MARKET WRAPS

Watch For:

Housing Starts for December; Canada CPI for December; earnings from Bank of America, Morgan Stanley, Procter & Gamble, UnitedHealth.

Opening Call:

Stocks were poised for muted opening moves following Tuesday's selloff, and government-bond yields extended their advance, as investors prepare for central banks globally to raise interest rates.

Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, withdrawing a pillar of support for markets. Mounting expectations of interest-rate rises follow evidence that the drivers of inflation have broadened beyond the supply-chain shock that fueled price gains for much of 2021.

Recent volatility is "really all about inflation and how aggressive central banks are going to be to counteract it," said Brian O'Reilly, head of market strategy at Mediolanum Asset Management, adding that inflation could also curtail economic growth by knocking consumption. "Certainly, the market is nervous at the moment."

Companies due to report earnings before the opening bell in New York include Morgan Stanley, Bank of America and U.S. Bancorp, and household names UnitedHealth Group and Procter & Gamble. United Airlines and Alcoa are set to post results after markets close.

In the U.K., data out Wednesday showed consumer prices rising at 5.4% in December, the fastest rate since March 1992-shortly before the country was compelled to leave the European Exchange Rate Mechanism on 'Black Wednesday.' The pace of price growth was far above the 2% target set by the Bank of England, which in December became the first major central bank to raise rates since the start of the pandemic.

Investors will get a glimpse of the health of the U.S. housing market at 8:30 a.m. ET. Construction of new homes is forecast to have slowed in December as builders contended with shortages of materials and workers.

Stocks to Watch:

JB Hunt CFO John Kuhlow, on an earnings call, said labor-related issues remain the main pain points but the company is committed to investing in employees, noting that in December it paid out a special bonus of nearly $11 million to frontline workers. COO Nicholas Hobbs said the truck and trailer market, along with the driver market, remain extremely tight.

Kuhlow said that in 2021, the company targeted about $1 billion in net capex, which it missed by about $130 million, attributing the difference largely to supply-chain delays that continue to affect its ability to take delivery of equipment.

Forex:

Firm energy prices are contributing to ramped-up monetary policy tightening expectations including for the Fed and this should lift the dollar, ING said. Energy prices rise as crude supply increases in December failed to live up to what was agreed by OPEC+, ING analysts said.

Higher energy prices may linger and delay any easing of inflation, they said. "This environment is seeing the scale of expected tightening cycles increase around the world, including in the U.S.

"The market now expects the Fed's terminal rate, the level at which rates stop rising, will reach 1.80%, compared to last week's bets of 1.60%, the analysts say. ING expects the DXY dollar index to rise to around 96.40-96.50, from 95.6140 currently.

Bonds:

High inflation rates and monetary policy turnaround by the Fed and other major central banks are pushing bond yields higher almost everywhere in the world, said Christian Kopf, head of fixed income portfolio management at Union Investment.

"The eurozone is no exception," he said, after the 10-year German Bund yield turned positive for the first time since May 2019. "But here [in the eurozone] the rise in yields has been flatter and slower than in other parts of the world," he said.

He expects the rise to remain flatter and slower because inflation in the eurozone is still relatively moderate, especially compared with the U.S., and also because the European Central Bank is much more cautious than its counterparts in tightening monetary policy.

The 10-year German Bund yield turns positive on Wednesday for the first time since May 2019, driven in particular by the trend in the U.S. Treasury market, Elmar Voelker, senior fixed-income analyst at LBBW, said.

"It had already become apparent that a rebound of the 10-year Bund yield above zero would not be too long in coming," he said. Downward pressure on bond prices and corresponding upward pressure on yields is currently coming primarily from the U.S. where there are increasing signs that the Fed is likely to herald the turnaround in key interest rates in just a few weeks, Voelker added.

Commodities:

Oil prices extended gains after the International Energy Agency, in its monthly report, raised its forecasts for global oil demand growth in 2021 and 2022. Prices had been tracking lower ahead of the report's release and had fallen as low as $87.63 a barrel.

The IEA said that 2022 should be the year that oil demand returns to pre-pandemic levels. Its latest forecast reaffirmed the view that the Omicron variant of Covid-19 had a minimal impact on demand.

The agency noted that the variant's rapid spread but limited severity could prove positive for demand by increasing global resistance to the virus without provoking strict lockdowns.

The tightness in the global oil market looks set to ease this year, with supply likely outstripping demand, thanks largely to increased non-OPEC production, Wood Mackenzie said. It expects global supply in 2022 to grow by 4.8 million barrels a day, slightly outpacing demand growth.

