The daily business briefing: November 4, 2021
Fed unveils plan to unwind stimulus, financial coalition puts $130 trillion in assets behind green-energy transition, and more
Fed unveils plan to taper bond purchases
The Federal Reserve on Wednesday announced its plan to taper the asset buying program it has been using to boost the economic recovery during the coronavirus crisis. "In light of the substantial further progress the economy has made toward the committee's goals since last December, the committee decided to begin reducing the monthly pace of its net asset purchases," the central bank said in a statement at the end of a two-day meeting of its policy-setting Federal Open Market Committee. The Fed said it would start reducing the $120 billion-per-month in purchases of mortgage-backed securities and Treasury bonds, cutting $15 billion per month starting this month. Despite the vote of confidence in the economy, the Fed expressed a slightly more concerned tone on inflation, which remains double the Fed's 2 percent target.
Financial coalition puts $130 trillion behind green-energy transition
A global coalition of financial institutions announced Wednesday that more than 450 firms controlling $130 trillion in assets have committed to shifting the global economy to cleaner energy. On Day 3 of the United Nations' COP26 climate summit, the Glasgow Financial Alliance for Net Zero said these banks, investors, and insurers have vowed that the companies and projects they invest in will reach net-zero emissions by 2050. This will mean "every financial decision takes climate change into account," said former Bank of England chief Mark Carney, who leads the coalition with billionaire former New York Mayor Michael Bloomberg. Jason Opeña Disterhoft, senior climate and energy campaigner at Rainforest Action Network, said the pledge would amount to "greenwash" without a commitment to stop fossil-fuel expansion.
Stock indexes hit fresh records
U.S. stock indexes rose to the latest in a string of records on Wednesday after the Federal Reserve announced its plan to dial back the bond-buying program it has been using to stimulate the economy during the coronavirus pandemic. The S&P 500 and the Dow Jones Industrial Average rose by 0.6 percent and 0.3 percent, respectively. The tech-heavy Nasdaq gained 1 percent. The Fed expressed concern about rising inflation but said increased prices were "largely reflecting transitory factors." Despite the announcement on tapering asset purchases, the Fed signaled it would keep interest rates unchanged. "It was more dovish than markets expected," said Mona Mahajan, senior investment strategist at Edward Jones, of the outcome and press conference. "Anytime there's a whiff of lower rates, we tend to get favorable market reactions." Futures were little changed early Thursday.
Toyota reports stronger profit in latest quarter
Toyota on Thursday reported that its profit jumped by 33 percent in the latest quarter despite ongoing supply-chain disruptions linked to the coronavirus pandemic. The Japanese automaker reported a profit of $5.5 billion for July through September, up from $4.1 billion in the same period last year. Quarterly sales rose by 11 percent to $66 billion. Toyota said that it was forced to reduce production due to difficulties getting computer chips, a problem that has hurt all auto manufacturers. Toyota said production has started recovering as it struggles to meet strong demand. The company lifted its forecast for the current fiscal year, which runs through March 2022, to $22 billion, up from its earlier expectations of $20 billion.
Allbirds shares rise 90 percent in IPO
Allbirds shares soared in the eco-friendly shoe company's market debut on Wednesday, rising by 90 percent to value the company at $4.1 billion. Allbirds priced its 20.2 million shares at $15 on Tuesday, raising about $303 million, and trading opened on the Nasdaq exchange at $21.21. The shares closed Wednesday at $28.64. Allbirds, which makes popular wool sneakers and slip-ons, targeted IPO investors looking to back companies focusing on sustainability. "I think why the demand was so great ... investors were really attracted by the opportunity to put their capital against great opportunity to create outcomes that were better for the planet," co-founder and co-CEO Joey Zwillinger said in an interview on CNBC's Squawk Box.