Wall Street’s climb makes October the best month this year.
The S&P 500 rose close to 7 percent for the month as strong earnings reports and progress toward a spending deal in Washington helped investors shake off a number of concerns.
Strong earnings reports, talks in Washington toward a big-ticket spending deal and a continued decline in coronavirus infections came together in October to make it the stock market’s best month this year.
By Friday, the S&P 500 was on track to end the month with a gain of about 6.7 percent — its best showing since November 2020, when stocks jumped more than 10 percent as drug companies reported strong results for their coronavirus vaccine candidates. The index was slightly higher in midafternoon trading, and on track to close at another record.
The rally came as investors shook off a number of concerns that had dogged Wall Street just a month ago. In September, worries that high inflation, slowing growth and supply chain logjams would lead to economic misery for American companies and consumers, pulling the S&P 500 down about 4.8 percent. It was the benchmark index’s worst month of 2021.
But improving prospects on several fronts fueled the rebound. Earnings reports from the country’s biggest companies overwhelmingly came in better than investors had expected, driving gains in a number of individual stocks. Of the 244 companies in the S&P 500 to report third-quarter results as of Thursday, 82 percent have done better than Wall Street analysts had forecast, according to the data provider Refinitiv.
A number of large technology stocks, whose sheer size gives them an outsize influence over benchmarks like the S&P 500, rallied as well. Microsoft rose more than 16 percent and Alphabet climbed more than 10 percent in the month after reporting solid financial results. And a deal to sell 100,000 of its electric cars to the rental company Hertz pushed Tesla’s stock value beyond $1 trillion for the first time.
As oil prices continued to rise, energy companies also profited. On Friday, Exxon Mobil and Chevron both reported a third-consecutive quarterly profit of more than $6 billion. Their shares rose 9.5 percent and 12 percent in October. Energy companies were the best performing shares in the S&P 500, rising so far this month.
Not every report was so upbeat. On Friday, shares of Amazon tumbled 3.1 percent after the company reported its slowest sales growth in almost seven years as the pandemic-fueled surge in online shopping eased. Apple also dropped 2.1 percent after its quarterly results fell short of expectations. Still, thanks to gains earlier in the month, both stocks ended October higher.
Investors were also encouraged by signs of progress among Democrats in Washington toward an agreement on a spending plan. On Thursday, President Biden said the party was coalescing around a $1.85 trillion economic and environmental spending bill — although it remains far from certain that an agreement will take shape.
If it does, though, it would pave the way for approval of a separate $1 trillion infrastructure spending bill that has bipartisan support, and hopes for the surge in infrastructure spending lifted shares of construction and materials companies that will benefit from it.
It helped too that the coronavirus surge driven by the Delta variant began to quickly fade, with the number of cases in the United States falling by more than half by the end of October.
Wall Street has been concerned about rising prices for months, and though inflation remains high, several recent measures of price gains eased concerns about the continuing increases somewhat. The Producer Price Index, a measure of wholesale prices that is likely to filter through to consumers in the following months, rose less quickly than expected in September, and on Friday the Personal Consumption Expenditures price index, which is the Federal Reserve’s preferred inflation gauge, also signaled that prices were increasing less quickly than they did over the summer.
Fast rising prices could prompt the Fed to begin to pull back on its support for the economy, including by eventually raising interest rates. That could hurt risky investments like stocks. So it also helped that some economic data highlighted ongoing risks to the economy, something that might keep the Fed from moving too quickly, said Fiona Cincotta, senior financial markets analyst at Forex.com.
For example, thanks in part to supply-chain bottlenecks, the U.S. economy grew just 0.5 percent in the third quarter, the weakest growth since the recovery from the pandemic began, the government said on Thursday.
“If you raise interest rates too quickly, the economic recovery could come to a standstill,” Ms. Cincotta said.
The Fed has made it clear it is not planning to raise its benchmark interest rate — the strongest tool it has to affect the economy — anytime soon, but the central bank is expected to begin winding down a bond-buying program that has been in place since early in the pandemic. That program has helped keep cash flowing through the economy.
Annual inflation is climbing at the fastest pace in three decades in the United States, keeping pressure on the Federal Reserve and White House as they try to calibrate policy during a tumultuous period marked by widespread supply shortages, solid consumer demand and quickly rising wages.
Prices climbed by 4.4 percent in the year through September, according to the Personal Consumption Expenditures price index data released Friday. That beats out recent months to become the fastest pace of increase since 1991.
