Wall Street ended Wednesday with mixed results, with the Nasdaq Composite giving up its earlier gains and ending down 0.1%.
The S&P 500, meanwhile, closed up 0.4%, just a hair below its September 2 all-time high. The Dow closed up 0.4%, or 152 points.
The Federal Reserve’s Beige Book most recent report, a summary of how things are going in the central bank’s 12 districts, has given us yet more reason to be vexed by the supply chain chaos.
The report, released Wednesday, says that while the economy is growing, “that the pace of growth slowed… constrained by supply chain disruptions, labor shortages, and uncertainty around the Delta variant of COVID-19.”
That said, consumer spending is mostly holding up even as car sales are declining because of low inventory and high prices.
“Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months,” the report said.
Oil prices notched fresh seven-year highs on Wednesday, signaling yet more pain at the pump for American drivers.
US crude jumped another 1.1% to close at $83.87 a barrel, the highest settle since October 13, 2014. That’s more than double the price of 12 months ago.
Oil hit an intraday high of $84.25 a barrel, topping $84 a barrel for the first time in seven years.
Not surprisingly, prices at the pump continue to creep higher. The national average for regular gasoline rose to $3.35 a gallon on Wednesday, up by nearly seven cents from a week ago, according to AAA. Regular gas sold for an average of $2.16 a gallon a year ago.
The latest rally comes after a new government report showed weekly crude inventories unexpectedly fell by half a million barrels. Crude has now settled at seven-year highs for five consecutive trading days.
Brent crude, the world benchmark, gained nearly 1% to finish at a fresh three-year high of $85.82 a barrel.
There is no Federal Reserve meeting this month, so investors waiting for an official taper announcement will have to wait a little longer. But FOMC voting member Randal Quarles just threw those people a nugget.
“I think the substantial further progress test has been met,” Quarles said during a conversation at the Milken Institute Global Conference regarding the central bank’s desire to see certain progress in the economy and labor market before changing policy.
The Fed next meets on November 2.
The high level of pandemic-era inflation has been a continuing thorn in the Fed’s side. For months, the central bank kept saying the price increases were merely temporary, before acknowledging that they could stick around for longer.
And that presents a new challenge for policy makers: tightening policy to rein in inflation now, given that monetary policy moves rather slowly, could lead to lower demand just as supply chains are improving, said Quarles. “We could undershoot our inflation target.”
Then again, there’s a chance that price increases will stick around.
If the current supply bottlenecks were to last longer than they should, leading current levels of inflation to last longer, American consumers will take that into account for their buying decision.
“The fundamentals question we face at the Fed right now is ‘how long is too long’? I don’t think it has been too long right now,” Quarles said.
Earnings season is in full swing and it’s been good news so far, according to Schwab CIO Omar Aguilar:
“Everything seems to be confirming that earnings push the investor focus back to fundamentals,” he said during the CNN Business digital live show Markets Now. And if proof were needed, Wall Street is trading higher today.
So far this year, investments in cyclical stocks have been leading the market higher, Aguilar said.
But there are plenty of clouds on the horizon, he added: supply chain constraints are shoring up inflation and could hurt the recovery. This makes the Federal Reserve – that guardian of stable prices – nervous, and has led to expectations of tighter monetary policy going forward.
“While the market might expect that [rate hikes] will happen faster than anticipated, that doesn’t mean that it will,” Aguilar said. After all, the Fed has confirmed again and again how data-driven it is. Aguilar predicts a first interest rate increase may occur in the last quarter of 2022 or in early 2023.
With bitcoin prices hitting a new all-time high, it seems that bitcoin miner Stronghold Digital Mining (SDIG) picked a perfect day to make its Wall Street debut.
Shares of Stronghold, a company that operates in Pennsylvania coal country, skyrocketed nearly 65% in their initial public offering.
CNN Business spoke to Stronghold CEO Greg Beard about the stock sale, which raised nearly $115 million for the company.
