MARKET WRAPS
Watch For:
U.S. Durable Goods for December; U.S. Advance Estimate 4Q GDP;
U.S. Weekly Jobless Claims; Comcast Corp. 4Q results; McDonald's
Corp. 4Q results; Mastercard Inc. 4Q results; Apple Inc. 1Q
results; Mondelez International Inc. 4Q results; Visa Inc. 1Q
results.
Opening Call:
Stock futures were flat Thursday, but looming interest-rate
increases and tighter monetary policy continue to weigh on investor
sentiment and could usher in volatility.
Earlier in the premarket, stock market futures for all three
indexes were 0.5% to 1% lower.
The downswing built on a bout of volatility in the stock market
that has seen major indexes swing wildly in intraday trading this
week. The VIX hit its highest level in a year on Wednesday. Markets
have been buffeted by concerns about central-bank policy around
interest rates and inflation and geopolitical tensions over Ukraine
and Russia.
Earnings season is ongoing and is seen as the next big test of
whether the stock market's sky-high valuations can be
justified.
"What I'm looking for this earnings season is inflationary
pressures and margins-if companies are able to hold onto their
profits," Fahad Kamal, chief investment officer at Kleinwort
Hambros said. "Are they able to pass along prices, are they able to
maintain pricing power?" As central banks rein in liquidity, that
is what becomes really important, he added.
On Wednesday, the Fed signaled it would begin raising interest
rates in mid-March, its latest step toward removing stimulus to
bring down inflation. Fed Chairman Jerome Powell said the central
bank could continue to lift rates faster than it did during the
past decade.
The news shows the central bank "is in a hurry," said John Vail,
chief global strategist at Nikko Asset Management in Tokyo. "The
Fed got serious really fast and it's having an effect on
markets."
Uncertainty over a potential Russian invasion of Ukraine is
casting a pall, analysts said. Russia is a major energy exporter
and oil prices have remained high even as stocks have fallen. The
Fed won't be comfortable about inflation until oil prices decline,
said Mr. Vail.
McDonalds, Mastercard, Comcast, Blackstone and Southwest
Airlines are set to post results before Thursday's opening bell.
Apple, Visa and food and beverage giant Mondelez are due to report
after markets close.
Tesla shares declined 0.8% in off-hours trading after the
electric-vehicle maker posted a record profit. Chief Executive Elon
Musk said that he wouldn't introduce new models this year and that
the company had been affected by supply-chain disruptions.
Data on gross domestic product in the final quarter of 2021 will
go out at 8:30 a.m. ET. Economists forecasted the economy grew at a
solid pace, propelled by consumer spending, business investment and
efforts to rebuild inventories. Momentum may have been affected in
recent weeks by the Omicron.
Fresh data on jobless claims, a proxy for layoffs, will also be
released at 8:30 a.m. Analysts are anticipating a decline amid a
tight labor market. Information on orders for durable and capital
goods in December is scheduled for the same time.
Stocks to Watch:
ServiceNow shares headed higher after the workflow management
software provider posted better-than-expected fourth-quarter
earnings.
ServiceNow posted revenue of $1.61 billion and adjusted profits
of $1.46 a share in the period, edging Wall Street estimates for
sales of $1.6 billion and earnings of $1.43. Subscription revenue
was $1.52 billion, up 29%, or 32% adjusted for currency, and
slightly ahead of the company's guidance range.
ServiceNow ended the quarter with current remaining performance
obligations - a measure of work to be completed in the next 12
months - of $5.7 billion, up 29%.
ServiceNow said it had 135 transactions in the quarter with more
than $1 million in net new contract value, up 52% from a year ago.
The company said the total number of customers producing $1 million
or more in annual revenue rose to 1,359.
Forex:
The dollar is likely to remain supported into March when the Fed
holds its next meeting, at which it could make an aggressive start
to its interest rate hiking cycle, ING said.