Prices climbed 0.3 percent from August to September, in line with what economists expected and slower than rapid numbers posted earlier in the summer. Policymakers may take that as a sign that inflation was moderating coming into the fall, but the fact that the Fed’s preferred inflation gauge remains elevated on an annual basis will keep Washington and Wall Street keenly focused on inflation numbers in the weeks and months ahead.
The new data come ahead of a Fed meeting next week, at which the central bank will provide an update on its latest thinking about price increases. It is also widely expected to announce its plan to begin pulling back some pandemic-era support for the economy.
As policymakers parse the latest figures, rising wages are likely to add to their nervousness. Pay and benefits picked up rapidly for working Americans in the three months through September, separate data released Friday showed, and especially for employees in service occupations. Surging pay is good news for employees, but could spur employers to continue hiking prices as they try to cover rising labor costs.
The current pace of inflation has become an uncomfortable political problem for President Biden and has created a delicate balancing act for the Fed, which is still trying to coax the labor market back to full strength. Employers may be struggling to fill jobs today and raising pay to compete for workers, but that seemingly tight labor market belies a more complicated reality. Many would-be employees remain on the labor market’s sidelines, likely because of concerns about the virus and child-care issues, and policymakers want to make sure that the economy is strong and jobs are available when they are ready to return.
“The big question for the Fed is: How much of this is really transitory and how much of this is here to stay?” said Gennadiy Goldberg, a senior U.S. rates strategist at T.D. Securities.
The answer should become clearer with time. The Fed is closely watching to see how quickly workers will return to the job market — or if some share of them never come back at all. Policymakers also waiting to see what happens as consumers spend down savings stockpiles built up during the pandemic and return to more normal living patterns, spending more on airplane tickets and theater dates and less on living room furniture and home office equipment.
Whether things get back to normal in time to keep longer-run inflation in check is perhaps the most pressing question facing U.S. economic officials as the economy grinds through a halting pandemic reopening.
Jerome H. Powell, the Fed chair, has increasingly acknowledged that inflation is lasting longer than central bankers had expected. Fed officials believe inflation will fade as supply chain snarls unravel and consumer demand for goods cools, but it remains unclear when that will happen. Janet L. Yellen, the Treasury secretary, has predicted that rapid price jumps will cool by later next year.
The inflation data released on Friday confirm what more timely measures like the Consumer Price Index had already shown: For now, price gains remain unusually brisk. Supply chains are struggling to keep up with strong demand, thanks to virus-tied factory shutdowns, clogged ports and a shortage of transit workers, among other factors. It is hard to buy a kitchen table or a used car, and the prices of many goods have jumped sharply.
Demand has yet to drastically fade. Personal spending continued at a solid pace in September, data released on Friday showed, climbing 0.6 percent from August — slower than the prior month, but in line with what economists had expected.
Spending could moderate in the months ahead as federal stimulus dries up and households deplete savings that they built up during the pandemic. A measure of incomes that includes benefit payments decreased 1 percent last month as more generous unemployment payments expired and other pandemic relief programs slowed or stopped payouts. The personal savings rate also fell to 7.5 percent, down sharply from recent months and roughly where it stood before the onset of the pandemic.
But just as government help wanes, labor income is climbing faster.
Americans are earning more from work, data released Friday showed: A measure of employment costs that traces wages and benefits climbed by 1.3 percent in the third quarter, more than the 0.9 percent economists had expected and the fastest pace in data since the series started in 1996.
On an annual basis, the Employment Cost Index climbed 3.7 percent, the fastest pace since 2004. Wage gains are especially rapid in service industries, which have been struggling to lure back workers as they reopen from pandemic lockdowns.
Strong wage gains could help to sustain demand and may keep inflation higher than normal, especially as companies try to remain profitable even as they pay more for labor. The Fed is closely watching wages and measures of inflation expectations, which have risen in recent weeks, as it tries to assess whether price gains might spiral out of control.
“The risk is that ongoing high inflation will begin to lead price- and wage-setters to expect unduly high rates of inflation in the future,” Mr. Powell said last week. And if inflation seemed likely to stay high, “we would certainly use our tools to preserve price stability, while also taking into account the implications of our maximum employment goal.”
The Fed is responding to the complicated moment by putting itself in a position to be nimble.
Policymakers are preparing to slow down the large-scale bond purchases they had been using to lower long-term borrowing costs and support the economy. The central bank has been buying $120 billion in Treasury and mortgage-backed securities, but it is poised to announce its plan to slow that program as soon as its meeting next week. Mr. Powell has said buying could stop altogether by mid-2022.
