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    Nike shares fall as supply chain havoc leads retailer to slash revenue forecast

    Nike said that global supply chain congestion is hurting the business more than it previously anticipated.
    The sneaker giant lowered its fiscal 2022 outlook to account for longer transit times, labor shortages and prolonged production shutdowns in Vietnam.
    Nike now expects full-year sales to increase mid-single digits, compared with a prior outlook of low double-digit growth.

    Pedestrians walk past the American multinational sport clothing brand, Nike store and its logo seen in Hong Kong.
    Budrul Chukrut | LightRocket | Getty Images

    Nike shares dropped more than 3% in extended trading Thursday after the sneaker giant said supply chain congestion is hurting its business more than it previously anticipated.
    The sneaker giant lowered its fiscal 2022 outlook to account for longer transit times, labor shortages and prolonged production shutdowns in Vietnam.

    Nike now expects full-year sales to increase at a mid-single-digit pace, compared with a prior outlook of low double-digit growth. In the fiscal second quarter, it sees sales flat to down low single digits. Analysts had been looking for revenue growth of 12% for the year, as well as a 12% increase for the second quarter, according to Refinitiv data.
    Nike’s revised forecast comes in the wake of a mixed first-quarter earnings report. It missed revenue expectations, as demand in North America softened. But the company sold more goods to shoppers at full price, boosting profits.
    Here’s how Nike did during its fiscal first quarter compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

    Earnings per share: $1.16 vs. $1.11 expected
    Revenue: $12.25 billion vs. $12.46 billion expected

    Over the next few quarters, Nike anticipates its entire business will see short-term inventory shortages, Chief Financial Officer Matt Friend said during a conference call.
    Since mid-July, the company has been working through factory shutdowns in Vietnam, where it produces roughly 50% of its footwear and 30% of its apparel. Facilities have been closed as the government tries to tamp down the spread of the Covid-19 virus. About 80% of Nike’s footwear factories in southern Vietnam and roughly half of its apparel factories in the area remain closed, Friend said.

    “We’ve already lost 10 weeks of production, and that gap will continue. … It’s going to take several months to ramp back to full production,” he told analysts.
    Once its products are produced, Nike is also running into shipping delays. According to Friend, transit times in North America are double pre-pandemic levels, taking an average of 80 days to move goods from Asia to Nike’s home turf.
    Nike said demand worldwide for its shoes and workout apparel remains strong. But with these bubbling inventory issues, near-term performance will be hurt.
    Management said fiscal first-quarter results would have been incrementally stronger, were it not for the supply chain snafus. Bottlenecks are resulting in a material lack of supply, leaving some consumers empty-handed.
    Nike’s fiscal first-quarter sales climbed to $12.25 billion from $10.59 billion a year earlier but were short of analysts’ expectations of $12.46 billion.
    China posted the smallest gain of any of its geographies, climbing 11%. In past quarters, the region had been one of Nike’s biggest revenue drivers.
    Revenue in North America rose 15% to $4.88 billion. That was short of the $5.05 billion that analysts polled by FactSet were looking for.
    Digital sales for the Nike brand rose 29% year over year. The retailer has been investing in its website and a suite of mobile apps. That has been especially beneficial during the health crisis, when many people have opted to shop from their homes.
    “Digital is increasingly becoming a part of everyone’s shopping journey, and we are well positioned to reach our vision of a 40% owned digital business by fiscal 2025,” Friend said.
    However, one upside to tightened inventories has been greater profitability on the products that Nike sells, since the company has little incentive to discount. Nike has also been reducing its reliance on wholesale partners that often sell at a markdown.
    Net income grew to $1.87 billion, or $1.16 per share, compared with $1.52 billion, or 95 cents per share, a year earlier. That topped analysts’ expectations for $1.11 a share.