"A debate over whether the Fed starts the cycle with 25bp or
50bp should keep the dollar bid into March," ING analysts say. Fed
Chairman Jerome Powell essentially confirmed that the central bank
would start lifting rates in March and refused to rule out a hike
at every meeting this year. The DXY dollar index rose 0.9%, having
earlier hit a six-week high of 96.8580.
Cryptocurrencies edged down, with bitcoin extending its decline
into a third day to trade below $36,000. Ether fell 1.7%. Meta
Platforms, formerly known as Facebook, is winding down its plans to
build a cryptocurrency payments network and is selling its
technology to a small bank, The Wall Street Journal reported.
The euro looks set to weaken further versus the dollar as the
Fed expects to start raising interest rates while the European
Central Bank is in no rush to follow suit, ING said.
"So far the ECB is firmly sticking to the script that the bump
in inflation will not hurry them into hiking," ING analysts said.
"Until something substantially changes here, expect EUR/USD to stay
under pressure."
ING expects EUR/USD to fall to 1.10 by the end of the first
quarter and to 1.08 by the end of the second quarter.
Bonds:
The yield on the benchmark 10-year Treasury note edged down to
1.835% Thursday from 1.845%. Shorter-dated government bonds
continued to sell off, with the two-year Treasury yield rising to
1.208%, notching a new pandemic high.
The Fed's message was "very hawkish" and went further than the
market's already lofty expectations, said Till Keller, managing
director for Germany, Austria and Switzerland at Ebury.
Anticipating a 25 basis-point interest-rate rise in March, Ebury
forecasts a total of four rises in 2022 as a bare minimum.
Keller finds that the perhaps most "hawkish" element of the
FOMC's communication was Powell's comment that he didn't rule out
the Fed raising interest rates at every meeting in the remainder of
the year.
"While we see this as unlikely, the acknowledgement that every
meeting from now on is a 'live' one is a clear signal of intent
that policymakers are firmly committed to controlling U.S.
inflation," Keller said.
U.S. borrowing costs rose after Powell delivered "a fairly
hawkish press conference" Wednesday, UniCredit said.
Investors are now left wondering whether the Fed will deliver
more than four rate increases in the current year, and pondering
the possibility of a 50 basis-point rise and the likelihood of
quantitative tightening starting as early as the summer, analysts
at the bank say. "The reaction in US Treasuries was powerful, but
appropriate given the outlook for an even steeper policy-tightening
path," they say. The two-year Treasury yield is up 11 basis points
to 1.202% this morning from Wednesday's close.
Commodities:
Oil prices ticked lower as hopes for a deal over Iran's nuclear
ambitions rise. Russia's envoy to the negotiations taking place in
Vienna said that world powers and Iran might reach an agreement
next month.
The deal would likely involve lifting sanctions on Iran's oil by
April, said Mikhail Ulyanov.
"If the talks continue at the pace they're currently going, in
principle, it's quite realistic to reach agreement by the end of
February," he was quoted by Bloomberg as saying.
Gold edged lower in early European trading. Geopolitical risks
remain, so "the path higher for gold is there, but it will likely
be a tough grind higher," Oanda reckons.
TODAY'S TOP HEADLINES
Apple Poised to Post Record Quarter as Investors Look for
Insight Into iPhone Demand
Apple Inc. on Thursday is expected to post another record
quarter, even as analysts see sales growing at their slowest pace
in more than a year.
Jittery investors will be left parsing how much of that slowdown
in revenue was because of lost sales due to supply chain
problems-as previously warned by Apple executives-or waning
interest in its latest iPhone lineup. Apple's iPhone 13 models are
very similar to versions introduced in October 2020, something that
in the past has been linked to slower sales.
Deutsche Bank Beats Profit Expectations, Restores Dividend
Deutsche Bank AG posted a rise in fourth-quarter profit, even
though its investment-banking business took a hit from rising
costs.