That would leave the Fed in a position to raise its policy interest rate, its more traditional and arguably more powerful tool, should it need to do so to tamp down price increases. That rate has been set near zero since March 2020.
“What they’re doing is a form of risk management at the moment,” said Mr. Goldberg. “They’re really walking a tightrope here.”
When the Fed raises interest rates, it makes it more expensive to borrow to buy houses, cars and washing machines. As demand cools, supply catches up and price gains moderate or even reverse, reducing inflation.
But the downside is that slower consumption and economic growth also lead to less business expansion and hiring. Slowing the job market is an unattractive prospect at a moment when millions of people remain out of work following lockdowns early in the pandemic and with concerns lingering about health and child care.
Plus, if the current burst in prices does prove temporary, a strong Fed reaction could prove premature — leaving the economy unnecessarily weak and inflation too low in the long term.
The Biden administration is trying to make sure that concerns about prices do not undermine its economic agenda. Ms. Yellen said over the weekend that she expects inflation to ease in 2022.
“Americans have not seen inflation like we have experienced recently in a long time,” Ms. Yellen acknowledged on CNN’s “State of the Union” on Oct. 24. “As we get back to normal, expect that to end.”
The eurozone economy continued its expansion through the summer as the region recovered from a double-dip recession, data published on Friday showed. But that recovery is being hampered by supply chain bottlenecks and labor shortages that are pushing up prices. In October, the annual inflation rate jumped to 4.1 percent, a separate report showed.
That matches the highest ever rate of inflation in the eurozone, last reached in mid-2008, according to data from the European statistics agency.
The previous month, inflation rose 3.4 percent from a year earlier. A surge in natural gas prices, caused by several factors including low stockpiles, disappointing supply from Russia and demand from China, is one of the key drivers of inflation. Energy prices rose nearly 24 percent in October from a year earlier.
Gross domestic product in the eurozone increased 2.2 percent in the third quarter, a slightly faster pace of growth than in the previous quarter of 2.1 percent, the region’s statistics agency also said on Friday.
The economy is rebounding from a recession at the end of 2020 and in the first quarter of this year, when a second wave of the coronavirus pandemic led to tight social restrictions across the region. As businesses have reopened and consumers have returned to restaurants and travel, economic output is expected to exceed its prepandemic level by the end of the year, according to the European Central Bank.
“From here on, do expect moderation,” Bert Colijn, an economist at ING Bank, wrote in a note to clients. “The first rebound effects are waning, which will lead to naturally slower G.D.P. growth. Besides that, input shortages and supply chain problems are adding to manufacturing woes.”
Christine Lagarde, the president of the European Central Bank, also said on Thursday that she expected the economic momentum to slow down, and the bank decided to keep its loose monetary stance unchanged. She added that high inflation and supply chain bottlenecks would last longer than initially expected but officials were confident they would ease over the course of next year.
“We did a lot of soul searching to test out analysis,” Ms. Lagarde said on Thursday about the central bank’s study of inflation. And she is confident the factors driving prices higher, including a mismatch in supply and demand, are temporary and that inflation will ease over the course of next year. “Granted, it will take a little longer than what we had expected,” she added.
Exxon Mobil and Chevron, the two dominant American oil companies, reported a third consecutive quarterly profit on Friday as petroleum and natural gas prices continued to climb higher.
In the third quarter, the American benchmark oil price remained near a seven-year high, ending the period at $76 a barrel. Since then it has risen an additional $6 a barrel, suggesting that the final quarter could be even more profitable for the oil companies.
While the Delta variant threatened the economic revival in the summer, so far this fall natural gas prices have also climbed around the world.
Exxon said it made $6.8 billion in the three months that ended in September on revenue of $73.8 billion. The profit compared with $4.7 billion in the second quarter on revenue of $67.8 billion. Throughout most of 2020, Exxon and other oil companies lost money as commodity prices collapsed under the pressure of the coronavirus pandemic, which halted air travel and commuting.
Darren Woods, Exxon’s chief executive, said the company’s financial performance had significantly improved, reflecting strong operations and cost control, as well as increased demand.
Mr. Woods said the returns on the company’s core businesses — production, refining and chemical — would allow the Texas-based company to advance lower-carbon investments.
“Third-quarter earnings were the highest since first quarter 2013 largely due to improved market conditions, strong operational performance and a lower cost structure,” said Mike Wirth, Chevron’s chief executive.
