MARKET WRAPS

Watch For:

U.S. International Trade for October; Canada Trade Balance for October

Opening Call:

Today's Headlines/Must Reads

- Investors Yank Money From Commercial-Property Funds, Pressuring Real-Estate Values

- Facebook Threatens to Pull News From Platform if Bill Passes Congress

- Oil Prices and Energy Stocks Are Headed in Different Directions. What Gives?

- China's Covid Easing Fuels Stock-Market Hopes-and Fans Fears

- California Lawmakers to Consider Penalties on Oil Companies to Fight High Gas Prices

- TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits

Follow WSJ markets coverage here .

Stock futures struggled for momentum on Tuesday, suggesting Wall Street would find it difficult to rebound from a poor start to the week, after stronger-than-expected economic data in recent days raised fears about further rate rises by the Federal Reserve.

"Ultimately it matters more where the Fed ends up and not how fast they get there, and the tighter-than-expected labor market combined with the boisterous business sentiment index gives more clout to the +5% terminal camp," SPI Asset Management said.

Technical analysts noted that the market's latest relapse came after it failed once again to break above an established downtrend.

Pointing to a chart of the S&P 500, commentators at the MarketEar.com suggested that much of the recent rally off the mid-October low was powered by those investors who short the market scrambling to cover their positions rather than any fundamental bullishness.

"The crowd did it again, covering shorts in panic. We are once again below that 200 day [moving average on the S&P 500] that got so many people excited and we saw some bears throw in the towel," MarketEar said.

"A close [on Monday] here or lower and things could get 'dynamic' to the downside. Don't forget the market will become less and less liquid as we approach Christmas."

Overseas indexes were mostly weaker, tracking Monday's losses on Wall Street. The Hang Seng dropped 0.4%, although shares in China and Japan made modest gains. In Europe, the Stoxx Europe 600 eased back 0.1% in early trading.

Stocks to Watch

Herbalife Nutrition said it would offer a $250 million aggregate principal amount of convertible senior notes in a private offering. Its common shares fell 11% in after-hours trading.

GitLab reported better-than-expected revenue in the latest quarter and lifted its 2023 guidance. Its shares rose 20% premarket.

MEI Pharma said it would discontinue development of cancer treatment zandelisib outside of Japan, after recent guidance from the FDA. MEI also said it planned a staggered reduction of about 30% of its workforce. MEI shares fell 31% after hours.

Powell Industries said fourth-quarter revenue increased 26%, boosted by $259 million in new orders. Net income rose to $8.7 million. Its shares rose 19% in after-hours trading.

Salesforce was up 0.7% in premarket trading following a slump of 7% after it was announced on Monday that Slack founder and CEO Stewart Butterfield was resigning from the company, effective Jan. 31.

Sumo Logic raised its fiscal-year sales outlook and the company forecast an adjusted loss of 35 cents to 36 cents a share, narrower than Wall Street expectations. The stock gained 11.5% after hours.

Textron was awarded a contract to build aircraft for the U.S. Army's Future Long-Range Assault Aircraft program. The award was based on Bell Textron's V-280 Valor tiltrotor, the company said. Textron didn't disclose terms of the contract though Bloomberg reported the contract was worth up to $1.3 billion. The stock gained 8% in after-hours trading.

Economic Insight

China may undergo some forms of a disorderly exit from its zero-Covid policy over the next three to four months, Loomis Sayles Investments said. Local Covid-19 infections will spike and overwhelm the country's healthcare system, but that period should be relatively short, it said.

Chinese equities have been rallying as investors look past near-term prospects to China's economic activity normalizing by mid-2023, Loomis Sayles said. Another factor to consider is that an accelerated China reopening may be an inflationary driver for the rest of the world from second half of next year.

Forex:

The dollar continued to edge higher in Europe after the stronger-than-expected ISM non-manufacturing report dampened expectations the Fed could pivot on its aggressive interest rate rise cycle.

"The longer U.S. data surprises on the upside and the longer the U.S. economy is robust the more doubts are probably going to increase as to whether the U.S. will actually face a recession next year and whether the U.S. central bank will actually cut its key rate at that stage," Commerzbank said.

It said the dollar may stabilize over coming weeks following the pronounced depreciation over past weeks.

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The euro looks vulnerable to a potential renewed rise in energy prices as the eurozone's supply issues persist, ING said.

"The freshly imposed EU embargo on Russian seaborne crude and the $60 per barrel price cap may start to show their effects on the energy market soon. When adding an expected drop in temperatures in Europe from this week, the risks of a new rally in energy prices are non-negligible, and the euro is highly exposed to such risks."