    Analysts and investors had been expecting sales to take a temporary hit from the drop-off in manufacturing. The lockdowns are also impacting a number of other retailers, ranging from athleisure rival Lululemon to the high-end furniture chain RH.
    Wall Street research firm BTIG earlier this month had downgraded Nike’s stock, seeing order cancellations running through at least next spring.
    “Over its history, Nike’s stock has been most tightly correlated with sales growth, so with growing evidence that sales will likely stall, we believe Nike’s stock will at best tread water until more clarity is had around its manufacturing issues,” BTIG analyst Camilo Lyon said in a research note.
    Nike shares are up about 13% year to date, as of Thursday’s market close, but down about 9% from an all-time high reached in early August. That’s when talk of the supply chain congestion started to pick up.
    Nike said it ended the latest quarter with inventories of $6.7 billion, which was about flat from a year earlier, and down slightly from inventories of $6.9 billion in the prior period.
    For the balance of this fiscal year, the company said, it sees demand outweighing supply. But it expects to return to more normalized inventory levels in fiscal 2023.
    “Over the past 18 months, we’ve demonstrated our ability to manage through turbulence,” Chief Executive Officer John Donahoe said Thursday. “And that’s what we’ll continue to do as we navigate through these current supply chain issues. We’ll focus on what we can control.”
    Find the full press release from Nike here.

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    Costco brings back purchase limits on toilet paper, cleaning supplies and more

    Costco Chief Financial Officer Richard Galanti said the retailer is bringing back purchase limits on household essentials such as toilet paper, bottled water and cleaning supplies.
    The membership-only warehouse chain said it wants to make sure those items stay on shelves as it copes with supply chain challenges, from shipping delays to truck driver shortages.
    The retailer saw strong demand for home furnishings, sporting goods and jewelry in the fiscal fourth quarter — even selling some rings in the $100,000 range, Galanti said.

    People shop for toilet paper at a Costco store in Novato, California on March 14, 2020.
    Josh Edelson | AFP | Getty Images

    Costco Chief Financial Officer Richard Galanti said Thursday the company wants to make sure it has essential items at stores, even as shipping delays and truck driver shortages make it hard to keep them on shelves.
    During an earnings call, he said the retailer is “putting some [purchase] limitations on key items.” Those include toilet paper, paper towels, bottled water and high-demand cleaning products. He did not specify how many of each item customers will be able to buy.

    The new product limits are prompted by a different challenge than the ones in earlier phases of the pandemic, when stores saw unusually high demand for paper products and antibacterial wipes as customers stockpiled those goods.
    “A year ago there was a shortage of merchandise,” Galanti said. “Now they’ve got plenty of merchandise but there’s two- or three-week delays on getting it delivered because there’s a limit on short-term changes to trucking and delivery needs of the suppliers, so it really is all over the board.”
    The membership-only warehouse chain beat analysts’ expectations on Thursday for the fiscal fourth quarter, which ended Aug. 29. Yet, Galanti said, the pandemic has challenged Costco’s supply chain and increased its costs, as it has at other retailers.
    Costco is placing earlier orders to get what it needs, Galanti said. He added the company has chartered three ocean vessels for the next year to transport containers between Asia and the U.S. and Canada. Each ship can carry 800 to 1,000 containers at a time, he said.
    As early as August, there had been some social media posts about product limitations for some of its private-label products. This week, the retailer warned some customers that they may see delays when they placed an online order for toilet paper — a household item that has become synonymous with stockpiling. That delay was first reported by Fox Business, which saw it mentioned in a purchase order confirmation email.

    Galanti said on Thursday that demand was strong for jewelry, home furnishings, pharmacy and sporting goods during the latest three-month period. He said the retailer — best known for big and bulky — “sold a couple of rings in the $100,000 range.”
    Costco’s shares were up less than 1% on Thursday evening. As of the market’s close, the stock had gained 20% this year, bringing its market value to $200.16 billion.

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    Abortion providers ask Supreme Court to quickly take up challenge of restrictive Texas law

    A group of abortion providers and advocates asked the Supreme Court on Thursday to quickly review their challenge to a highly restrictive abortion law in Texas.
    That law, which bans most abortions after as early as six weeks and allows private citizens to file lawsuits against anyone who “aids or abets” in an abortion, went into effect this month.
    The petitioners’ latest effort asked the Supreme Court to take up the case before a lower court issued its final ruling.

