Wall Street’s climb makes October the best month for stocks this year. (Published 2021) (2024)

Wall Street’s climb makes October the best month for stocks this year.

Large technology stocks, whose sheer size give them an outsize influence over benchmarks like the S&P 500, rallied as well. Microsoft rose more than 17 percent and Alphabet climbed 11 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. Exxon Mobil’s shares climbed nearly 10 percent in October, and Chevron’s gained close to 13 percent.

Not every report was so upbeat. On Friday, shares of Amazon tumbled 2.2 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 1.8 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 remained far from certain that an agreement would 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. Hopes for a surge in infrastructure spending lifted shares of construction and materials companies that would benefit from it.

It helped, too, that the coronavirus surge driven by the Delta variant began to fade, with the number of cases in the United States falling by more than half by the end of October.

Wall Street also has been concerned about rising prices, and though inflation remains high, several recent measures of price gains somewhat eased concerns about the continuing increases. 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 on a month-to-month basis than they did over the summer.

Fast-rising prices could prompt the Fed to begin to pull back on its monetary support for the economy, includingby 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, in part because of 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 it 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.

The Fed’s favorite inflation index remained at 30-year high as pay surged.

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 TD 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. 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 confirmed 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 Sunday. “As we get back to normal, expect that to end.”

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The Fed’s tapering decision and fresh data on jobs: The week in business.

The eurozone recovery continues, but inflation hits the highest in 13 years.

“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.

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Exxon Mobil and Chevron continue to report higher profits, helped by rising oil prices.

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.

Chevron reported a $6.1 billion profit for the second quarter on revenue of $43 billion. The company made $3.1 billion in the second quarter on revenue of $37.6 billion.

“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.

Politico’s journalists are seeking union recognition from its new owner.

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.

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A union election is set for Starbucks workers in the Buffalo area.

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.

Catch up: Amazon reports disappointing results and Facebook changes its name.

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China Evergrande is said to make another bond payment, avoiding default for a second time.

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 is the first big U.S. bank to mandate vaccination for its workers.