“We’re very proud that we went public the regular way,” Beard said, a jab at companies that have used so-called blank check mergers with special purpose acquisition companies (SPACs) to go public instead of selling new shares in an IPO.
Stronghold takes waste coal, a byproduct from coal mining, to use as an energy source for its bitcoin mining operations. Beard is quick to point out that the company is not using new coal to create energy for its bitcoin mining rigs.
“We do burn it, but with emissions controls to knock out toxins,” Beard said, explaining that this is a more environmentally friendly way to use coal assets.
Beard said that Stronghold’s mining costs are about half of the industry average since the company owns its own mining hardware as well as its own power plant, and that the company plans to use some of the proceeds from the offering to buy more equipment.
Prices are rising all over the place as supply chain issues and high demand from consumers are keeping producers on their toes.
Some worry that prices could rise so far that Americans might stop spending. But so far it doesn’t seem that’s likely to happen.
“I am somewhat surprised, although it does make sense when we look at this against the backdrop of billions in savings,” said Stifel Chief Economist Lindsey Piegza on the CNN Business digital live show Markets Now.
“Consumers are moving forward facing this pent-up demand,” she added.
But while the higher prices and supply chain problems have yet to hurt the US consumer, Piegza expects these problems to persist: “I think it will have to be around for quite some time,” she said.
Social media company Pinterest could soon have a new fintech owner if rumors about PayPal’s interest are to be believed.
Shares of Pinterest (PINS) soared nearly 10% in mid-afternoon trading following reports from Bloomberg, CNBC and Reuters suggesting that PayPal may make a $70 a share bid for Pinterest.
That would value Pinterest at about $39 billion and is more than 25% higher than Pinterest’s closing stock price Tuesday. PayPal (PYPL) fell 4.5% Wednesday.
The two companies were not immediately available for comment. But a deal could make sense for PayPal, which has courted a younger user base with its Venmo payment sharing app.
And Pinterest, a top performing social media stock last year, has cooled off a bit this year. Shares are down nearly 10% in 2021, as the company has lost some of its luster compared to other hot social networks such as TikTok and Snapchat (SNAP).
When Southwest Airlines canceled more than 2,000 flights between October 8 and October 11, inconveniencing hundreds of thousands of passengers, some suggested it was caused by pilots refusing to fly in protest over the airline’s vaccine rules.
The pilots unions at Southwest and American are on record opposing recently announced vaccine mandates for those airlines’ employees. But Southwest and its pilots union both insisted that those objections had nothing to do with the service disruptions, in which the airline was left without the crews it needed to operate its full schedule for several days. They point to statistics on absenteeism and pilots volunteering for flights that they said show there was no sick-out.
But United Airlines CEO Scott Kirby threw some shade on those rivals and their pilots, saying in an interview Wednesday that the fact that about 97% of United employees already have been vaccinated or applied for an exemption from the mandate means it doesn’t have to worry about those kinds of service meltdowns.
“This is largely a rear-view mirror issue for us,” he said about vaccine mandates in an interview on CNBC. “That winds up meaning that over the holidays, customers can book with confidence at United. I suspect that some of the noise and issues you’re seeing elsewhere could lead to [service] challenges.”
Later, speaking with investors, Kirby clarified that he thinks it is a risk for airlines to allow employees to choose Covid testing or getting vaccinated, rather than requiring the vaccine for everyone, as United has done.
“Other airlines … they’re likely to have tens of thousands of employees that need to be tested every week,” he said. “Can you imagine, you have tens of thousands of employees, people forget to get their tests, people do the test wrong, people don’t get it done, people test positive. And if you think weather in one state can lead to a meltdown, imagine if you have thousands of employees a day calling in and saying, “For some reason, my test didn’t pass.”
What a month it has been for bitcoin! The cryptocurrency hit a new all-time high of more than $66,000 Wednesday morning. Prices have surged in October thanks to more support from top institutional investors like George Soros and the launch of the first exchange-traded fund tied to bitcoin futures.