    A demonstrator holds up an abortion flag outside of the U.S. Supreme Court as justices hear a major abortion case on the legality of a Republican-backed Louisiana law that imposes restrictions on abortion doctors, on Capitol Hill in Washington, U.S., March 4, 2020.
    Tom Brenner | Reuters

    A group of abortion providers and advocates asked the Supreme Court on Thursday to quickly review their challenge to a highly restrictive abortion law in Texas, which bans most abortions after as early as six weeks.
    That law, which also allows private citizens to file lawsuits against anyone who “aids or abets” in an abortion, went into effect on Sept. 1.

    In a 5-4 decision that day, the conservative-leaning Supreme Court rejected an emergency request to block the law, focusing on procedural questions while making no judgment about the constitutionality of the law.
    Patients in Texas are now reportedly fleeing to other states for procedures — though advocates note many women lack the means to evade the new restrictions.
    Rather than try again to temporarily block the Texas law, Thursday’s petition asked the Supreme Court to grant a request to review their case. That procedure, called a writ of certiorari, is generally filed after a ruling in a lower court.
    But the abortion-rights advocates in their latest effort asked the high court to take up the case quickly, rather than wait for final judgment in an appeals court, where they say “the writing is on the wall” even though the matter remains pending.
    “Meanwhile, Texans are in crisis,” they wrote in the petition. “Faced with the threat of unlimited lawsuits from the general populace and the prospect of ruinous liability if they violate the ban, abortion providers have been forced to comply.”

    The law forces many pregnant women to travel hundreds of miles to neighboring states, where providers are grappling with a surge in patients and weekslong backlogs, the petition said. Many others may be unable to make that trek if they don’t have the money, the time or the ability to put their obligations on hold, or if they fear retaliation from their partners or families, the petition said.
    “All these individuals must carry to term or seek ways to induce an abortion without medical assistance, as reports now suggest more Texans are doing,” according to the petition.
    The advocates acknowledged that the Supreme Court’s shadow-docket decision did not preclude them from filing suit against the law in state court. But they argued that the handful of cases pending there “could take months, if not years, to wend through the state-court system before they could provide statewide relief.”
    “The Court should act now to resolve the question presented on an expedited basis, with the benefit of briefing and argument that was impossible when Petitioners filed their emergency application,” the petition said.

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    CDC panel endorses Pfizer Covid booster shots for high-risk adults, rejects plan to distribute widely across America

    A key CDC advisory group voted to recommend distributing Pfizer and BioNTech’s Covid-19 booster shots to older Americans and other vulnerable people.
    The panel struggled over a controversial proposal to give boosters to a wide swath of the U.S. population, rejecting the plan by a vote of 9-6.
    It would have distributed the shots to nursing home staff, people who live or work in prisons and homeless shelters, front-line health employees, unpaid caregivers, and other essential workers, like teachers.

    A key Centers for Disease Control and Prevention advisory group voted Thursday to recommend distributing Pfizer and BioNTech’s Covid-19 booster shots to older Americans, nursing home residents and other vulnerable people, clearing the way for the agency to give the final OK as early as this evening.
    The agency’s Advisory Committee on Immunization Practices unanimously endorsed giving third Pfizer shots to people 65 and older and nursing home residents in the first of four votes. The panel also recommended third doses for adults age 18 to 64 with underlying conditions. Many of those groups were among the first to get the initial shots in December and January.

    The panel struggled over a controversial proposal to give boosters to wide swath of the U.S. population, rejecting the plan by a vote of 9-6. It would have distributed the shots to nursing home staff, people who live or work in prisons and homeless shelters, front-line health employees, unpaid caregivers, and other essential workers, like teachers.
    “I mean, we might as well just say just give it to everybody 18 and over,” committee member Dr. Pablo Sanchez said before voting against the proposal.