EUR/USD is "mostly facing downside risks," ING said.

Energy:

Crude futures held solid gains in European trading, after Beijing relaxed rules on Covid-19 testing, helping sentiment in the oil market.

"China's reopening sentiment should provide a plank for the crude price to springboard off," said SPI Asset Management.

Metals:

Base metals were mixed early in the London session, with gold little changed, as traders remained uncertain on whether the Fed will keep hiking rates into next year.

Positive economic data on Monday "lifted interest rate expectations and helped propped the dollar higher," weighing on metals, Marex said.

Elsewhere, Bloomberg reported that the EU and U.S. are considering tariffs on Chinese aluminum and steel, citing unnamed sources.

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Facebook Threatens to Pull News From Platform if Congress Passes Bill Helping Publishers

Meta Platforms Inc. is threatening to remove news from Facebook in the U.S. if Congress passes legislation meant to help publishers team up to negotiate payments from tech companies, echoing similar warnings that the company has lobbed at various governments around the world.

"If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions," Meta tweeted on Monday as part of a longer statement condemning the bill, known as the Journalism Competition and Preservation Act.

   
 
 

Uber Reaches Settlement with Chicago Over Fees and Restaurant Listings

Uber Technologies Inc. agreed to a multimillion-dollar settlement with the city of Chicago over what authorities there called deceptive practices at UberEats and Postmates.

Restaurants were listed without their consent and were charged excessive fees, according to a two-year investigation by the city.

   
 
 

California Lawmakers to Consider Penalties on Oil Companies to Fight High Gas Prices

California legislators opened a special session Monday to explore the possibility of levying penalties on the oil industry for what Democratic Gov. Gavin Newsom has called price-gouging of consumers.

A draft of the legislative proposal released Monday by Mr. Newsom laid out a framework that would set an annual maximum profit margin for oil refiners and create a tiered system of penalties based on how much a company's margin deviates from the state-set maximum. Mr. Newsom declined to provide specific thresholds, saying the details were yet to be worked out with lawmakers.

   
 
 

TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits

Taiwan Semiconductor Manufacturing Co. plans to build a second semiconductor factory in Arizona and increase its investment there to $40 billion, the White House said ahead of a visit by President Biden.

TSMC, the world's largest contract chip maker, is stepping up its plans for U.S. manufacturing with encouragement from the Biden administration and likely financial support from U.S. taxpayers, reflecting Washington's concerns about reliance on Asia for critical chip making.

   
 
 

PepsiCo to Lay Off Hundreds of Workers in Headquarters Roles

PepsiCo Inc. is laying off workers at the headquarters of its North American snacks and beverages divisions, a signal that corporate belt-tightening is extending beyond tech and media, according to people familiar with the matter and documents reviewed by The Wall Street Journal.

Hundreds of jobs will be eliminated, one of the people said. The cuts affect the company's North America beverage business, which is based in Purchase, N.Y., and its North America snacks and packaged-foods business, which has headquarters in Chicago and Plano, Texas, the people said.

   
 
 

Citi on verge of agreement to get back what it accidentally paid to Revlon's lenders, court filing shows

Finders keepers, losers weepers is not always the law of the land.

Hedge funds are on the verge of reluctantly returning some $500 million that Citigroup C accidentally gave to them three years ago, a court filing shows.

   
 
 

Lovell Minnick Seeks $1.5 Billion for Newest Buyout Fund

Lovell Minnick Partners is seeking a modest increase in size for its newest buyout fund.

The Radnor, Pa.-based firm is targeting $1.5 billion for Lovell Minnick Equity Partners VI, to take control and minority positions in companies in the financial services industry and related sectors, according to documents prepared for the Massachusetts Pension Reserves Investment Management Board, which managed $92.4 billion as of June 30, 2022.

   
 
 

Taylor Swift Fans Sue Ticketmaster After 'Eras Tour' Sales Debacle

More than two dozen Taylor Swift fans sued Ticketmaster in a California court for anticompetitive and fraudulent behavior after they alleged the company blocked them from buying tickets this past month to the musician's concerts.

In the lawsuit, filed in Los Angeles County Superior Court, the fans said Ticketmaster knew the sale would be plagued with issues in part because it had let too many people access the presale.

   
 
 

Investors Yank Money From Commercial-Property Funds, Pressuring Real-Estate Values

Big and small investors are queuing up to pull money out of real-estate funds, the latest sign that the surge in interest rates is threatening to upend the commercial-property sector.