The better-than-expected result has paved the way for the bank
to pay a dividend to shareholders for the first time since
2019.
Facebook's Cryptocurrency Venture to Wind Down, Sell Assets
Facebook's ambitious effort to bring cryptocurrency to the
masses has failed.
The Diem Association, the consortium Facebook founded in 2019 to
build a futuristic payments network, is winding down and selling
its technology to a small California bank that serves bitcoin and
blockchain companies for about $200 million, a person familiar with
the matter said.
Tesla Supplier LG Energy Hits $99 Billion Valuation on Trading
Debut
Shares in LG Energy Solution Ltd. jumped 68% on their first day
of trading, after the world's No. 2 maker of electric-vehicle
batteries raised about $10.6 billion in South Korea's largest-ever
initial public offering.
The offering by LG Energy, which supplies batteries to Tesla
Inc., General Motors Co. and Hyundai Motor Co., capitalized on
investor appetite for key suppliers in the EV industry as well as
electric-car makers themselves.
William Ackman's Hedge Fund Takes Stake in Netflix
Billionaire investor William Ackman said his hedge fund has
acquired 3.1 million shares of Netflix Inc., attracted by a recent
selloff of the streaming giant's stock.
Pershing Square, the fund, said it acquired a stake in Netflix
due to a combination of investors' negative reaction to the
streaming company's subscriber growth in the fourth quarter and
recent market volatility.
Omicron Pushes Some Companies Back to Virtual Shareholder
Meetings
Some companies are switching to virtual shareholder meetings
again as the Omicron variant continues to spread through the U.S.
and businesses take precautions to limit infections.
Many companies shifted to meeting with their investors remotely
as Covid-19 cases first surged in the U.S. in the spring of 2020-a
trend that continued in 2021, when 65%, or 3,316, of shareholder
meetings by publicly traded U.S. businesses were conducted
remotely, according to Wall Street Horizon, a data provider.
Tesla Is a Proven Automaker, an Unproven Tech Giant
With help from China, Tesla has turned itself into an unusually
profitable car maker. Whether that makes it a tech company worthy
of a near-trillion-dollar valuation is less clear.
As it has scaled up production in its Shanghai factory over the
past two years, the electric-vehicle pioneer has accumulated enough
profit to make up for all the losses in its previous history. Late
Wednesday it reported a 14.7% operating margin for the fourth
quarter in an industry where single-digit margins are considered
normal.
Amazon Faces Unionization Battle in Staten Island
A group of Amazon.com Inc. workers pushing to unionize a large
company warehouse in New York won enough support to hold an
election, the National Labor Relations Board said, opening a new
battlefront between employees and the e-commerce giant.
Supporters of the nascent union, which calls itself the Amazon
Labor Union, met the requirement for such a vote, the NLRB said
Wednesday, which typically requires signatures from 30% of eligible
employees at a facility. Organizers are aiming to unionize
thousands of employees at a company warehouse in Staten Island.
Robust U.S. Growth Is Expected for Late 2021, but Omicron Looms
Now
The U.S. economy appears to have grown robustly in the final
quarter of 2021 but recently lost momentum, economists say, with
business activity undermined by pandemic-induced shortages of
supplies and workers.
The Commerce Department will offer a broad snapshot of the
world's largest economy at 8:30 a.m. ET Thursday. Economists
estimated the agency will report that gross domestic product, the
broadest measure of goods and services, expanded at a 5.5% annual
rate in the fourth quarter, according to a Wall Street Journal
survey.
Job Market Appears Healthy Despite Omicron Headwinds
The labor market remains tight early this year, with layoffs low
and job openings plentiful, a show of strength against the
disruptions caused by the Omicron variant of Covid-19.
Initial jobless claims, a proxy for layoffs, are estimated to
have fallen by 21,000 to 265,000 for the week ended Jan. 22,
according to economists surveyed by The Wall Street Journal.