"A shortage of supply is not anticipated for this year," the energy consulting firm says. Aside from north American output, production in Russia, Brazil and the North Sea is also set to grow, it said. That said, oil-production activity may be capped amid producers' ongoing focus on paying down debts and returning funds to investors rather than investing in new projects, Wood Mackenzie said.

Gold prices rose after U.K. inflation data showed prices rose at the fastest rate in 30 years in December. Gains are likely capped by expectations that high inflation will be followed by policy tightening from global central banks, said Rupert Rowling, an analyst at Kinesis Money.

"A high inflation environment should prove positive for gold... However, with central banks across the world expected to increase interest rates to tackle inflationary pressures, this presents a headwind," he said.

Base metals prices also rose supported by a weaker dollar.

Divisions within the Democratic Republic of Congo's ruling party will add headwinds to policymaking in the world's No.1 producer of cobalt, a key ingredient in electric vehicle batteries, said Fitch Solutions.

This week's resignation of the first vice-president of Congo's national assembly, Jean-Marc Kabund, is another indicator of worsening instability in a country that produces a third of the world's cobalt, which could add pressure on the global battery supply chain.

"Due to the already tight nature of the global battery supply chain, any disruption to cobalt production in the DRC will have a noticeable impact on battery supplies globally," the firm said. "The latest events point to continued instability between the cabinet and parliament over the next few quarters."

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Activision Blizzard's Workplace Problems Spurred $75 Billion Microsoft Deal

When allegations of a toxic workplace at Activision Blizzard Inc. surfaced last year and investors fled the video-gaming giant's stock, Microsoft Corp. rushed in.

A California regulatory agency had sued Activision in July alleging widespread sexual harassment. Then a Wall Street Journal article in November reported that longtime Chief Executive Bobby Kotick knew about allegations of employee misconduct across Activision that he didn't brief the board on, adding to pressure on the company and its stock.

   
 
 

China Notifies Firms of Tougher Investment Rules for Big Tech

SINGAPORE-China has notified some companies of new rules that require the country's biggest internet firms to seek approval for investment deals, a mechanism that is likely to curb domestic technology giants from growing even bigger through acquisitions, according to people familiar with the issue.

The country's top internet regulator, the Cyberspace Administration of China, recently established a new mechanism that requires internet companies to obtain formal approval for investment deals if they have 100 million users or more or have posted revenue in the previous year of at least 10 billion yuan, equivalent to $1.57 billion, the people said.

   
 
 

Sony Shares Fall Sharply After News of Microsoft Deal for Activision Blizzard

Sony Group Corp.'s shares fell nearly 13% in Tokyo on Wednesday on concerns about tough new competition for its videogame business from the newly announced combination of Microsoft Corp. and Activision Blizzard Inc.

The $75 billion deal, which still needs regulatory approval, would unite Microsoft's Xbox platform with the publisher of top games including Call of Duty and World of Warcraft.

   
 
 

Apple Says Senate's Big-Tech Legislation Would Weaken Its User-Privacy Push

Apple Inc. is warning that Senate legislation aimed at reining in large tech companies would weaken a privacy-protection tool that it rolled out last year and has already stung Facebook, Snapchat and other online-ad businesses reliant on user data to target messages.

The Senate Judiciary Committee is set to debate a bipartisan bill, dubbed the American Innovation and Choice Online Act, on Thursday that supporters say aims to protect digital competition. The legislation is set to limit the power of the biggest U.S. tech companies, including Apple, Amazon.com Inc., Google-parent Alphabet Inc. and Facebook's Meta Platforms Inc.

   
 
 

BHP Metallurgical Coal Operations Disrupted by Australia Covid-19 Surge

BHP Group Ltd. said a surge in Covid-19 cases in Australia is causing a shortage of workers at its coal pits that will likely constrain how much steelmaking coal the world's No. 1 miner can produce in its fiscal year.

BHP, which in eastern Australia runs the world's biggest metallurgical coal export operations in joint venture with Mitsubishi Corp., on Wednesday reported an 8% fall in first-half production of the commodity, to 17.7 million metric tons. That prompted the miner to downgrade its full-year production forecast to 38 million-41 million tons, from a prior 39 million-44 million ton estimate.

   
 
 

Airlines Cancel Some Flights Ahead of U.S. 5G Wireless Launch

Two of the biggest U.S. wireless operators agreed to not turn on some 5G signals near airport runways, a temporary concession to address air-safety concerns that have already prompted international airlines to cancel some U.S.-bound flights.

