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Wall Street closes with slight gains; inflation surge showed no let-up in Sept.

JPMorgan's 3Q profits rise, but low rates weigh on revenue

Shares of JPMorgan Chase fell Wednesday after the bank said it struggled to boost revenue with interest rates at near-zero levels. File/AP

S&P 500 breaks 3-day losing streak

NEW YORK — Stocks ended another day of choppy trading modestly higher on Oct. 13, enough to break a three-day losing streak for the S&P 500.

The benchmark index rose 0.3 percent. Strength in technology stocks helped push the Nasdaq up 0.7 percent, while the Dow Jones Industrial Average ended little changed.

Delta Air Lines fell 5.8 percent, the most in the S&P 500, after warning that higher fuel and labor costs could affect its profitability.

Bank stocks had some of the biggest losses. JPMorgan Chase fell after its latest earnings showed it struggled to grow revenues with interest rates at near-zero levels. Falling bond yields also weighed on the sector, which relies on higher yields to charge more interest on loans.

Inflation surges, matches 13-year high

WASHINGTON — Another surge in consumer prices in September sent inflation to 5.4 percent from a year ago, matching the highest such rate since 2008 as tangled global supply lines continue to create havoc.

Consumer prices rose 0.4 percent in September from August as supply chain disruptions kept many goods scarce. The costs of new cars, food, gas, and restaurant meals all jumped.

The annual increase in the consumer price index matched readings in June and July as the highest in 13 years, the Labor Department said Oct. 13. Excluding the volatile food and energy categories, core inflation rose 0.2 percent in September and 4 percent compared with a year ago. Core prices hit a three-decade high of 4.5 percent in June.

The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also new and used cars, hotel rooms, clothing, and furniture, among other goods and services. COVID-19 has shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that don't arrive for months.

"Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated, as supply/demand imbalances are only gradually resolved," said Kathy Bostjancic, an economist at Oxford Economics, a consulting firm. "While we share the Fed's view that this isn't the start of an upward wage-price spiral, we look for inflation to remain persistently above 3% through mid-2022."

Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, who are having to pay more to attract employees. Average hourly wages rose 4.6 percent in September from a year earlier, a healthy increase, but not enough to keep up with inflation.

The price increases have raised pressure on the Federal Reserve, which has pegged its benchmark interest rate at nearly zero to spur more borrowing and spending. Yet inflation is far above its target of 2 percent. Fed chair Jerome Powell has repeatedly said that the price gains should "abate" next year, bringing inflation closer to the target.

Fed officials: Bond buys could end by mid-'22

WASHINGTON — Federal Reserve officials agreed at their last meeting that if the economy continued to improve, they could start reducing their monthly bond purchases as soon as next month and bring them to an end by the middle of 2022.

The discussion was revealed in the minutes of the Fed's Sept. 21-22 meeting, released Oct. 13. Fed officials also said that the reduction, or tapering, of bond purchases could begin in the middle of November or December. The 18 Fed policymakers meet eight times a year.

The Fed is widely expected to announce the tapering at its next meeting, to be held Nov. 2-3. The announcement is likely to occur before the tapering actually begins. If so, such a move would mark the Fed's first step back from the extraordinary efforts it has made to stimulate the economy in the wake of the pandemic.

"Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate," the minutes said.

Last December, the Fed said that it would buy $120 billion a month in bonds until the economy had made "substantial progress" toward its goals of maximum employment and inflation that averages 2 percent over time. The bond purchases are intended to spur more borrowing and spending by keeping longer-term interest rates low. The Fed has also pegged its short-term benchmark rate at nearly zero.

Delta has $1.2B gain, touts holiday bookings

ATLANTA — Delta Air Lines posted a $1.2 billion profit for the third quarter on Oct. 13, helped by the latest installment of federal pandemic aid for the airline industry, but warned that rising fuel prices will lead to a "modest" loss in the fourth quarter.

The airline also expects higher labor costs as it hires thousands of employees to replace some of those who left the company last year, when the pandemic's impact on travel was most brutal.

The airline said that travel demand is improving after hitting a flat spot when COVID-19 infections in the U.S. jumped over the summer, fueled by the rise of the so-called delta variant.

"We are seeing bookings pick up materially over the past four or five weeks," CEO Ed Bastian said. "As the variant has receded, people are starting to get back out."

