MARKET WRAPS

Watch For:

Canada Housing Starts for December; Goldman Sachs Group Inc. 4Q results.

Opening Call:

Stock futures fell, led by large technology stocks, as government bond yields rose to a two-year high, a sign that investors are rotating out of stocks that do well in a low-interest-rate environment.

In premarket trading, shares of electric-vehicle maker Tesla fell 2.5%. Twitter, Meta Platforms -- formerly known as Facebook -- and Amazon.com each fell about 2%.

Investors expect a tight labor market and elevated inflation will prompt the Federal Reserve to carry out multiple rate increases this year.

Investors in interest-rate futures markets are betting on four to five interest rate increases this year, according to CME Group.

"Markets are still trying to find a level for rate increases. It was only in October the market was expecting one rate hike for 2022 and now it's expecting four," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "That's reflecting the level of uncertainty we have in the market right now about the path of Fed policy."

The Cboe Volatility Index -- Wall Street's so-called fear gauge, also known as the VIX -- ticked up to 21.78, its highest level in a month.

Many financial companies are slated to post earnings ahead of the market open, most notably Goldman Sachs, plus Bank of New York Mellon, PNC Financial Services and Charles Schwab. Profits have begun to ebb at some big banks that benefited from the tumultuous pandemic economy.

"Equity markets will look to company results for some direction as the fourth-quarter earnings season gets into full swing," said Lukman Otunuga, an analyst at broker FXTM. "Should we witness another mixed or disappointing week of results, this could sap more confidence from stock market bulls, especially when considering that the broader S&P 500 index is already down over 2% so far this year."

Forex:

The dollar should remain supported by expectations for imminent U.S. interest rate rises ahead of the Federal Reserve's next meeting, ING said. The absence of notable data before the Fed's January 25-26 means pricing for monetary policy tightening should remain largely unchanged, ING analysts said.

That should offer some room for speculators to rebuild dollar longs, or bets on the currency rising, which were unwound in the first two weeks of January, they said.

"Another grim day for global equities may also help the dollar to find some support," they said, noting the dollar's safe haven status.

Cryptocurrencies, which have shown themselves in recent weeks to be sensitive to monetary policy as risk assets, were lower. Bitcoin, the leading crypto, was down 2.5% over the last 24 hours to below $42,000, according to data from CoinDesk. Smaller peer Ether fell 3.5% over the same period to around $3,150.

The Japanese yen could fall versus the dollar as Bank of Japan and Federal Reserve policy expectations widen but any declines will be limited, MUFG Bank said.

"USD/JPY's recent clear failure to test the 117.00-level has provided a bearish technical signal for the pair in the near-term," MUFG currency analyst Lee Hardman said.

Assuming dollar sentiment improves, some USD/JPY recovery is feasible but the pair's recent correction lower suggest its trend higher since the start of 2021 may be coming to an end, he said. The BOJ on Tuesday said it was in no rush to change its easy policies while investors expect the Fed to raise interest rates as soon as March.

Bonds:

On Tuesday, the yield on the benchmark 10-year Treasury note ticked up to 1.834%-its highest level in two years-from 1.771% Friday. The yield on the two-year government bond rose to 1.036%-the highest level since February 2020-from 0.965% Friday, a sign of expectations for higher rates.

Meanwhile, the recent upward trend in German Bund yields is expected to slow "as Covid cases increase," DZ Bank analyst Birgit Henseler said. "In our view a downturn in business and consumer confidence indicators will slow down the recent rise in yields," she said, adding that a sharp and sustained fall in 10-year Bund yields isn't in sight because of upward pressure on yields from inflation.

The German bank forecasts the 10-year Bund yield reaching 0% on a three-month horizon and at 0.10% on a six-month view. "But if inflation declines sharply towards the end of the year, we see 10-year yields falling back to 0% in spite of the winding down of asset purchases," she said.

Commodities:

Oil prices climbed to their highest level in seven years, as geopolitical tensions in the Middle East added to worries about tight supply. Brent crude oil futures rose as high as $88.11 a barrel, their highest level since late-2014 before paring some gains.

Yemen's Iran-backed Houthi rebels claimed responsibility for drone and missile attacks on the United Arab Emirates, in retaliation for the gulf state's renewed involvement in the Yemeni civil war.

