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Jerome Powell at the Council on Foreign Relations in New York City. Photo: Spencer Platt/Getty Images
Fed Chair Jerome Powell has been put in a tough situation by President Trump and the market ahead of July's FOMC meeting, with his hand forced in the face of historic uncertainty. But he hasn't done much to help himself.
Driving the news: Powell again sought safety in equivocation on Tuesday, noting during a speech at the Council of Foreign Relations that "The global risk picture has changed ... since May 1, significantly," but also saying "it’s important not to overreact in the short term to things that happen to be temporary or transient."
Why it matters: The U.S. economy is at a delicate moment: trade and manufacturing data are worsening, jobs growth is volatile and slowing, and the bond market is bracing for the worst while equity investors keep expecting the best.
Be smart: The Fed chair has responded by embracing what Axios' Felix Salmon calls "constructive ambiguity," pushing back against the blueprint created by predecessors Ben Bernanke and Janet Yellen. They dictated the Fed's plans to the market with forward guidance and long-winded policy statements. Powell has reversed course.
The bottom line: Powell is not just fighting President Trump's continued criticism, but also his trade war's negative impact on the U.S. economy, while also having to hedge against a surprise agreement, Axios' Courtenay Brown writes.
The onslaught of underwhelming U.S. manufacturing data continued as the Richmond Fed reported factory activity barely expanded during the month, reflecting a decrease in the employment index.
The U.S. national debt will rise to "unprecedented" levels if spending continues on the same trajectory, the CBO reports in its latest projections. The nonpartisan organization predicted debt will almost double from the current 78% of GDP to 144% by 2049.
The intrigue: Things could actually be worse than that. The projection is an 11 percentage point reduction from last year's estimate, based largely on the expectation that U.S. interest rates will remain historically low for the next decade-plus.
Still, the agency warns: "The prospect of such large deficits over many years, and the high rising debt that would result, poses substantial risks for the nation and presents policymakers with significant challenges."
Axios' Bob Herman writes: The pharmaceutical industry has already shelled out more than $200 billion for acquisitions during the first half of 2019, capped off yesterday by AbbVie's $63 billion buyout offer for Allergan.
The big picture: This year's deal-making has already surpassed 2017 and 2018, as drug companies plan for patent losses and jockey for lucrative assets that are advancing in clinical trials, including gene therapies.
Driving the news: The AbbVie-Allergan combination makes 2019 one of the busiest for pharmaceutical deals in the past several years.
The running theme in almost all of these deals: scoop up cancer drugs and gene therapies, which command the highest prices.
Yes, but: AbbVie-Allergan is different. Wall Street has been down on both companies, and this buyout is focused on Allergan's aesthetics drugs, like Botox. It's largely about protecting economic moats, based on AbbVie CEO Richard Gonzalez's comments.
The big question: The Federal Trade Commission is increasing its scrutiny of pharma mergers, including BMS-Celgene and Roche-Spark. So, don't assume every deal will get clean antitrust approval.
Of note: The $188.24 per share AbbVie will pay is 45% more than Allergan's last close. AbbVie's stock dropped 16%, its biggest slide since 2012.
U.S. restaurants have been a beacon of hope in the moribund brick-and-mortar retail picture, but they now face trouble of their own, analysts at ratings agency S&P Global warn.
What's happening: "Already, cracks are showing across our rated restaurant universe," Diya G. Iyer, S&P's primary credit analyst, wrote in a note to clients Tuesday.
Details: Despite some improving brands, the rise of food halls and continued pressure on lower-income households this year will work against much of the fast casual and fast food sector, Iyer warns, where Pizza Hut, Wendy's and BossCo (parent of Checkers) have all been downgraded to CCC+ ratings with negative outlooks.
By the numbers:
Yes, but: S&P notes that there have been 0 restaurant defaults in the last 2 years and only 1 a year in the years prior.
Watch this space: "We will continue to closely monitor refranchising efforts that McDonald's Corp., Wendy's, and other major players undertook in recent years," Iyer writes.