    Lisa Wilson receives a shot of the Pfizer vaccine at a mobile COVID-19 vaccination site in Orlando, Florida.
    Paul Hennessy | SOPA Images | LightRocket | Getty Images

    Dr. Leana Wen, an emergency physician and former Baltimore health commissioner, on Twitter called the CDC panel’s vote to reject boosters more widely a “mistake.”
    “Really, we are not allowing healthcare workers, many of whom got vaccinated in back in December, to get a booster? What about teachers in cramped classrooms where masks aren’t required?” she tweeted, adding CDC Director Dr. Rochelle Walensky should overrule the recommendation.
    The recommendation doesn’t go nearly as far as President Joe Biden wanted. His administration said it planned to start giving booster shots to people 16 and older this week. While the CDC panel’s recommendation doesn’t give the Biden administration everything it wanted, boosters will still be on the way for millions of Americans who originally received Pfizer’s shots.

    The endorsement comes a day after the Food and Drug Administration granted emergency use authorization to administer third Pfizer shots to many Americans six months after they complete their first two doses. While the CDC’s committee’s recommendation isn’t binding, Walensky is expected to accept the panel’s endorsement shortly.

    CNBC Health & Science

    Walensky addressed the committee Thursday before the vote, thanking them for their work and laying out what’s at stake.
    “These data are not perfect, yet collectively they form a picture for us, and they are what we have in this moment to make a decision about the next stage in this pandemic,” she said.
    Before the vote, some committee members said they worried that widely offering boosters could interfere with efforts to get the shots to the unvaccinated or potentially reduce confidence in the vaccines’ effectiveness. Others were frustrated that only Pfizer recipients would be eligible to get the shots, leaving out millions of Americans who got the Moderna and Johnson & Johnson vaccines.
    The vote came at the end of a two-day meeting, where CDC advisors listened to several presentations on data to support the wide distribution of booster shots, including one from a Pfizer executive who displayed data that showed a third shot appears to be safe and boost antibody levels in recipients.
    During one presentation Thursday, CDC official Dr. Sara Oliver showed observational studies from Israel, where officials began inoculating the nation’s population ahead of many other countries and started offering third shots to their citizens in late July.
    The Israel data has been criticized by at least one FDA official as it is based on so-called observational studies that don’t adhere to the same standards as formal clinical trials. 
    “We can use the experience from Israel to inform our knowledge of the safety of boosters,” Oliver said, adding the country has only reported one case of a rare heart inflammation condition known as myocarditis out of nearly 3 million third doses administered.
    CDC official Dr. Kathleen Dooling said data also suggests a third dose may reduce the risk of severe illness in older adults and people with comorbidities. Potential risks include myocarditis, although this risk is very rare, occurring mostly in males under 30, she said.
    “The third dose of Pfizer-BioNTech Covid-19 vaccine appears to have similar reactogenicity as the second dose,” she added.
    The topic of who should get boosters and when has been a contentious topic among the scientific community since the Biden administration last month outlined its plan to widely distribute them.
    In a paper published days before an FDA advisory meeting last week, a leading group of scientists said available data showed vaccine protection against severe disease persists, even as the effectiveness against mild disease wanes over time. The authors, including two high-ranking FDA officials and multiple scientists from the World Health Organization, contended in the medical journal The Lancet that widely distributing booster shots to the general public is not appropriate at this time.
    In outlining plans last month to start distributing boosters as early as this week, Biden administration officials cited three CDC studies that showed the vaccines’ protection against Covid diminished over several months. Senior health officials said at the time they worried protection against severe disease, hospitalization and death “could” diminish in the months ahead, especially among those who are at higher risk or were inoculated during the earlier phases of the vaccination rollout.
    – CNBC’s Robert Towey contributed to this report.

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    NIH Director Collins calls Israeli Covid vaccine booster data 'impressive,' says it shows tenfold reduction in infection

    National Institutes of Health Director Dr. Francis Collins said the data from the Israeli study shows a tenfold reduction in infection within 12 days after a person receives Pfizer’s Covid booster.
    Collins added that the data indicates a roughly twelvefold reduction in severe Covid.
    His comments Thursday came just a day after the FDA approved Pfizer’s booster for high-risk people, including anyone 65 and older.