Exxon, Chevron and other major oil companies have shifted their emphasis from expanding exploration to a more disciplined, cautious approach to break the pattern in which higher prices led to increased production, which in turn led to a return to lower prices. Instead, the companies are using their cash to repurchase shares and reduce debt.
Chevron said its capital spending so far this year was 22 percent lower than a year ago. The company, which is based in San Ramon, Calif., reduced its debt by $5.6 billion and repurchased $625 million in shares during the quarter.
Journalists at Politico, the inside-the-Beltway news outlet that was sold in August to the German publisher Axel Springer for more than $1 billion, announced Friday that they were moving to form a union and seeking voluntary recognition from their new owner.
The new unit, called the PEN Guild and affiliated with the NewsGuild, a union that represents journalists at other news outlets (including The New York Times), said it would represent more than 250 journalists at Politico and E&E News, a site covering energy and the environment that Politico acquired last year.
The unit said it had submitted to the National Labor Relations Board cards signed by more than 80 percent of eligible staff.
“The PEN Guild seeks equitable pay, a diverse and inclusive workplace and job protections for everyone — which we believe will make the newsrooms of Politico and E&E places where we are able to do our best work possible,” it said.
Politico did not immediately comment.
Politico was founded in 2007 by Robert Allbritton, whose family had owned a television company and the controlling stake of a local bank, and made a name for itself with a scoop-driven, insider style. In later years, Politico developed a lucrative suite of subscriber-only sites for specialized news, Politico Pro.
In an August interview with The New York Times, Mr. Allbritton, who remains Politico’s publisher, argued that unionizing did not make sense in an industry dominated by information work.
Axel Springer, a German publishing giant whose largest shareholder is KKR, the private equity giant, agreed to purchase Politico, Politico Europe and the Politico-owned tech news site Protocol this summer as part of its expansion into the United States. In 2015, it purchased Business Insider, now known as Insider, for $500 million and turned it into a subscription-based outlet. (Insider journalists formed a union earlier this year.)
Last year, Axel Springer acquired a controlling stake in the newsletter publisher Morning Brew. It also has sought to acquire Axios, the newsletter-based outlet founded in 2016 by three Politico veterans.
Earlier this month, Axel Springer removed Bild’s top editor, Julian Reichelt, after a report in The Times about a Bild trainee who had testified that Mr. Reichelt had asked her to a hotel for sex and to keep a payment under wraps. A previous internal investigation found that Mr. Reichelt had mixed his personal and professional lives but not broken any laws or committed sexual harassment or coercion.
Starbucks employees in upstate New York seeking to unionize notched a victory in their effort on Thursday, a day after the company, which is facing a staffing shortage, said that it would raise wages for U.S. employees.
Workers at three Buffalo-area stores will vote on whether to form a union in a mail-in election ending Dec. 8, an official with the National Labor Relations Board ruled Thursday.
In a win for the union seeking to represent the employees, the three stores will vote in separate elections, meaning that workers need only a majority of votes cast at a single location to form a union. The company had argued that employees at all 20 Buffalo-area stores should vote in a single election.
The campaign represents the most serious union effort at Starbucks in years. None of Starbucks’s nearly 9,000 corporate-owned stores in the country are unionized, though many of the stores owned by companies that have a licensing agreement with Starbucks have unions, and a corporate-owned store in Canada recently unionized.
On Wednesday, the company outlined its new pay plan. All hourly employees will earn at least $15 an hour, and the company will raise its average pay to $17 an hour by the summer of 2022. Employees with two or more years of service could receive up to a 5 percent raise starting January 2022. Workers with five or more years of service time could receive up to a 10 percent raise. On Thursday, Starbucks reported record revenue for its fiscal fourth quarter.
In a statement, the workers seeking to unionize called the election ruling “a significant victory,” and they said the company’s challenge over the proper voting pool was “a delay tactic.”
The company has denied that it was seeking to delay the elections and argued that workers at all 20 stores should vote together because they can work at multiple locations and because upper-level managers oversee decisions across a range of stores. The labor board official, an acting regional director, rejected those arguments.
Starbucks can still appeal the ruling to the labor board in Washington, a move it did not rule out.
“Our storied success has come from our working directly together as partners, without a third party between us,” a Starbucks spokesman, Reggie Borges, said in a statement. “We just received the ruling, and we are evaluating our options.”
Since workers at the three stores filed for union elections in late August, Starbucks has sent a number of managers, more senior company officials and even a top corporate executive to Buffalo. Many workers say the presence of the company officials is intimidating, while the company says they are there to address operational issues.