Part of the attack targeted facilities of the state-owned oil firm ADNOC. The attack on the major energy producer added "geopolitical tension" to "ongoing signs of tightness across the market," said ANZ Bank in a note.

Goldman Sachs expects Brent oil prices to rise to $100 a barrel in the third quarter of the year before climbing as high as $105 by the first three months of 2023.

GS expects OECD inventories to fall to their lowest level since 2000 this summer as demand remains robust in the face of new variants of Covid-19.

At the same time, the bank doubts the capacity of OPEC+ nations to raise supply sufficiently. The bank argues only demand destruction can help balance the market, which will "require ever rising oil prices given the reluctance to invest in oil during the energy transition and the gradual depletion of shale's geological, midstream and service capacities."

Copper prices weakened as inventories climb to a two-month high. After falling almost constantly since August 2021, LME stocks of the red metal have turned higher this year rising to 94,525 tons this week.

However, supply risks could still support prices after Peruvian community groups on Monday rejected the latest proposals to end a standoff with a major mine.

The communities have been blockading access to the Las Bambas copper mine over environmental concerns. Peru is the world's second-largest copper producer and Las Bambas is the second-largest mine in the South American nation.

Gold edged lower in early European trade and it may struggle to breach key technical resistance around the $1,833/oz level. The precious metal has repeatedly struggled at this level and seems to be having the same experience this time, Oanda said.

However, it is impossible to ignore gold as it continues to rally despite more and more rate increases being priced in around the world and yields rising in tandem, Oanda said.

There could be an argument that there are safe-haven or inflation-hedge moves owing to current environment, which could become clearer in coming weeks, Oanda added.

TODAY'S TOP HEADLINES

Citigroup Nears Sale of Taiwan Consumer-Banking Business

HONG KONG-Citigroup Inc. is nearing a sale of its retail banking franchise in Taiwan to DBS Group Holdings Ltd. for around $2 billion, according to a person familiar with the matter, as the New York-based bank speeds up its strategic shift in Asia.

A deal with Singapore-based DBS could be announced before the end of this month, and it would include the transfer of all of Citigroup's Taiwan consumer-banking staff, the person said. The U.S. bank's Taiwan retail business includes 45 branches, mortgage lending and a large credit-card business.

Kohl's Is Urged by Macellum to Make Changes or Explore Sale

An activist investor is renewing a push to get department-store chain Kohl's Inc. to take action to boost its lagging stock.

Macellum Advisors GP LLC, which has a roughly 5% stake in Kohl's, has been urging the company to make changes including altering its board, people familiar with the matter said. Kohl's has so far rejected Macellum's request to add directors with retail experience or a shareholder to its board, the people said. The New York hedge fund, which was part of a group that ran a proxy fight at the retailer last year, now expects to do so again.

BlackRock's Climate Stance Is About Profits, Not Politics, Larry Fink Says

Larry Fink's efforts to get companies to adopt climate-friendly policies have led some to call him an activist. The BlackRock Inc. chairman and chief executive prefers a different label: capitalist.

In his annual letter to the CEOs of the companies in which BlackRock invests, Mr. Fink said businesses that don't plan for a carbon-free future risk being left behind. The quest for long-term returns, and not politics, is what animates the money manager's efforts, he wrote.

Big U.S. Companies Step Up Hiring of Female, Black CFOs

America's biggest businesses employed more female and Black finance chiefs in 2021 than ever before-albeit coming from a relatively low base-as company leaders and boards are under pressure to broaden their C-suite, a trend recruiters expect will accelerate in 2022.

Rio Tinto Full-Year Australian Iron-Ore Shipments Fall; 2022 Exports Likely Higher

Rio Tinto PLC said annual iron-ore shipments from its Australian mining operations fell by 3% in 2021 as projects were disrupted by a worker shortage and supply chain issues, but said shipments will likely increase this year.

The world's No. 2 mining company by market value said 321.6 million metric tons of iron ore were shipped from its operations in remote northwest Australia last year. Fourth-quarter shipments were down 5% year-over-year at 84.1 million tons, the miner said.

U.S. Airlines Say Further 5G Delay Needed to Avoid Flight Disruptions This Week

The chief executives of major passenger and cargo airlines said there could be significant flight disruptions when new 5G service goes live in the U.S. this week, unless implementation of the wireless service within 2 miles of major airport runways is delayed.