    A patient receives his booster dose of the Pfizer-BioNTech coronavirus (COVID-19) vaccine during an Oakland County Health Department vaccination clinic at the Southfield Pavilion on August 24, 2021 in Southfield, Michigan.
    Emily Elconin | Getty Images

    National Institutes of Health Director Dr. Francis Collins called Israel’s data on Covid-19 booster shots “impressive,” noting that the shots provided a tenfold reduction in infection for people who received a third dose of the Pfizer-BioNTech vaccine.
    Israel began administering boosters in late July to people over 60, giving scientists more time to examine their ability to combat Covid and bolster the waning effectiveness of the initial series of doses. Collins’ comments Thursday came just a day after the Food and Drug Administration approved the Pfizer-BioNTech Covid booster for high-risk people, including anyone 65 and older.

    “Without tipping my hand too much, I will say the data looks really impressive, that the boosters do in fact provide substantial reduction in infection — like, a tenfold reduction just within 12 days after that booster, and also a reduction in severe illness, which is the thing we’re most concerned about,” Collins said during a discussion on Covid hosted by Bloomberg Philanthropies.

    CNBC Health & Science

    Collins added that the Israeli data indicated a roughly twelvefold reduction in severe Covid as the nation was starting to experience more breakthrough cases. Pfizer reported on Aug. 25 that recipients of its third doses experienced a threefold increase in antibodies.
    The Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices, a panel of medical authorities who offer guidance to the agency, will vote Thursday on whether to endorse the FDA’s booster decision. The panel began a two-day series of presentations on boosters Wednesday to give experts and the public a chance to hear more data before the final vote.
    Vaccine makers Moderna and Johnson & Johnson are weeks away from the CDC and FDA evaluating their boosters, Collins said. Even though Pfizer’s boosters are only currently available for recipients of its first two doses, Collins said the NIH is completing a “mix and match trial” to determine the effects of administering initial doses and boosters from separate manufacturers.
    “It’s not a big trial, but it’s enough to see, do you bump your antibody levels up as well if you go to a different booster than you started with, or you maybe do even better,” Collins said.

    The CDC reports that 2.3 million people have received third doses in the U.S. since Aug. 13 and that nearly 55% of the total population is fully immunized against Covid. But false online rumors about vaccines remain a significant obstacle for health officials to overcome, Collins said.
    “In the United States, we have 70 million people who, despite the compelling evidence — it’s all been shared in public, of safety and efficacy of any one of these three vaccines — have yet to decide to roll up their sleeves,” Collins said. “And I’m afraid they’re barraged by all kinds of misinformation, and some of it actually intentional disinformation that is rampant in social media.”

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    Southwest Airlines' incoming CEO says carrier will cut flights next year if staffing falls short

    Southwest Airlines is in the process of adding some 10,000 workers through next year.
    The Dallas-based airline was left short-staffed during a summer peak after thousands of workers took buyouts and leaves of absence.
    Incoming CEO Bob Jordan vowed not to repeat the summer’s flight disruptions.

    A passenger checks in her luggage at the Southwest Airlines terminal at LAX.
    Mel Melcon | Los Angeles Times | Getty Images

    Southwest Airlines customers suffered hundreds of cancelations, delays and other disruptions this summer as the carrier struggled with snowballing problems of bad weather and a lack of staff.
    Its next CEO, Bob Jordan, vowed not to repeat that. The airline is about halfway to its goal of hiring 5,000 workers this year and has already trimmed its schedule for the rest of 2021 to avoid further service shortfalls. The airline, and others like Spirit and American, set out to operate an ambitious schedule over the summer to try to recover revenues lost during the coronavirus pandemic, but a shortfall of staff exacerbated operational issues.

    “The next question is the March schedule. We plan to meet that but if we find ourselves not able to hire to meet that we’ll go back and look at modifying the schedule,” Jordan said in an interview on Thursday. “What we’re not going to do is we’re not going to repeat last summer.”
    Jordan, who takes the reins from Gary Kelly in February and is a 33-year Southwest employee, told the Skift Global Forum in New York earlier Thursday that the carrier also plans to add 8,000 employees next year. The Dallas-based airline has about 56,000 employees.
    Hiring has been a challenge.
    “We’re pulling out every stop,” Jordan said. The airline raised starting pay to $15 an hour and has been offering retention bonuses, referral bonuses as well as additional pay for certain markets with higher costs of living like Denver, he said.
    Jordan said he was confident that it could reach its goal to add 5,000 workers this fall, but noted competition has been brutal. Employers from retailers to airlines to restaurants have struggled to fill jobs and turned to bonuses and higher pay to attract workers.