WTO Arbiter Sides With China in Tariff Fight With U.S.
WASHINGTON-The World Trade Organization on Wednesday authorized
China to impose retaliatory tariffs worth $645 million on imports
from the U.S. in a decade-old dispute over Chinese subsidies to
promote exports of products such as solar panels and steel
pipes.
The ruling was made by a WTO arbitration panel in a case dating
back to 2012. China had complained about the tariffs the U.S.
imposed between 2008 and 2012 on solar panels and other products
that the U.S. said were produced with unfair subsidies to
state-owned companies.
The Case for $100 Oil: More Driving, Less Drilling
Wall Street's summer forecast calls for $100 oil.
A barrel hasn't cost that much since the summer of 2014, before
OPEC launched a price war with U.S. shale producers and sent oil
prices into a yearslong slump. Early in the pandemic, prices fell
to uncharted depths. But the bust ended last year, when crude
prices gained more than 50% and oil stocks led the broader market
higher.
EU Takes China to WTO Over Lithuania Trade Restrictions
BRUSSELS-The European Union has taken China to the World Trade
Organization over alleged trade restrictions that were imposed on
Lithuania after the small Baltic country allowed Taiwan to open a
representative office in Vilnius under a name that suggests it is
separate from China.
EU Executive Vice President Valdis Dombrovskis on Thursday said
his office had requested a consultation at the WTO with China over
what the EU sees as discriminatory trade practices, the first stage
of an official proceeding. The EU handles foreign trade on behalf
of its 27 members.
German Consumer Confidence Is Expected to Halt Its Downward
Trend in February
Consumer sentiment in Germany is expected to edge up in February
despite rising inflation and a surge in Covid-19 cases, according
to GfK on Thursday.
GfK's forward-looking consumer sentiment index forecasts
confidence among households rising to minus 6.7 in February from a
revised figure of minus 6.9 in January. Economists polled by The
Wall Street Journal anticipated a drop to minus 8.0 points.
China Industrial Profits Rose 34.3% in 2021
China's industrial profit climbed 34.3% in 2021 thanks to strong
growth from raw material producers and high-tech manufacturers,
official data showed Thursday.
Profit growth slowed sharply at the end of the year, however,
rising just 4.2% in December from a year ago, according to figures
from the National Bureau of Statistics. In November, industrial
profit grew 9.0% from the year-earlier period.
North Korea Fires Short-Range Missiles in Sixth Weapons Test of
New Year
SEOUL-North Korea conducted its sixth weapons test since Jan. 5,
South Korea's military said, flying two suspected short-range
ballistic missiles off its east coast.
The missiles were launched around 8 a.m. local time Thursday,
from an area near the country's northeastern city of Hamhung. They
flew about 118 miles at an altitude of around 12 miles, according
to South Korea's military.
Biden's First Supreme Court Pick to Test His Pledge to Nominate
a Black Woman
WASHINGTON-Justice Stephen Breyer's expected retirement from the
Supreme Court will pave the way for President Biden to keep a
liberal in his seat and gives both parties an issue they could use
to energize their voters ahead of midterm elections.
Justice Breyer hasn't confirmed his retirement but is expected
to appear with Mr. Biden at the White House on Thursday, according
to a person familiar with the matter.
WTO Arbiter Sides With China in Tariff Fight With U.S.
WASHINGTON-The World Trade Organization on Wednesday authorized
China to impose retaliatory tariffs worth $645 million on imports
from the U.S. in a decade-old dispute over Chinese subsidies to
promote exports of products such as solar panels and steel
pipes.
The ruling was made by a WTO arbitration panel in a case dating
back to 2012. China had complained about the tariffs the U.S.
imposed between 2008 and 2012 on solar panels and other products
that the U.S. said were produced with unfair subsidies to
state-owned companies.
