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Dow closes at record high

The Dow jumped to a record high Tuesday for the second day of trading in the fourth quarter.

The Dow  (^DJI) ended Tuesday’s session up 123 points to 26,773.94, clinching its 14th record close of the year. The S&P 500 (^GSPC) was down 0.04%, or 1.16 points, while the Nasdaq (^IXIC) was down 0.47%, or 37.76 points.

Overseas, European equities were swathed in the red as political uncertainty continues in Italy, with the country feuding with the EU over its budget proposal. Italy’s new budget proposal, which seeks to increase spending and cut taxes, ups the deficit target to 2.4% for the country.

Some uncertainty over trade eased up earlier in the week after the U.S. reached a trilateral agreement with Mexico and Canada governing $1 trillion worth of trade. The new agreement, called the U.S.-Mexico-Canada Agreement (USMCA)is expected to be signed by leaders of the three countries in November before going to Congress to gain approval. While the deal signaled the start of easing trade tensions in North America, President Donald Trump said in a press conference on Monday that it is still “too early to talk” with China — the region where the U.S. has its largest trade deficit — adding that “they’ve been ripping us for so many years.”

STOCKS: PepsiCo tops expectations, Stitch Fix slumps

PepsiCo (PEP) reported earnings Tuesday morning that topped analyst expectations and signaled a return to growth in its North American beverage division, which had previously lagged behind its packaged snack business. PepsiCo’s North American beverage segment reported organic growth of 2.5%, after falling 1.5% the quarter prior. The company also reported quarterly revenues of $16.49 billion, topping expectations of $16.36 billion, and adjusted earnings per share of $1.59, or two cents above average expectations as compiled by Thomson Reuters. PepsiCo CFO Hugh Johnston told Yahoo Finance Tuesday that the company isn’t looking at a “substantive” business overhaul under incoming CEO Ramon Laguarta, implying the company won’t be splitting its food and beverage businesses as had previously been floated. 

Shares of Stitch Fix (SFIX) extended losses Tuesday after reporting user growth that fell short of average analyst expectations, indicating that the company may not be able to keep pace with Amazon’s roll-outs of additional personal shopping services. Stitch Fix said active clients for the quarter rose 25% to 2.7 million from the year-ago period, but the number stayed flat from the quarter prior and fell short of average analyst expectations of 2.81 million for the quarter, according to StreetAccount. Stitch Fix also reported net revenue of $318.3 million, which represented a 23% year-over-year increase but failed to meet analyst expectations of $318.6 million. The stock was down 35% to $28.94 per share at the end of trading Tuesday. 

NEWS: Amazon ups its minimum wage, Tesla hits production goals

Amazon (AMZN) announced it is increasing its minimum wage to $15 for all of its full-time, part-time, temporary and seasonal employees in the U.S., effective Nov. 1. The new policy will impact more than 250,000 Amazon employees and another 100,000 seasonal employees hired to work during the holiday season, the company said. The Seattle, Washington-based company will also deploy its public policy team to advocate for an increase in the federal minimum wage, which is currently set at $7.25 an hour. Amazon’s move won the praise of Senator Bernie Sanders, who had previously been a vocal critic of the company’s alleged treatment of workers.

Tesla (TSLA) produced 53,239 Model 3 vehicles in the third quarter, in line with the company’s previously issued guidance stating that it would produce between 50,000 and 55,000 Model 3s over the period. The company produced 80,142 total vehicles in the third quarter, or 50% more than the quarter prior, the company said in a statement Tuesday.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 20, 2018. REUTERS/Brendan McDermid

Kroger (KR) and Walgreens (WBA) announced Tuesday that the two companies are collaborating on a new format combining Kroger’s grocery business with Walgreens’ pharmaceutical, health and beauty business. The companies chose 13 Walgreens stores in northern Kentucky — near Kroger’s headquarters in Cincinnati — to pilot the format, the companies said in a statement.

Google’s (GOOG, GOOGL) advertising executive Sridhar Ramaswamy is leaving the search engine giant to join Greylock Partners, the venture capital firm said in a blog post Monday. Prabhakar Raghavan, vice president of Google cloud applications, on Friday will take over Ramaswamy’s role, which involves overseeing the largest revenue-driving segment of the company. Google-parent company Alphabet saw 86% of its $32.66 in revenue from advertising last quarter.

ECONOMY: “Higher wage growth alone need not be inflationary,” Powell says

Federal Reserve Chairman Jerome Powell said Tuesday that low unemployment and rising wages will not necessarily catalyze price increases that would result in a corresponding raising of interest rates or inflation.

“The rise in wages is broadly consistent with observed rates of price inflation and labor productivity growth and therefore does not point to an overheating labor market,” Powell said in prepared remarks at the National Association of Business Economics in Boston Tuesday. “Higher wage growth alone need not be inflationary.”

While the economic convention of the Phillips Curve suggests that lower unemployment relates to higher inflation, the U.S. of late has seen low unemployment but relatively low levels of inflation. “I do not see it as likely that the Phillips curve is dead, or that it will soon exact revenge,” Powell said. “What is more likely, in my view, is that many factors, including better conduct of monetary policy over the past few decades, have greatly reduced, but not eliminated, the effects that tight labor markets have on inflation.”

For now, Fed policy makers will stay the course, Powell asserted. “From the standpoint of contingency planning, our course is clear: Resolutely conduct policy consistent with the FOMC’s symmetric 2% inflation objective, and stand ready to act with authority if expectations drift materially up or down,” Powell said.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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