    “You see 15 bucks [an hour] at Lowe’s and at McDonald’s,” he said. “The market sets the rate and I’m not sure it’s completely done yet.”
    Jordan told Skift earlier that the carrier usually receives 42 or 43 applicants per open position and is now seeing about 14.
    Southwest in August cut its third-quarter revenue outlook, citing weaker bookings during a rise in delta-variant cases of Covid-19.
    “The holiday bookings are holding up really well,” Jordan said. “It feels like we are on the backside of this delta wave.”
    Southwest and other airlines have been trying to ensure their own staff are vaccinated against Covid-19. United Airlines has the strictest policy: an outright mandate for its 67,000 U.S. employees that requires them to be inoculated, with few exceptions, or face termination. Delta Air Lines in November plans to impose a $200-a-month surcharge on company health insurance for unvaccinated employees.
    Southwest is currently offering incentives like two days of pay for employees who upload proof of vaccination. Jordan told CNBC he would prefer to use incentives and not issue a vaccine mandate.
    “I know the topic of vaccines and mandates are personal, it’s emotional but at the end of the day we need to get as many people vaccinated as possible, as a country, as a company,” he said. “I’d much rather get there through incentives and encouragement and data than a mandate. I would love for our employees to have a choice.”
    However, a government vaccine mandate for large employers as well as government contractors, could change that. Southwest fits both categories because it operates charter flights for the government and other services.
    “There’s a lot to learn about what the rules are,” he said.
    Jordan said it isn’t clear yet what percentage of staff is vaccinated but the new incentives would provide more data. He guessed the company’s rate of fully vaccinated employees mirrors the national average, which is just more than 64% of the U.S. population over the age of 12. “I’m hopeful with the incentives we get to something much higher than that,” he said.

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    Here's what will happen when the Fed's 'tapering' starts, and why you should care

    Fed officials indicated Wednesday that they’re ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.
    Bond purchases have added more than $4 trillion to the Fed’s balance sheet, which now stands at $8.5 trillion.
    Tapering represents a teeing up of future rate hikes, though they appear to be at least a year in the distance.

    The Marriner S. Eccles Federal Reserve building in Washington.
    Stefani Reynolds/Bloomberg via Getty Images

    The Federal Reserve will likely start to tiptoe into the unknown before the end of the year.
    Central bank officials indicated Wednesday that they’re ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.

    While the Fed has gone into policy retreat before, it has never had to pull back from such a dramatically accommodative position. For most of the past year and a half, it has been buying at least $120 billion of bonds each month, providing unprecedented support to financial markets and the economy that it now will start to walk back.
    The bond purchases have added more than $4 trillion to the Fed’s balance sheet, which now stands at $8.5 trillion, about $7 trillion of which is the assets bought up through the Fed’s quantitative easing programs, according to the central bank’s data. The purchases have helped keep interest rates low, provided support to markets that malfunctioned badly at the start of the pandemic crisis, and coincided with a powerful run for the stock market.
    In light of the role the program has played, Fed Chairman Jerome Powell assured the public Wednesday that “policy will remain accommodative until we have reached” the central bank’s goals on employment and inflation.
    Markets thus far have taken the news well, but the real test is ahead. Tapering represents a teeing up of future rate hikes, though they appear to be at least a year in the distance.

    “It’s certainly been communicated well, so I don’t think that should be a shock to anybody or cause a disruption to the market,” Charles Schwab head of fixed income Kathy Jones said. “The question really is more around asset prices than [interest] rates. We have very high valuations across the board in asset prices. What does this shift away from very easy money do to asset prices?”

    The answer so far has been … nothing. The market rallied Wednesday afternoon despite what amounted to a preannouncement for Fed tapering, and roared higher again Thursday.
    How things go the rest of the way likely depends on how the Fed stage manages its exit from its money-printing operations.

