sign in vapor 

Juul

SumUp, a London-based maker of point-of-sale payments solutions for small businesses, raised €590 million in equity and debt funding led by Bain Capital Tech Opportunities at an €8 billion valuation.

Why it matters: This reflects softening valuations for European fintech, given reports from earlier this year that investors were floating a €20 billion mark for SumUp.

Caveat: This is still a massive step-up for the company, which last raised equity funding in 2017. Or, put another way, SumUp isn't in the same boat as Swedish fintech Klarna — once Europe's most valuable startup with a $45 billion valuation, which now is said to be seeking new funds at around $15 billion.

Details: The round was split evenly between equity and debt. Other investors include BlackRock, btov Partners, Centerbridge, Crestline, Fin Capital and Sentinel Dome Partners.

The bottom line: "I can very comfortably say the €8 billion is a true and fair valuation, because that's the price people put on the company in the worst of markets... In this environment we think we will see good opportunities for M&A deals once people realize that money is not free any more." — SumUp CEO Marc-Alexander Christ to the FT

European fintech SumUp raises €590 million

The deal reflects softening fintech valuations in Europe.

Illustration of a phone with a mobile payment icon on the screen, unzipping to show cards and money inside.

Fintech

Nike announced Thursday that it plans to permanently close all its businesses in Russia in the coming months.

Driving the news: In March, Nike joined a slew of other global businesses in pulling back its business operations in Russia after the country's unprovoked invasion of Ukraine.

Now it is joining corporate giants such as Starbucks and McDonald's in permanently exiting the country.

The big picture: "NIKE, Inc. has made the decision to leave the Russian marketplace. Our priority is to ensure we are fully supporting our employees while we responsibly scale down our operations over the coming months," the company said in an emailed statement.

Last month, Russian media reported that Nike had not renewed agreements with the Russian company that operated 37 Nike-branded stores in the country, according to Reuters.

Editor's note: This article has been updated with a statement from Nike.

Nike to fully exit Russia in coming months

Nike joins the likes of Starbucks and McDonald's in permanently winding down all business in Russia.

 A woman walks into a Nike boutique in a shopping mall in Moscow

 A Nike boutique in Moscow. Photo: Vlad Karkov/SOPA Images/LightRocket via Getty Images

Nike

Russia

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

Axios Markets

The White House is showing a renewed focus on hammering down gasoline prices — including calling oil company executives to Washington for face-to-face talks Thursday.

Why it matters: Prices at the pump have become a central focus for increasingly cranky consumers, and a ubiquitous reminder of the administration's fecklessness on inflation, their top concern.

The executives will likely get an earful from Energy Secretary Jennifer Granholm, though it remains unclear what combination of carrots and sticks could coax the industry into pumping more crude and selling it more cheaply.  

State of play: The risk that runaway gas prices pose politically has prompted a flurry of activity. 

President Biden Wednesday called for Congress to suspend the Federal gas tax (though that could be counterproductive). 

Administration officials are not ruling out restrictions on energy exports (tricky in light of the need to help supply European allies facing the loss of Russian supplies).

And next month, Biden is expected to travel to Saudi Arabia — a country he once vowed to make "a pariah" on the world stage — to try to cajole more crude out of the kingdom. 

What they're saying: "With the world now focused on the risks for high and rising energy inflation, the likelihood of policy correction is rising," wrote Goldman Sachs analysts in a client note this week, referring to government efforts to stimulate oil production. 

Rising production out of Saudi Arabia and Russia — amid falling political will globally to blackball purchases from both — could help lower prices, per Goldman.

The impact: Market prices for wholesale crude oil and gasoline have started to roll over.

U.S. benchmark West Texas Crude is down about 8% this month, to just above $105 per barrel. 

It's down about 14% from its recent peak of $122. 

Yes, but: This isn't just about what the administration is doing. Much of the decline is also related to the growing odds that the Federal Reserve's rate hikes could push the country into a recession over the next year to 18 months, which would mean lower demand for oil.

Continued weakness in China — including a new lockdown in Shenzhen this week — is expected to be a drag on global growth. 

The bottom line: Soaring gas prices are a killer for politicians. It only makes sense that the administration is trying to do something about them.

White House shows renewed focus on gas prices

It's unclear what combination of carrots and sticks could coax the oil industry into pumping more crude and selling it more cheaply.

Illustration of a gas pump with the hose forming a descending stock trend line. 

White House

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Change in Indeed job&nbsppostings

There are increasing signs that workers' power — a consequence of the hot COVID-era economy — is leveling off or even eroding in some sectors.

Why it matters: The super-tight labor market has been great for working people but a little too spicy for the Fed's taste — chair Jerome Powell has cited it as a factor driving inflation. Now there are signs his rate hikes are having the intended cooling-off effect.

What they're saying: "It's not that workers have lost power, it's just that they're not increasingly gaining it," says Nick Bunker, economic research director at Indeed.

Details: There are still way more job listings on Indeed than there were before the pandemic started — a clear sign of high demand for workers — but postings are coming back down from the highs of last year.

The tech sector, where we've seen the most layoffs over the past month, is notching some noticeable declines. Listings for "software developers" fell about 7% over the past four weeks, Bunker says.

The folks at the Layoffs tracker website noted 109 layoff events so far in June, compared to 75 the prior month and just 17 in March.

Fear factor: You can't discount the role psychology is playing in the power equation. Employers fearing a recession are pulling back postings, Bloomberg wrote earlier this week. At the same time, workers are starting to worry about job security, as we reported. 

Meanwhile, the Wall Street Journal is giving advice on how to keep your job.

And yet: Remember, the unemployment rate is still really low!

What to watch: Whether the quits rate starts to ebb, Bunker says. So far it's held relatively steady, a sign that workers are still feeling that leverage — confident enough to risk a new job.

The next report is due out from the Labor Department in July.

Job market power is swinging back to employers

"It's not that workers have lost power, it's just that they're not increasingly gaining it."

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