Market Snapshot: U.S. stocks consolidate after lurching toward record high

What’s driving markets

A good start to third-quarter earnings season has helped investors put the nervousness of September behind them, even as concerns over inflation, COVID-19 and China’s economy still linger.

Of the approximately 70 S&P 500 companies that have reported results so far, 86% posted earnings that topped analysts expectations, according to Refinitiv.

“It’s an impressive turnaround from where the narrative was just a few weeks ago, when the index had fallen by over -5% from its peak as concerns from Evergrande to a debt ceiling crunch set the agenda. But the removal of both risks from the immediate horizon along with another round of positive earnings reports have swept away those anxieties,” said Deutsche Bank strategists led by Jim Reid.

Evergrande 3333, -12.54% was back in the headlines on Thursday after the property developer ended talks to sell most of its property services division.

Investors continue to sift through earnings, including results from Dow component International Business Machines Corp. IBM, -6.68%, which missed revenue estimates, and Tesla Inc. TSLA, +2.25%, which offered a cautious outlook after beating third-quarter earnings expectations. Shares of both companies were lower in premarket trade.

Some Federal Reserve officials in recent days, including Fed Governors Christopher Waller and Randal Quarles, and Cleveland Fed President Loretta Mester, may be laying the groundwork for interest-rate hikes next year if high inflation persists.

The U.S. economy is still growing at a solid pace, the Federal Reserve’s Beige Book noted Wednesday, but labor shortages and supply-chain bottlenecks are restraining growth and triggering higher inflation.

Stock index futures remained lower early Thursday though after U.S. data showed first-time applications for unemployment benefits fell to 290,000 from 296,000 in the week ended Oct.16. Economists had looked for a figure of 300,000. The Philadelphia Fed’s October manufacturing index fell to 23.8 from 24.5 a month earlier, compared with expectations for a rise to 30.7.

Which companies are in focus?

• Airlines were also in focus on Thursday. Shares of American Airlines Group Inc. AAL, +1.13% edged higher after the air carrier reported a narrower-than-expected third-quarter loss on revenue that nearly tripled, though load factor came up short.
• Southwest Airlines Co. LUV, -0.90% reported a narrower-than-expected third-quarter loss as passenger revenue nearly tripled, while overall demand remained “quite strong” despite a deceleration in traffic in August and September as a result of surging COVID-19 cases. Shares were little changed.
• AT&T Inc. T, +1.06% shares rose after the telecommunications giant posted better-than-expected profit for its third quarter and continued to see strong subscriber additions in its wireless business.
• Pfizer Inc. PFE, -0.29% and its German partner BioNTech SE BNTX, +3.45% said Thursday a late-stage trial of a 30-milligram booster dose of their COVID-19 vaccine showed efficacy of 95.6% compared with those who received a placebo. Pfizer shares and BioNTech ADRs rose in premarket trade.
• Freeport-McMoRan Inc. FCX, -3.04% shares rose after the mining company reported third-quarter net profit that soared more than fourfold, while revenue came in shy of forecasts, as realized copper prices soared but gold prices fell.