    How it works

    Here’s what tapering could look like:
    Powell said the official tapering decision could happen at the November meeting, and the process would commence shortly thereafter. He added that he sees tapering being finished “sometime around the middle of next year.” That timeline, then, offers a view into how the actual reductions will go down.
    If the taper indeed begins in December, reducing the purchases by $15 billion a month would get the process down to zero in eight months, or July.
    Jones said she would expect the Fed to cut Treasurys by $10 billion a month and mortgage-backed securities by $5 billion. There have been some calls from within the Fed to be more aggressive with mortgages considering the inflated state of housing prices, but that seems unlikely.

    Federal Reserve Chair Jerome Powell testifies during a U.S. House Oversight and Reform Select Subcommittee hearing on coronavirus crisis, on Capitol Hill in Washington, June 22, 2021.
    Graeme Jennings | Pool | Reuters

    Powell’s general tone during this post-meeting news conference surprised Jones. The chairman repeatedly said he is satisfied with the progress made toward full employment and price stability. With inflation running well above the Fed’s comfort zone, Powell said “that part of the test is achieved, in my view, and in the view of many others.”
    “The tone was perhaps a little bit more hawkish than the market expected when it comes to tapering,” Schwab’s Jones said. “That comment that the Fed will finish by the middle of next year, it was like, ‘OK, we had better get a move on here if we’re going to do that.'”
    Jones said that Powell’s comments and the Fed’s tapering intentions reflected a high level of confidence that the economy continues to recover from the pandemic-induced recession, which was both the shortest and steepest in U.S. history.
    “The Fed is telling us that it collectively expects growth and inflation to be pretty strong over the next year, and they’re ready to withdraw the easy policy,” she added.

    A view to a rate hike

    What happens after the taper is what’s really important.
    The summary of individual members’ rate forecasts — the vaunted “dot plot” — indicated a slightly more aggressive posture. The 18 members of the policymaking Federal Open Market Committee are about split on whether to enact the first quarter-point hike next year.
    Officials see as many as three more hikes in 2023 and in 2024, bringing the Fed’s benchmark borrowing rate to a range between 1.75% and 2%, from its current 0 to 0.25%. Powell stressed the Fed will move carefully before raising rates and likely will wait until tapering is complete, but the market will be watching for more hawkish indications.
    “The next Fed meeting could be really interesting. It should give us a lot more volatility than we’re seeing now,” said John Farawell, head trader with bond underwriter Roosevelt & Cross. “They did sound more hawkish. It’s going to be data-driven and going to be about how Covid plays out.”
    For investors, it will be a new world in which the Fed is still providing support but not as much as before. While the mechanics sound simple things could get complicated if inflation continues to run above the Fed’s expectations.
    FOMC members upped their 2021 core inflation estimate to 3.7%, increasing it from the 3% projection in June. But there’s plenty of reason to believe that there’s considerable upside to that forecast.
    For instance, in recent days economic bellwether companies including General Mills and Federal Express have indicated that prices are likely to rise. Natural gas is up more than 80% this year and will mean substantially higher energy costs heading into the winter months.
    UBS forecasts that economic conditions and the tapering news will start putting upward pressure on yields, driving the benchmark 10-year Treasury to 1.8% by the end of 2021. That’s about 40 basis points from its current level but “should not have a significant adverse effect on borrowing costs for companies or individuals,” UBS said in a note for clients.
    Yields move opposite prices, meaning that investors will be selling bonds in anticipation of higher rates and less Fed support.
    Analysts at UBS say investors should keep in mind that the Fed is moving forward because it is getting more confident in the economy, and still will be providing support.
    “While higher bond yields lower the relative attractiveness of equities, a gradual rise in bond yields should be more than offset by the positive impact from rising earnings as economies return to normal,” the firm said. “Tapering should thus be seen as the gradual withdrawal of an emergency support measure as conditions normalize.”

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    Photos document the fight to save the world's largest trees

    Last week, fires began burning out of control in steep canyons near Sequoia National Park, which contains some of the world’s largest trees.
    These photos show the efforts to save the trees by wrapping their bases in fireproof blankets as firefighters fought the blazes.