Business and international travel continue to lag, however — corporate travel stalled at about 40 percent of its pre-pandemic level. Airlines are hoping for a boost as more workers return to their offices and as the U.S. relaxes border restrictions in November.

Delta is rebuilding more of its previous schedule. The airline operated at 71% of its 2019 passenger-carrying capacity in the third quarter and expects that to rise to 80% in the fourth quarter. That will help revenue rise slightly, to more than 70% of where it stood in late 2019, the airline forecast.

JPMorgan profit rises, but revenue slows 

NEW YORK — JPMorgan Chase posted a 24 percent jump in its third-quarter profit Oct. 13, largely driven by one-time gains that boosted its results, as it struggled to grow revenues with interest rates at near-zero levels.

The nation's largest bank by assets said it earned a profit of $11.69 billion. Two one-time items helped boost its profits this quarter: a $566 million tax benefit and the release of $2.1 billion from its reserves to cover bad loans.

JPMorgan is the first of the big Wall Street banks to report their results this quarter, with Citigroup, Wells Fargo, Bank of America, Goldman Sachs and Morgan Stanley reporting later this week. Investors will be looking to see how banks — often a proxy for the overall economy — performed the last three months as the delta variant of the coronavirus swept across the globe and many companies dealt with supply-chain disruptions.

All the banks are facing a growing economy but ultra-low interest rates, which is starting to weigh on their profits since they can't charge customers more to borrow money. Earlier this year banks were reporting massive jumps in profit, but that was due to banks moving loans they considered at-risk during the pandemic back onto the "good" side of their balance sheet.

Without higher interest revenue or a growing number of customers, investors are likely to see JPMorgan's results as partly just moving money from "Column A" to "Column B." JPMorgan has said just as such themselves. In a statement on Wednesday, JPMorgan CEO Jamie Dimon said, "we do not consider these ... releases core or recurring profits."

JPMorgan has roughly $18.6 billion set aside for potentially bad loans, which is down from $33.8 billion in the same period a year earlier.

Third-quarter revenues were $30.44 billion, up 2 percent from a year ago. The bank earned $14.48 billion in interest income this quarter, down 1 percent from a year earlier.

US asks Tesla about lack of recall

DETROIT — U.S. safety investigators want to know why Tesla didn't file recall documents when it updated Autopilot software to better identify parked emergency vehicles, escalating a simmering clash between the automaker and regulators.

In a letter to Tesla, the National Highway Traffic Safety Administration told the electric car maker Oct. 12 that it must recall vehicles if an over-the-internet update deals with a safety defect.

"Any manufacturer issuing an over-the-air update that mitigates a defect that poses an unreasonable risk to motor vehicle safety is required to timely file an accompanying recall notice to NHTSA," the agency said in a letter to Eddie Gates, Tesla's director of field quality.

The agency also ordered Tesla to provide information about its "Full Self-Driving" software that's being tested on public roads with some owners.

The latest clash is another sign of escalating tensions between Tesla and the agency that regulates vehicle safety and partially automated driving systems.

In August the agency opened an investigation into Tesla's Autopilot after getting multiple reports of vehicles crashing into emergency vehicles with warning lights flashing that were stopped on highways. The software can keep cars in their lane and a safe distance from vehicles in front of them.

Messages were left early Wednesday seeking comment from Tesla.

China exports jump; surplus with US grows

BEIJING — China's exports rose at a slightly faster pace in September while demand for imports of iron ore and other commodities eased as a property construction boom cooled and authorities enforced curbs on energy use.

Customs data showed exports rose 28.1 percent to $305.7 billion. That was slightly faster than the 26 percent increase in August and above forecasts. Imports rose 17.6 percent to $240 billion, less than the previous month's 33 percent increase.

This year's trade figures have been distorted by comparison with 2020, when global demand plunged in the first half after governments shut factories and shops to fight the pandemic. Chinese exporters reopened after the ruling Communist Party declared the virus under control in March 2020, while their foreign competitors still were hampered by anti-virus curbs.

Still, economists have forecast that surging global demand for Chinese goods will level off as anti-disease controls ease and entertainment, travel and other service industries reopen.

The politically sensitive trade surplus with the U.S. rose to $42 billion in September from nearly $38 billion in August, the report said. Exports to the U.S. jumped 30 percent to $57.4 billion, while imports from the U.S. rose nearly 17 percent to $15.4 billion. American retailers are refilling bare store shelves, helping to keep demand strong, economists said.

Associated Press

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