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Illustration: Aïda Amer/Axios
Despite historically low interest rates, U.S. companies are being unusually frugal, holding back on issuing new debt and pumping up their balance sheets with cash.
Why it matters: Historically, when interest rates are low and the economy is strong, companies have levered up to increase capital expenditures and buy assets in order to expand. The opposite is happening now.
What they're saying: "That is highly unusual, as being late cycle this is precisely when companies are supposed to lever up," credit strategists at Bank of America Global Research said in a recent note.
By the numbers: Net debt declined on a year-over-year basis in the fourth quarter of 2019 for the first time in nearly a decade, Bank of America's data shows.
What's happening: Despite increased profits from the Tax Cuts and Jobs Act, CEOs and company leaders have told Axios the uncertainty of the U.S.-China trade war and fears of an imminent recession discouraged big-ticket spending during 2019.
Be smart: It's not just net debt. Companies have added very little gross debt, dating back to the second quarter of 2017, BofA's data shows, the continuation of a "remarkable development."
Between the lines: Investment grade companies that would be in the best position to issue very cheap debt to finance investment projects or mergers are pulling back in part because they spent so much between 2014–2017 pursuing large-scale M&A.
Wells Fargo is near a deal to pay $3 billion to settle its myriad claims of consumer abuse over years. (Bloomberg)
Japan's manufacturing PMI fell to 47.6 in February, the 10th straight month in contraction territory and the weakest reading since December 2012. (Reuters)
A majority of surveyed economists now expect Japan to fall into recession this quarter. (Bloomberg)
Morgan Stanley's CEO said he began talks to acquire E*Trade in December, and the Charles Schwab-TD Ameritrade merger encouraged the $13 billion purchase. (WSJ)
The government of Hubei Province will extend its business shutdown for a third time, to March 10, more than a month and a half after the Lunar New Year holiday was slated to end. (Nikkei)
The Philadelphia Fed's manufacturing business outlook rose to near its highest level on record, and notched its biggest reading above economists' expectations in history.
Why it matters: The survey's results were taken in the immediate aftermath of the phase one U.S.-China trade deal, which bolstered expectations among many in the manufacturing industry.
Details: The future general activity diffusion index, which measures firms' expectations six months ahead, rose to 45.4 from 38.4 in the previous month. More than half of the firms surveyed expected activity to rise over the next half a year, and new orders almost doubled, rising to 33.6 from 18.2.
Yes, but: Following Wednesday's strong producer prices report, which showed the largest gain since October 2018, the Philly Fed survey provided more evidence of upward pressure on costs. Prices paid rose to 19.7 from 14.6.
One more thing: The index's employment component fell significantly to 9.8 from 19.3.
The intrigue: Despite the PPI report Wednesday and the Philly Fed reading Thursday showing serious potential for inflation to pick up, expectations for the Fed to cut rates by year end remain near 90%, according to CME Group's FedWatch tool.
Illustration: Eniola Odetunde/Axios
Axios' Courtenay Brown writes: When California passed its boardroom law, requiring public companies based there to have at least one female director, there were concerns it would spark a gold rush for the same handful of well-known women — but that hasn’t happened.
Why it matters: Of the 138 women who joined all-male California boards last year, 62% are serving on their first company board, per a new study by accounting firm KPMG.
Of note: The report doesn’t look at whether the women are also on the boards of private companies or nonprofits.
There’s no standard definition of how many boards is "too many" for one person to serve on.
The backstory: California's first-in-the-nation law was signed in September 2018, giving companies more than a year to comply. By 2021, companies with five-person boards will have to have at least two women, while boards of six or more will have to have three.
The Conference's Board's index of 10 major economic indicators jumped in January, doubling Wall Street expectations.
Why it matters: Real estate is clearly booming in the U.S., as low interest rates have prompted increased buying and a response from builders.
What they're saying: “The LEI’s six-month growth rate has returned to positive territory, suggesting that the current economic expansion — at about 2 percent — will continue through early 2020," Ataman Ozyildirim, senior director of economic research at the Conference Board, said in a statement.
Yes, but: The numbers also come from a bullish period after the signing of the phase one trade deal and before the outbreak of novel coronavirus.
Charles Drew was a physician, surgeon and medical researcher who invented the refrigerated trucks that are used to this day to transport blood between locations, known as bloodmobiles or mobile blood donation centers.