    Ed Christopher, deputy fire director at the U.S. Fish and Wildlife Service, looks over the Four Guardsmen at the entrance to General Sherman at Sequoia National Park, California, Sept. 22, 2021.
    Gary Kazanjian | AFP | Getty Images

    Last week, fires began burning out of control in steep canyons near California’s Sequoia National Park, which contains some of the world’s largest trees as measured by volume. As the flames approached, park officials wrapped the bases of some trees in fireproof aluminum blankets to protect the giants. By Monday, the flames had mostly passed by the biggest trees, although the blankets were probably less important to their salvation than the controlled burns the park has done in recent years, a park official told SFGate.
    Here’s a look back at the fight to protect the trees in Sequoia:

    Protecting an icon

    Firefighters cover a sign carved from sequoia wood at an entrance to Sequoia National Park, Sept. 17, 2021.
    Sequoia and Kings Canyon National | via Reuters

    A tree aflame

    Flames lick up a tree as the Windy Fire burns in the Trail of 100 Giants grove in Sequoia National Forest in California, Sept. 19, 2021.
    Noah Berger | AP

    Photographing the giants

    A photographer takes pictures at the base of giant sequoia trees in the Lost Grove along Generals Highway north of Red Fir during a media tour of the KNP Complex fire in the Sequoia National Park in California on Sept. 17, 2021.
    Patrick T. Fallon | AFP | Getty Images

    A memory captured

    Firefighters from Orange County take photos as the Windy Fire burns in Sequoia National Forest near California Hot Springs, California, Sept. 21, 2021.
    David Swanon | Reuters

    Holding the line

    Firefighters spray water as flames push toward a road during the Windy Fire in the Sequoia National Forest near Johnsondale, California, on Sept. 22, 2021.
    Patrick T. Fallon | AFP | Getty Images

    Guarding the Four Guardsmen

    Ed Christopher, deputy fire director at the U.S. Fish and Wildlife Service, looks over the Four Guardsmen at the entrance to General Sherman at Sequoia National Park, Sept. 22, 2021.
    Gary Kazanjian | AFP | Getty Images

    The forest ablaze

    A firefighter with Alaska’s Pioneer Peak Interagency Hotshot Crew carries a chain saw as the Windy Fire burns in the Sequoia National Forest near Johnsondale, California, on Sept. 22, 2021.
    Patrick T. Fallon | AFP | Getty Images

    Saving General Sherman, the world’s largest tree

    Operations Section Chief Jon Wallace looks over General Sherman, the world’s largest tree, which was protected by structure wrap from fires at Sequoia National Park, Sept. 22, 2021.
    Gary Kazanjian | AFP | Getty Images

    Controlling the burn

    Firefighters work to control the Windy Fire as trees burn in the Sequoia National Forest near Johnsondale, California, on Sept. 22, 2021.
    Patrick T. Fallon | AFP | Getty Images

    Checking residual heat

    Ed Christopher, deputy fire director at the U.S. Fish and Wildlife Service, checks the residual heat near the Four Guardsmen at Sequoia National Park, Sept. 22, 2021.
    Gary Kazanjian | AFP | Getty Images

    A blaze in the night

    The Windy Fire blazes through the Long Meadow Grove of giant sequoia trees near the Trail of 100 Giants overnight in Sequoia National Park, near California Hot Springs, California, on Sept. 21, 2021.
    David McNew | Getty Images

    A warning of danger

    A huge tree is marked unsafe by firefighters as the Windy Fire burns in Sequoia National Forest near California Hot Springs, California, Sept. 21, 2021.
    David Swanson | Reuters

    Working through the smoke

    Firefighters battle the Windy Fire as it burns in the Trail of 100 Giants grove of Sequoia National Forest on Sept. 19, 2021.
    Noah Berger | AP

    Watching the flames

    A firefighter watches flame and smoke rise into the air as trees burn during the Windy Fire in the Sequoia National Forest near Johnsondale, California, on Sept. 22, 2021.
    Patrick T. Fallon | AFP | Getty Images

    General Sherman survives

    The historic General Sherman tree, which was saved from fires, is seen at Sequoia National Park, California, Sept. 22, 2021.
    Gary Kazanjian | AFP | Getty Images

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