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)
Copyright (c) 2022 Dow Jones & Company, Inc.