The outlook had worsened for flight disruptions from the planned rollout of new high-speed wireless services, the airline executives said Monday in a letter to U.S. officials.

Offices Are Leased Up, Thanks to Cash Gifts for Tenants, Months of Free Rent

The recent recovery of U.S. office rents owes much of its success to something landlords hate to discuss: all the freebies, cash gifts and other incentives they have to fork over to tenants.

These sort of payouts have long existed to a degree in the office, retail real-estate and apartment markets, especially in places like New York City and San Francisco. But they have never been so big or so commonplace as they are in urban office markets these days, real-estate brokers say.

With Rate Increases Looming, Investors Dump Shares of Money-Losing Companies

Moonshot stocks are coming back to Earth.

As the Federal Reserve moves closer to raising interest rates, investors are repricing their bets on one of the riskiest corners of the market: shares of companies that don't make money. Cash-burning technology firms, biotechnology companies without any approved drugs and startups that listed quickly via mergers with blank-check companies-some of which soared during the pandemic-have dropped sharply.

BOJ Raises Inflation Expectations Amid Pandemic-Related Supply Shortages

TOKYO-The Bank of Japan raised its price forecast slightly amid pandemic-related supply shortages, although it still expects its 2% inflation target won't be reached for at least the next two years.

In its quarterly outlook released Tuesday, the bank's policy board projected inflation would increase 1.1% in the year ending March 2023 and 1.1% in the following year, up from previous projections for 0.9% and 1.0%, respectively.

China PBOC Aims to Act Forcefully to Help Stabilize Economy

China's central bank said Tuesday that it would act early and more forcefully to help stabilize the economy in 2022, a politically important year for Chinese leaders.

The People's Bank of China plans to guide financial institutions to expand their credit issuance this year, and will use multiple monetary instruments to keep market liquidity reasonably ample, said Liu Guoqiang, vice governor at the central bank, during a briefing.

German Economic Expectations Rebounded to a Five-Month High in January

Economic expectations in Germany rebounded at the beginning of the year after falling the previous month as financial market experts expected the hit from the Covid-19 Omicron wave to be short-lived, the ZEW economic research institute said Tuesday.

The index of economic expectations increased to 51.7 in January from 29.9 in December, topping the 32.5 consensus forecast from economists polled by The Wall Street Journal and the highest reading since July.

UK Labor Market Tightened in December Despite Omicron Woes

The number of people employed in the U.K. rose in December and unemployment continued to fall, signaling that the end of the furlough program and the spread of the Omicron coronavirus variant didn't weaken the country's labor market.

Staff on businesses' payrolls increased by 184,000 in December compared with the previous month, to 29.5 million, according to data from the Office for National Statistics released Tuesday.

BlackRock's Climate Stance Is About Profits, Not Politics, Larry Fink Says

Larry Fink's efforts to get companies to adopt climate-friendly policies have led some to call him an activist. The BlackRock Inc. chairman and chief executive prefers a different label: capitalist.

In his annual letter to the CEOs of the companies in which BlackRock invests, Mr. Fink said businesses that don't plan for a carbon-free future risk being left behind. The quest for long-term returns, and not politics, is what animates the money manager's efforts, he wrote.

Taliban Intensify Efforts to Take Control of Afghanistan's Overseas Embassies

ROME-Five months after the Taliban seized Kabul, Afghanistan's new rulers are stepping up their campaign to gain control of the country's embassies abroad, most of which continue to be run by diplomats appointed by the former, U.S.-backed government.

No foreign capital has formally recognized the Taliban. And nearly all of the country's 65 diplomatic missions still fly the flag of the fallen Afghan republic-though after the Aug. 15 flight of former President Ashraf Ghani from Kabul, they have no government to represent.

Kim Jong Un's January Missile-Test Barrage Is Fast but Not Furious

SEOUL-North Korea has never started a year with so many weapons tests. Kim Jong Un has many reasons to be in a hurry.

China will soon be on the world's center stage as host of the Winter Olympics. In March, South Koreans will elect a new president who could set a new course for the country's engagement with the North. Pyongyang's provocations could upstage Beijing during the Winter Games or hand political momentum to a more hard-lined South Korean candidate.

Texas, Arizona Have Recovered All the Jobs Lost When Covid-19 Hit

Texas and Arizona have joined two other states in recovering all the jobs they lost at the start of the Covid-19 pandemic, leading a trend that is expected to include another dozen states by the middle of this year.