EU Takes China to WTO Over Lithuania Trade Restrictions
BRUSSELS-The European Union has taken China to the World Trade
Organization over alleged trade restrictions that were imposed on
Lithuania after the small Baltic country allowed Taiwan to open a
representative office in Vilnius under a name that suggests it is
separate from China.
EU Executive Vice President Valdis Dombrovskis on Thursday said
his office had requested a consultation at the WTO with China over
what the EU sees as discriminatory trade practices, the first stage
of an official proceeding. The EU handles foreign trade on behalf
of its 27 members.
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
Candn Pacific Kansas City (CP.T) 4Q
Rogers Commun (RCI.A.T) 4Q
Rogers Commun (RCI.B.T) 4Q
Economic Indicators (ET):
0830 Nov Payroll employment, earnings & hours
Stocks to Watch:
No items published
Other News:
No items published
Market Talk:
BOC's Rate Hold Gives Housing Prices Room to Rise
Housing prices in Canada have further room to ramp higher from
record increases after the Bank of Canada surprised markets by
holding its benchmark rate unchanged Wednesday at 0.25%, Bank of
Nova Scotia economist Derek Holt says. "Low interest rates are
clearly exacerbating underlying supply-demand imbalances in the
housing market," says Holt, among the most outspoken financial
commentators calling for BOC rate rises. BOC's No. 2 official,
Carolyn Rogers, said during a press conference that a lack of
housing supply was driving price increases, with existing homes up
a record 26% in December from a year ago. "BOC seems to be
dramatically downplaying the role of easy money as a contributor to
hot housing markets which I find to be an untenable position."
Expected Major Events for Thursday
00:01/UK: Dec Zoopla House Price Index
00:01/UK: Dec UK monthly automotive manufacturing figures
06:00/JPN: Dec Revised Machine Tool Orders
07:00/GER: Feb GfK consumer climate survey
09:00/ITA: Nov Industrial turnover & orders
11:00/UK: Jan CBI Distributive Trades Survey
13:00/RUS: Weekly International Reserves
13:30/US: Dec Advance Report on Durable Goods
13:30/CAN: Nov Payroll employment, earnings & hours
13:30/US: 4Q Advance estimate GDP
13:30/US: 01/22 Unemployment Insurance Weekly Claims Report -
Initial Claims
13:30/US: U.S. Weekly Export Sales
14:45/US: Consumer Comfort Index
15:00/US: Dec Pending Home Sales Index
15:30/US: 01/21 EIA Weekly Natural Gas Storage Report
16:00/US: Jan Federal Reserve Bank of Kansas City Survey of
Tenth District Manufacturing
21:30/US: Foreign Central Bank Holdings
21:30/US: Federal Discount Window Borrowings
23:30/JPN: Jan CPI (Tokyo), CPI ex-Food (Tokyo)
23:50/JPN: Jan Provisional Trade Statistics for 1st 10 days of
Month
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Thursday
1-800-FLOWERS.COM Inc - Class A (FLWS) is expected to report
$1.77 for 2Q.
A. O. Smith Corporation (AOS,X-SMCA) is expected to report $0.77
for 4Q.
Alaska Air Group Inc (ALK) is expected to report $0.22 for
4Q.
Altria Group Inc (MO) is expected to report $1.08 for 4Q.
Applied Industrial Technologies Inc (AIT) is expected to report
$1.08 for 2Q.
Bassett Furniture Industries Inc (BSET) is expected to report
$0.35 for 4Q.
Blackstone Inc (BX) is expected to report for 4Q.
CNX Resources Corp (CNX) is expected to report $0.52 for 4Q.
Comcast Corp (CMCSA) is expected to report $0.65 for 4Q.
Cullen/Frost Bankers (CFR) is expected to report $1.34 for
4Q.
Danaher Corp (DHR) is expected to report $2.14 for 4Q.
Dow Inc (DOW) is expected to report $1.89 for 4Q.