If the union vote is successful, the workers would become part of Workers United, an affiliate of the giant Service Employees International Union.
Employers in the United States are struggling to fill some jobs, with workers still sidelined by the pandemic or rethinking their ambitions. A record 4.3 million people quit their jobs in August, the Labor Department reported recently. That was up from four million in July and is by far the most in the two decades the government has been keeping track.
“Obviously, like all other retailers, we are navigating a very complex and unprecedented environment, and yes, we have seen some staffing challenges in certain parts of the country,” John Culver, Starbucks group president for North America, said during a conference call on Thursday. Mr. Culver noted that the company had adjusted store hours to “redeploy staffing into other stores where we need it.”
Its wage plan “culminates in a total of approximately $1 billion in incremental investments in annual wages and benefits over the last two years,” Starbucks said in a statement on Wednesday.
Starbucks also said it was investing in training by redesigning its “Barista Basics” guide and adding training time for all roles. Workers aiming to unionize have pointed to inadequate attention to training and periods of understaffing or high turnover.
Amazon on Thursday posted its slowest sales growth in almost seven years as the pandemic-fueled surge in online shopping eased. The company’s profit shrank, driven in part by higher labor costs and more spending on new warehouses and other logistics infrastructure meant to speed delivery times, and Amazon told investors to expect sales growth and profit to continue contracting in current quarter, which includes the holiday shopping season.
Facebook changed its corporate name to Meta on Thursday. Facebook and its other apps, such as Instagram and WhatsApp, will remain but under the Meta umbrella. It will begin trading under the stock ticker MVRS on Dec. 1.
Apple said on Thursday that its sales jumped by 29 percent and profit surged 62 percent in the most recent quarter, as the world’s most valuable public company continued to rake in money despite supply chain shortages that have slowed its growth. Revenue growth slowed from 36 percent in the prior quarter. Tim Cook, Apple’s chief executive, told CNBC that the results were due to “larger than expected supply constraints” related to global computer chip shortages caused by the pandemic.
China Evergrande, the troubled property giant, made another debt payment ahead of a Friday deadline, averting default for the second time in two weeks, according to one of the company’s bondholders.
The company made an interest payment that had been due on Sept. 29, this person said, speaking on condition of anonymity to discuss the matter. Evergrande had a 30-day grace period on the bond payment; the extension was to end on Friday.
The company didn’t immediately respond to a request for comment on the payment.
The payment comes a week after the world’s most indebted property developer narrowly avoided defaulting on another bond. Evergrande made an $83.5 million interest payment to bondholders last Friday, according to Securities Times, an official newspaper. That payment likewise came just a day ahead of a default. The interest payment due this Friday totaled $45.2 million.
Weighed down by more than $300 billion of debt, Evergrande has been trying to sell off parts of its vast empire to raise enough cash to pay off creditors. Last week, one of those deals — largely seen as a last-ditch lifeline — fell through. Evergrande has warned in securities filings that “in view of the difficulties, challenges and uncertainties” it has faced in selling its assets, it could not guarantee it would “be able to meet its financial obligations.”
The company’s financial crisis is testing the resolve of Chinese officials who were once quick to step in to save struggling giants like Evergrande. They have pledged to clean up China Inc.’s mountain of debt and end the property sector’s binge-borrowing habits.
Yet if the authorities let Evergrande fail, they could hurt some of the estimated more than one million Chinese home buyers who have purchased apartments from the company and are waiting for them to be built. A collapse could also slam construction workers and subcontractors who are waiting to be paid.
Alexandra Stevenson contributed reporting.
Citigroup told employees on Thursday that it would require vaccination against Covid-19 as a condition of employment in the United States, making it the first major bank to issue such a mandate.
“It has become crystal clear that Covid-19 will not be going away anytime soon,” Sara Wechter, the company’s head of human resources, wrote in a LinkedIn post describing the new policy.
Ms. Wechter cited two catalysts for the decision. First, because the bank does business with the federal government, it has an obligation to comply with President Biden’s executive order requiring vaccination for people working on government contracts. And mandating vaccinations will also allow the bank to “ensure the health and safety of our colleagues as we return to the office,” she wrote.
Citi will consider requests for medical and religious exemptions and will “will do all we can to help our colleagues comply with this new requirement,” Ms. Wechter wrote.
A Citi spokeswoman declined to comment on the mandate’s details.
Other big banks, including Bank of America and Goldman Sachs, have made vaccination a requirement for employees entering their offices but have stopped short of saying they would fire those who refuse to be vaccinated.