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Stock futures gained on Wednesday as investors digested new earnings data and awaited a key inflation report, which will help show the extent to which rising prices have weighed on the economic recovery and corporate profits.
Third-quarter earnings season picked up, with notable companies including JPMorgan Chase (JPM) and BlackRock (BLK) posting results before market open. JPMorgan Chase, the largest U.S. bank by assets, posted results that topped estimates on both the top and bottom lines, boosted by a larger-than-expected release of credit reserves and strong sales in the firm’s investment banking and equities trading divisions.
Investors have been trimming their outlooks for overall S&P 500 earnings growth for the third quarter, given that rising input prices, higher labor costs and other supply-side headwinds likely weighed on margins and chipped away at profitability.
Recent developments for a plethora of companies across industries have already reflected the impacts of supply chain shortages and shipping challenges. The Wall Street Journal reported that firms from Costco (COST) to Walmart (WMT) have resorted to chartering their own ships to import goods ahead of the holiday season. And Bloomberg reported Tuesday that Apple (AAPL) was set to cut its iPhone production targets for this year by as many as 10 million units due to ongoing chip shortages.
The latest batch of economic data due Wednesday is likely to confirm that these supply and demand mismatches translated to ongoing inflationary pressures at the start of the fall. In the Labor Department’s Consumer Price Index, core prices, excluding food and energy, rose by 4.0% in September over last year, coming down only slightly from June’s 30-year high of 4.5%. And a broader measure of consumer prices including all categories rose 5.4% in September compared to last year, coming in at the fastest pace since 2008.
Wall Street analysts are looking for third-quarter earnings growth of about 27% on a year-over-year basis, according to FactSet data. Though this would still be the third-fastest earnings growth rate since 2010, it would be a marked slowdown from the second quarter’s nearly 90% pace.
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