Wall Street ended Wednesday with mixed results, with the Nasdaq Composite giving up its earlier gains and ending down 0.1%.
US stocks balance strong earnings with serious economic challenges
By CNN Business
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.
"We will be discussing it at the November meeting, and I think the test has been met," he added.
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.
"Transitory doesn’t necessarily mean short-lived," Quarles said.
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.
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.
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."