The ProShares Bitcoin Strategy ETF (BITO) began trading Tuesday and it is likely to be the first of many bitcoin ETFs that will hit Wall Street in the coming months.
United Airlines reported an operating loss in the third quarter, but said that the recovery in air travel that started earlier this year is back “on track.”
United also said that a rebound in international and business travel, two of the most lucrative sources of revenue for airlines, is particularly encouraging.
Rules were announced to reopen US-European air travel for fully-vaccinated passengers as of Nov. 8. United executives told investors Wednesday that bookings on those trans-Atlantic routes the final two months of the year are now above where they were in the same period of 2019, ahead of the pandemic. United now plans to increase capacity on international routes, adding 10% more seats on those flights compared to 2019. Domestic capacity should remain roughly equivalent to 2019 levels.
CEO Scott Kirby said that rise of Covid cases delayed the office re-openings that had been expected to boost business travel after Labor Day. The airline now believes the surge in business travel will occur in January.
Kirby also said in an interview on CNBC that leisure travelers are likely to pack into planes during the upcoming holiday travel season.
“Airplanes are going to be full,” he said. “The demand for the holidays is really robust.”
Shares of Brinker International (EAT), which owns Chili’s and Maggiano’s Little Italy, sank 10% in early trading after it told investors that staffing challenges and increasing food costs is eating into its bottom line.
Same-store sales at Chili’s and Maggiano’s both declined in August before rebounding in September.
US stocks rose modestly at Wednesday’s opening bell.
The Dow opened 0.1%, or 33 points, higher, while the S&P 500 rose 0.2%. The Nasdaq Composite also opened up 0.2%.
The economic calendar is quiet with the exception of the Federal Reserve’s Beige Book report on economic conditions in the different Fed districts, which is due at 2pm.
As for earnings season, Tesla (TSLA) and IBM (IBM) are among the companies reporting results after the closing bell today.
Procter & Gamble (PG), the consumer goods giant that makes Pampers diapers, Crest toothpaste and Tide detergent, says that running its business is far from simple right now.
“Supply chains are under pressure from tight labor markets, tight transportation markets and overall capacity constraints,” Chief Financial Officer Andre Schulten told analysts this week. “Inflationary pressures are broad-based and sustained.”
But it does have confidence that it can weather the storm, thanks to its size, its ability to raise prices and a flood of consumer spending.
“These costs and operational challenges are not unique to P&G, and we won’t be immune to the impact,” Schulten said. “However, we think the strategies we’ve chosen, the investments we’ve made and the focus on executional excellence have positioned us well to manage through this volatility over time.”
Strategy 1: Be big.
Strategy 2: Charge more.
Strategy 3: Ride the wave.
US stock futures were flat Wednesday as investors continue to balance stronger-than-expected earnings with labor shortages, a global supply chain crisis, surging prices and a slowing economic rebound.
Here’s where things stand as of 6:25 am ET:
Facebook (FB) is planning to rebrand itself with a new name focused on the metaverse, the Verge reported on Tuesday, as the tech giant comes under fire from regulators around the world over its business practices.
The company plans to announce the new name next week, the Verge reported, citing a source with direct knowledge of the matter. Facebook wants to be known for more than social media, according to the tech publication.
Facebook does not comment on rumor or speculation, a company spokesperson said in response to a question about the potential name change.
Netflix now has 213.5 million subscribers globally, having added 4.4 million subscribers in the third quarter of 2021, the company reported on Tuesday.
That number beat the streaming service’s own expectations as well as those of analysts. The company also forecast that it would have 222 million subscribers for the next quarter.
The results immediately sent the company’s stock up by as much as 2% in after hours trading before going negative nearly as much as the night went on.
Netflix’s third quarter profit was $1.4 billion, up from $790 million in the year-earlier quarter. Revenue jumped 16%, to $7.4 billion.