The states, which also include Utah and Idaho, have benefited from demographic shifts before and during the pandemic-experiencing outsize payroll growth in retail, warehousing, technology and transportation industries. Companies have moved operations to the states, and workers have moved in as well, sometimes leaving more crowded and expensive urban areas. The states-all Republican controlled-also have had relatively relaxed Covid-19 restrictions during the pandemic, which economists say softened the blow on their economies.

Schumer Hits Trouble After Earlier Wins in 50-50 Senate

WASHINGTON-Last month, the Democratic-controlled Senate failed to advance President Biden's roughly $2 trillion economic plan. This week, the party's push to overhaul election practices nationwide is set to fizzle out as well.

These twin setbacks have cast a harsher spotlight on the leadership of Senate Majority Leader Chuck Schumer (D., N.Y.), the lawmaker responsible for navigating President Biden's agenda through the 50-50 Senate after he delivered a Covid-19 aid bill early last year and a bipartisan infrastructure bill in the summer.

Write to sarka.halas@wsj.com TODAY IN CANADA

Earnings:

Goodfood Market 1Q

Economic Indicators (ET):

0815 Dec Housing Starts

Stocks to Watch:

First Quantum Minerals Releases First ESG Report, Sets Climate Change Targets; Report Aligned with TCFD

First Quantum Opts Out of Net Zero Commitment in Favor of GHG Emissions Reduction Targets; Emissions Targets Based on Commercially Available Solutions; Targets Set Are 'Realistic', Have Identified Pathway to Achievement

First Quantum Doesn't Expect Climate Change Targets to Drive Major Rise in Capex; Targets Also Shouldn't Spur Big Rise in Mine Operating Costs, Based on Current Electricity Costs

First Quantum Aims to Lower GHG Emissions 30% by 2025 via Use of Renewable Energy at Cobre Panama Mine; Aims to Cut Absolute GHG Emissions & Intensity of Copper Production 50% by 2030 via Alternative Power, Reduced Coal Usage; Will Monitor Development of New Technologies, Update Emissions Aims Accordingly

Optiva Sets Up R&D Center in Bengaluru, India, for Telecom Business Support Systems; New Center Is Part of Strategy to Lead in Telecom BSS as Market Continues Disaggregating Software From Network Hardware

Velan Appoints President & CEO Bruno Carbonaro to Bd of Directors; Outgoing Director, Yves Leduc, Will Serve as Special Advisor to Chmn of the Co

Market Talk:

BOC Risks Losing Control of Inflation Without Rate Rise Next Week

The Bank of Canada is losing control of inflation, and raising interest rates next week is its "least unpalatable" option, Bank of Nova Scotia economist Derek Holt says.

Holt's comments are based on the latest quarterly business-outlook survey, in which two-thirds of respondents said they expect annual inflation to stay above 3% for the next two years. A strong majority of companies suggested they will raise wages to hire and retain workers amid intense labor shortages, and those costs are likely to be passed on to customers. BOC has to move now on inflation--which is at an 18-year high of 4.7%--even though authorities have imposed lockdowns to contain a sharp rise in Covid-19 cases, Holt says.

"Omicron is a health policy shock for governments to address. Controlling inflation is the BOC's job full stop."

Expected Major Events for Tuesday

04:30/JPN: Nov Revised Retail Sales

04:30/JPN: Nov Revised Industrial Production

07:00/UK: Dec UK monthly unemployment figures

08:59/JPN: Japan Monetary Policy Meeting decision

08:59/JPN: Jan Monthly Economic Report

09:00/ITA: Nov Foreign Trade EU

10:00/GER: Jan ZEW Indicator of Economic Sentiment

11:00/FRA: Nov OECD Harmonised Unemployment Rates

13:15/CAN: Dec Housing Starts

13:30/US: Jan Empire State Manufacturing Survey

15:00/US: Jan NAHB Housing Market Index

21:00/US: Nov Treasury International Capital Data

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Tuesday

AMCON Distributing Co (DIT) is expected to report for 1Q.

Bank First Corp (BFC) is expected to report $1.41 for 4Q.

Bank of New York Mellon Corp (BK) is expected to report $1.01 for 4Q.

Charles Schwab (SCHW) is expected to report $0.78 for 4Q.