AT&T Inc. and Verizon Communications Inc. on Tuesday afternoon accepted the new limits after a monthslong standoff between the cellular operators and aviation officials, who had promised to limit flights over concerns about the 5G signals' effect on aircraft instruments.

   
 
 

German Benchmark Bond Yield Turns Positive for First Time Since 2019

Europe's most closely watched government bond yield turned positive for the first time since 2019, part of a broad readjustment by investors to rising inflation and the global economic rebound from the pandemic.

The yield on the 10-year German bund rose as high as 0.021% on Wednesday after trading in negative territory for over 30 months. It then eased down to 0.010%. Bund yields had been as low as minus 0.841% in March 2020.

   
 
 

Big Tech and Foes Spar Over Bill to Curb Market Power of Dominant Internet Platforms

WASHINGTON-Big technology companies and their critics are ramping up lobbying efforts in Congress this week as a key Senate panel takes up legislation that seeks to blunt the market power of dominant tech platforms.

The antitrust legislation, set to be considered by the Senate Judiciary Committee Thursday, would bar dominant online platforms such as Amazon.com Inc.'s e-commerce site and Alphabet Inc.'s Google search engine from preferring their own goods and services over other companies.

   
 
 

Oil Demand to Exceed Pre-Covid Levels in 2022, IEA Says

Global oil demand will exceed pre-pandemic levels this year thanks to growing Covid-19 immunization rates and as recent virus waves haven't proved severe enough to warrant a return to strict lockdown measures, the International Energy Agency said Wednesday.

In its monthly oil market report, the IEA hiked its oil demand growth forecast for the coming year by 200,000 barrels a day, to 3.3 million barrels a day. The Paris-based agency also raised its demand growth forecasts for 2021 by 200,000 barrels a day to 5.5 million barrels a day.

   
 
 

Bitcoin Sags in 2022 Under Weight of Stock Selloff and Fed Policy

The Federal Reserve is casting a shadow over cryptocurrencies.

Like stocks, cryptocurrencies have extended a selloff to start the year because of expectations that the central bank will raise interest rates as early as March.

   
 
 

Covid-19 Claims a Big Cruise-Line Victim, Genting Hong Kong

Cruise operator Genting Hong Kong Ltd. sought court approval to appoint outside professionals to help lead a restructuring, becoming the industry's highest-profile financial casualty since the onset of the Covid-19 pandemic.

Genting Hong Kong, which is majority owned by Malaysian billionaire Lim Kok Thay, said it would imminently be unable to pay its debt and that it expects to run out of cash around the end of the month. The company, which runs cruises under the Star, Dream and Crystal brands, said it had exhausted efforts to negotiate with financing counterparties.

   
 
 

UK Inflation Accelerated to a Three-Decade High in December

Consumer prices in the U.K. rose at their quickest pace in almost three decades in the year through December on supply-chain disruptions and higher energy costs.

The consumer price index--which measures what consumers pay for goods and services--increased 5.4% on the year in December, up from a 5.1% rise in November, the Office for National Statistics said Wednesday. December's annual inflation rate is the highest since March 1992.

   
 
 

Free N95 Masks to Be Made Available at Pharmacies, White House Says

WASHINGTON-The Biden administration on Wednesday is expected to announce plans to make 400 million N95 masks available free at pharmacies and community health centers across the country, a White House official said.

The move comes as President Biden has stepped up the federal government's response to a nationwide surge in Covid-19 cases triggered by the highly transmissible Omicron variant. Some scientists and doctors have said popular single-layer cloth masks may not be sufficient to protect against Omicron and called on the administration to expand access to high-filtration masks such as N95s.

   
 
 

Democrats Pursue 'Talking Filibuster' as Elections Bill Stalled

WASHINGTON-Senate Majority Leader Chuck Schumer (D., N.Y.) set in motion a plan to require senators to speak on the floor if they want to block Democrats' elections bill, a proposed change to the chamber's filibuster rule intended as a last-ditch effort to pass the legislation.

Facing Republican opposition to the elections bill, Democrats have been weighing various proposed changes to the current Senate procedures, which require 60 votes for most legislation to proceed to a final vote. While all 50 members of the Democratic caucus have united behind the party's elections overhaul, Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia have said they would reject partisan attempts to weaken the filibuster, dooming the effort.