Eagle Materials Inc (EXP) is expected to report $2.45 for
3Q.
East West Bancorp (EWBC) is expected to report $1.57 for 4Q.
First Merchants Corp (FRME) is expected to report $0.93 for
4Q.
FirstCash Holdings Inc (FCFS) is expected to report for 4Q.
Great Western Bancorp Inc (GWB) is expected to report $0.73 for
1Q.
Heritage Financial Corp (HFWA) is expected to report $0.46 for
4Q.
Kirby Corp (KEX) is expected to report $0.26 for 4Q.
LSI Industries (LYTS) is expected to report $0.06 for 2Q.
MSCI Inc (MSCI) is expected to report $2.30 for 4Q.
Marsh & McLennan (MMC) is expected to report $1.31 for
4Q.
McCormick & Co (MKC) is expected to report $0.80 for 4Q.
McDonald's Corp (MCD) is expected to report $2.35 for 4Q.
Murphy Oil (MUR) is expected to report $0.43 for 4Q.
Northrop Grumman Corp (NOC) is expected to report $5.97 for
4Q.
Nucor Corp (NUE) is expected to report $7.88 for 4Q.
Popular Inc (BPOP) is expected to report $2.25 for 4Q.
Rockwell Automation (ROK) is expected to report $1.82 for
1Q.
Rogers Communications Inc - Class B (RCI,RCI.A.T,RCI.B.T) is
expected to report $0.94 for 4Q.
S&T Bancorp Inc (STBA) is expected to report $0.63 for
4Q.
Sherwin-Williams Co (SHW) is expected to report $1.56 for
4Q.
Simmons First National Corp - Class A (SFNC) is expected to
report $0.36 for 4Q.
Southwest Airlines (LUV) is expected to report $0.11 for 4Q.
Teledyne Technologies Inc (TDY) is expected to report $2.68 for
4Q.
Textron Inc (TXT) is expected to report $0.95 for 4Q.
Valero Energy Corp (VLO) is expected to report $1.83 for 4Q.
Valley National Bancorp (VLY) is expected to report $0.27 for
4Q.
West Bancorporation Inc (WTBA) is expected to report $0.75 for
4Q.
Xcel Energy Inc (XEL) is expected to report $0.57 for 4Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
American Express Raised to Buy From Neutral by B of A
Securities
Avis Budget Group Raised to Neutral From Underweight by JP
Morgan
CH Robinson Worldwide Cut to Equal-Weight From Overweight by
Barclays
Chipotle Mexican Raised to Buy From Hold by Gordon Haskett
Church & Dwight Cut to Neutral From Outperform by Credit
Suisse
Clorox Cut to Underperform From Neutral by Credit Suisse
DraftKings Raised to Overweight From Equal-Weight by Morgan
Stanley
EVO Payments Raised to Buy From Neutral by Citigroup
Gatos Silver Cut to Neutral From Outperformer by CIBC
Gatos Silver Cut to Underperform From Outperform by RBC
Capital
Gatos Silver, Inc. Cut to Underperform From Outperform by RBC
Capital
Heartland Express Cut to Underweight From Equal-Weight by
Barclays
Intl Flavors & Fragrances Raised to Buy From Hold by
Stifel
JB Hunt Raised to Overweight From Equal-Weight by Barclays
Lumentum Holdings Raised to Overweight From Neutral by JP
Morgan
Moderna Raised to Hold From Sell by Deutsche Bank
Nielsen Holdings Cut to Sell From Neutral by Goldman Sachs
Ormat Technologies Cut to Neutral From Buy by B of A
Securities
Penn National Gaming Raised to Outperform From Neutral by
Macquarie
Red Rock Resorts Cut to Neutral From Outperform by Macquarie
Schlumberger Raised to Outperform From Neutral by Exane BNP
Paribas
Verizon Cut to Neutral From Overweight by JP Morgan
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
January 27, 2022 06:15 ET (11:15 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.