Citrix Systems Inc (CTXS) is expected to report $0.37 for 4Q.

Concentrix Corp (CNXC) is expected to report for 4Q.

FB Financial Corp (FBK) is expected to report $0.80 for 4Q.

FTI Consulting (FCN) is expected to report $1.20 for 4Q.

First Midwest Bancorp (FMBI) is expected to report $0.45 for 4Q.

Fulton Financial Corp (FULT) is expected to report $0.37 for 4Q.

Goldman Sachs Group (GS) is expected to report $11.77 for 4Q.

Guaranty Bancshares Inc (GNTY) is expected to report $0.81 for 4Q.

Hancock Whitney Corp (HWC) is expected to report $1.36 for 4Q.

Heartland Express (HTLD) is expected to report $0.25 for 4Q.

Hingham Institution for Savings (HIFS) is expected to report for 4Q.

Interactive Brokers Group Inc (IBKR) is expected to report $0.83 for 4Q.

J.B. Hunt Transport Services Inc (JBHT) is expected to report $2.01 for 4Q.

Madison Pacific Properties Inc - B Share (MPC.T) is expected to report for 1Q.

Mercantile Bank Corp (MBWM) is expected to report $0.86 for 4Q.

Mission Produce Inc (AVO) is expected to report for 4Q.

Nicolet Bankshares Inc (NCBS) is expected to report $1.24 for 4Q.

Old National Bancorp (ONB) is expected to report $0.28 for 4Q.

PNC Financial Services Group (PNC) is expected to report $3.29 for 4Q.

PetMed Express (PETS) is expected to report $0.35 for 3Q.

Pinnacle Financial Partners Inc (PNFP) is expected to report $1.58 for 4Q.

Progress Software Corp (PRGS) is expected to report $0.25 for 4Q.

Signature Bank (SBNY) is expected to report $3.97 for 4Q.

Silvergate Capital Corp (SI) is expected to report for 4Q.

Truist Financial Corp (TFC) is expected to report for 4Q.

United Community Banks (UCBI) is expected to report $0.62 for 4Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Acutus Medical Cut to Hold From Buy by Canaccord Genuity

Amicus Therapeutics Raised to Outperform From Market Perform by SVB Leerink

ATI Physical Therapy Raised to Buy From Hold by Jefferies

ATI Physical Therapy Shares Rally on Analyst Upgrade

BJ's Wholesale Club Cut to Underweight From Overweight by JP Morgan

Brinker International Cut to Hold From Buy by Gordon Haskett

Cerence Cut to Sector Perform From Outperform by RBC Capital

Cheniere Energy Partners Cut to Neutral From Buy by Goldman Sachs

Chipotle Mexican Raised to Overweight From Equal-Weight by Morgan Stanley

Corning Cut to Hold From Buy by Deutsche Bank

Dave & Busters Raised to Buy From Hold by Gordon Haskett

Digital Realty Cut to Equal-Weight From Overweight by Barclays

Disney Cut to Neutral From Buy by Guggenheim

Domino's Pizza Cut to Equal-Weight From Overweight by Morgan Stanley

Fiserv Cut to Sector Weight From Overweight by Keybanc

Five Below Raised to Overweight From Sector Weight by Keybanc

Ford Motor Cut to Sector Perform From Outperform by RBC Capital

FTC Solar Cut to Underperform From Neutral by B of A Securities

GrowGeneration Cut to Hold From Buy by Craig-Hallum

i3 Verticals Cut to Sector Weight From Overweight by Keybanc

KB Home Cut to Neutral From Buy by Seaport Global

Lennar Raised to Buy From Neutral by Seaport Global

Mosaic Raised to Outperform From Market Perform by BMO Capital

NetApp Raised to Outperform From Market Perform by Cowen & Co.

Oneok Raised to Neutral From Sell by Goldman Sachs

O'Reilly Automotive Raised to Overweight From Neutral by JP Morgan

RLJ Lodging Trust Raised to Outperform From Neutral by Baird

Sirius XM Cut to Underweight From Neutral by JP Morgan

Texas Roadhouse Raised to Outperform From In-Line by Evercore ISI Group

U.S. Century Bank Cut to Neutral From Overweight by Piper Sandler

Zions Bancorp Raised to Buy From Neutral by Compass Point

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

January 18, 2022 06:13 ET (11:13 GMT)

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