   
 
 

Sanders Says He Is Open to Supporting Primary Challenges to Sinema, Manchin

WASHINGTON-Sen. Bernie Sanders said he would be open to supporting primary challenges to Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia over the two Democrats' refusal to support a pair of party priorities, a rare move for a sitting senator.

Ms. Sinema and Mr. Manchin have stood in the way of Democrats' push to change Senate rules to enable the party to pass its election-law overhaul in the 50-50 Senate, drawing criticism from activists and some lawmakers. A vote on the election bill and potentially changing the filibuster are set for this week, but both are expected to fail.

   
 
 

China Detains Prominent Activists as Olympics Near, Citing State Security

TAIPEI-Chinese authorities have detained two prominent human-rights activists, quietly intensifying a crackdown on dissent weeks before Beijing hosts the most politicized Winter Olympics in recent memory.

Free-speech advocate Yang Maodong was formally detained in the southern city of Guangzhou on suspicion of inciting subversion on Jan. 12, two days after his wife died of cancer in the U.S., according to his sister.

   
 
 

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

Earnings:

None scheduled

Economic Indicators (ET):

0830 Nov Wholesale trade

0830 Dec CPI

Stocks to Watch:

Revive Therapeutics Provides Update on Phase III Clinical Trial for Bucillamine in Covid-19; Revive Starting Patient Enrollment in Turkey as Part of Plans to Support Global Regulatory Approvals; 701 Subjects Dosed to Date in Trial; On Track to Complete Enrollment in 1Q, FDA Submission Thereafter; Starting Regulatory Package Activities to File for Drug Approvals Internationally; Not Making Express, Implied Claims That Product Has Ability to Eliminate or Cure Covid-19 at This Time; Bucillamine Is an Oral Drug With Anti-Inflammatory, Antiviral Properties

Royal Bank of Canada Announces C$1B NVCC Subordinated Debenture Issue; Notes Mature May 3, 2032; Notes Bear 2.94% Interest Until May 3, 2027, Three-Month CAD Offered Rate Plus 0.76% Thereafter Until Maturity; to Use Net Proceeds From Notes Sale for General Business Purposes; Expects Notes Sale to Close Jan. 25; RBC Capital Markets Acting as Lead Agent

   
 
 

Expected Major Events for Wednesday

00:01/UK: Dec Scottish Retail Sales Monitor

07:00/GER: Dec CPI

07:00/UK: Dec UK producer prices

07:00/UK: Dec UK monthly inflation figures

09:00/FRA: Jan IEA Oil Market Report

09:30/UK: Oct Card Spending statistics

09:30/UK: Nov UK House Price Index

10:00/ITA: Nov Balance of Payments

12:00/US: 01/14 MBA Weekly Mortgage Applications Survey

12:45/US: Weekly Chain Store Sales Index

13:30/CAN: Nov Wholesale trade

13:30/CAN: Dec CPI

13:30/US: Dec New Residential Construction - Housing Starts and Building Permits

13:55/US: 01/15 Johnson Redbook Retail Sales Index

21:30/US: 01/14 API Weekly Statistical Bulletin

23:50/JPN: Dec Provisional Trade Statistics for the Month

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

   
 
 

Expected Earnings for Wednesday

Alcoa Corp (AA) is expected to report $2.35 for 4Q.

BOK Financial Corp (BOKF) is expected to report $1.81 for 4Q.

Bank of America Corp (BAC) is expected to report $0.77 for 4Q.

Barrick Gold Corp (ABX.T,GOLD) is expected to report for 4Q.

Citizens Financial Group (CFG) is expected to report $1.11 for 4Q.

Columbia Banking System Inc (COLB) is expected to report $0.47 for 4Q.

Comerica Inc (CMA) is expected to report $1.58 for 4Q.

Commerce Bancshares Inc (CBSH) is expected to report $0.95 for 4Q.

Community Trust Bancorp (CTBI) is expected to report $1.07 for 4Q.

Discover Financial Services (DFS) is expected to report $3.70 for 4Q.

Eagle Bancorp (Maryland) (EGBN) is expected to report $1.17 for 4Q.

FNB Corp (FNB) is expected to report $0.30 for 4Q.

Fastenal Co (FAST) is expected to report $0.38 for 4Q.

Fastenal Co (FAST) is expected to report.

First Bancorp Inc (FNLC) is expected to report for 4Q.

First Community Corp. (South Carolina) (FCCO) is expected to report $0.49 for 4Q.

First Internet Bancorp (INBK) is expected to report $1.17 for 4Q.

HB Fuller Co (FUL) is expected to report $1.03 for 4Q.

Kinder Morgan Inc (KMI) is expected to report $0.28 for 4Q.

Limestone Bancorp Inc (LMST) is expected to report $0.40 for 4Q.

Morgan Stanley (MS) is expected to report $1.91 for 4Q.

NVE Corp (NVEC) is expected to report for 3Q.

Orrstown Financial Services Inc (ORRF) is expected to report $0.65 for 4Q.

PAM Transportation (PTSI) is expected to report $1.97 for 4Q.

PacWest Bancorp (PACW) is expected to report $1.00 for 4Q.

Plumas Bancorp (PLBC) is expected to report for 4Q.

Preferred Bank Los Angeles (PFBC) is expected to report $1.72 for 4Q.

Procter & Gamble (PG) is expected to report $1.64 for 2Q.

Prologis Inc (PLD) is expected to report $0.82 for 4Q.

Rocky Mountain Chocolate Factory Inc (RMCF) is expected to report for 3Q.

SouthGobi Resources Ltd (1878.HK,SGQ.T,SGQRF) is expected to report $-0.04 for 4Q.

State Street Corp (STT) is expected to report $1.88 for 4Q.

Sterling Bancorp (STL) is expected to report $0.50 for 4Q.

U.S. Bancorp (USB) is expected to report $1.10 for 4Q.

Umpqua Holdings (UMPQ) is expected to report $0.44 for 4Q.

Union Bankshares Inc (UNB) is expected to report for 4Q.

United Airlines Holdings Inc (UAL) is expected to report $-1.95 for 4Q.

UnitedHealth Group Inc (UNH) is expected to report $4.05 for 4Q.

Westbury Bancorp (WBBW) is expected to report for 1Q.

Wintrust Financial Corp (WTFC) is expected to report $1.53 for 4Q.

Powered by Kantar Media and Dow Jones.

   
 
 

ANALYST RATINGS ACTIONS

Acushnet Raised to Buy From Neutral by Compass Point

Airbnb Cut to Hold From Buy by Gordon Haskett

AvalonBay Raised to Equal-Weight From Underweight by Barclays

Brinker International Cut to Neutral From Outperform by Wedbush

Brixmor Property Group Raised to Buy From Hold by Truist Securities

Choice Hotels Intl Cut to Underweight From Equal-Weight by Morgan Stanley

ConocoPhillips Raised to Buy From Neutral by goldman sachs

CytomX Therapeutics Raised to Overweight From Underweight by Barclays

Delta Air Raised to Buy From Hold by Argus Research

Dollar General Cut to Equal-Weight From Overweight by Morgan Stanley

Duke Realty Cut to Hold From Buy by Truist Securities

Entegris Raised to Buy From Neutral by Seaport Global

First Republic Bank Raised to Outperform From In-Line by Evercore ISI Group

Glaukos Raised to Buy From Neutral by BTIG

Graphic Packaging Cut to Underweight From Sector Weight by keybanc

Green Plains Raised to Outperform From In-Line by Evercore ISI Group

Hyatt Hotels Raised to Buy From Hold by Truist Securities

Hyatt Hotels Raised to Outperform From Neutral by Macquarie

ICAD Cut to Neutral From Buy by Guggenheim

Illumina Raised to Buy From Hold by Stifel

iRhythm Technologies Raised to Overweight From Equal-Weight by Morgan Stanley

Limelight Networks Raised to Buy From Hold by Truist Securities

Mister Car Wash Raised to Overweight From Equal-Weight by Morgan Stanley

Neurocrine Cut to Sector Perform From Outperform by RBC Capital

Ovintiv Cut to Neutral From Overweight by JP Morgan

Pixelworks Raised to Buy From Neutral by Colliers Securities

Quaker Chemical Raised to Buy From Neutral by Seaport Global

Sherwin-Williams Cut to Equal-Weight From Overweight by Wells Fargo

Six Flags Raised to Outperform From Perform by Oppenheimer

Snowflake Raised to Outperform From Market Perform by William Blair

Under Armour Raised to Outperform From Market Perform by bmo capital

Westlake Chemical Raised to Buy From Hold by Deutsche Bank

Zscaler Raised to Overweight From Equal-Weight by Morgan Stanley

Zynga Cut to Hold From Buy by Jefferies

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

 

(END) Dow Jones Newswires

January 19, 2022 06:06 ET (11:06 GMT)

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