Blackstone Inc. last week said it would limit the amount of money investors could withdraw from its $69 billion flagship real-estate fund following a surge in redemption requests. Starwood Capital Group shortly after notified investors that it was also restricting withdrawals in a $14.6 billion fund, according to a person familiar with the matter.

   
 
 

Oil Prices and Energy Stocks Are Headed in Different Directions. What Gives?

Oil is sitting out Wall Street's year-end rally.

While recent hopes that inflation has peaked sparked sharp gains in stocks and bonds, oil prices just bounced off their 2022 lows, hit by worries about slowing global growth eating into demand for fuel. Early gains for crude Monday, triggered by easing Covid restrictions in China and a price cap on Russian oil, quickly petered out.

   
 
 

China's Covid Easing Fuels Stock-Market Hopes-and Fans Fears

Chinese stocks have recently been whipsawed by the country's attempts-and its numerous struggles-to move past the Covid-19 pandemic.

Investors say it is only the beginning of what is likely to be a long and tumultuous period, as Beijing tries to pivot from a zero-tolerance Covid policy characterized by lockdowns and numerous restrictions to living with the virus and limiting its damage to the economy. Economists and strategists say China's path to reopening in the coming year is littered with hurdles that make it difficult for investors to predict the impact on domestic spending, corporate earnings and the country's stock market.

   
 
 

RBA Raises Rates; Says Path to Soft Landing Is Narrow

SYDNEY-The Reserve Bank of Australia continued to raise interest rates cautiously at its final board meeting for the year, maintaining the pace of increases despite early signs that inflation may be peaking.

The RBA on Tuesday raised the official cash rate by 25 basis points to 3.10%. It was the third straight month that the RBA, which said it still expects to raise rates further, increased borrowing costs by that amount.

   
 
 

German Factory Orders Rebounded More Than Expected in October

Manufacturing orders in Germany increased in October after falling the previous two months, a sign demand for goods could be slightly recovering.

Factory orders rose 0.8% in October compared with the previous month, according to price-adjusted data from the German statistics office Destatis released Tuesday.

   
 
 

Why Monday's stock-market rout should be a wake up call for investors

Monday's punishing selloff could be the beginning of the next leg lower for stocks as a sense of complacency has taken hold in markets following a stellar October and November, several strategists told MarketWatch.

In a note to clients on Monday, Jonathan Krinsky, chief technical strategist at BTIG, said that U.S. stocks were primed to tumble after the S&P 500 SPX bounced off its latest resistance level, which coincided with the index's 200-day moving average, a key technical level for assets. Krinsky illustrated the pattern in a chart included below.

   
 
 

Warnock, Walker Close Out in Senate Runoff as Georgia Voters Head to Polls

ATLANTA-Georgia voters head to the polls Tuesday in a runoff election that will determine whether incumbent Democratic Sen. Raphael Warnock goes back to Washington or he is replaced by GOP challenger Herschel Walker.

Mr. Warnock spent election eve holding various get-out-the-vote events with younger people in Democratic-leaning Atlanta, while Mr. Walker spent much of the day at rallies in Republican areas of the northern suburbs.

   
 
 

Biden Backs Tying Energy Permitting Plan to Defense Policy Measure

WASHINGTON-The White House said President Biden supports including a proposal to speed up environmental reviews of energy projects in an annual defense-policy law, as lawmakers prepare to unveil the proposal as soon as this week.

White House press secretary Karine Jean-Pierre stated support for the permitting proposal's inclusion at a press briefing on Monday. Mr. Biden "believes we should pass the defensive authorization bill and that the permitting bill should be included in the legislation," Ms. Jean-Pierre said.

   
 
 

U.S., EU Agree to Coordinate Semiconductor Subsidy Programs

COLLEGE PARK, Md.-Top U.S. and European Union officials agreed to work closely to strengthen semiconductor supply chains, including sharing information about their respective programs to provide massive subsidies to promote domestic chip production.

At a Monday gathering to discuss trade and technology issues, however, the two sides failed to make progress on a dispute over the U.S.'s new electric-vehicle program that has strained bilateral ties, an issue that was raised by French President Emmanuel Macron during his meeting with President Biden last week.

   
 
 

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

Evertz Tech 2Q

Economic Indicators (ET):

0830 Oct Trade Balance

1000 Nov Ivey Purchasing Managers Index

Stocks to Watch:

Advantage Energy: Alberta Securities Commission Has Permitted Advantage to Extend Substantial Issuer Bid Without First Taking Up Any Common Shares; Advantage Energy: Haven't Determined if It Will Extend Offer

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Canfor: Will Temporarily Curtail Canadian Production Capacity Due to Very Weak Market Conditions; To Reduce Production at All Solid Wood Facilities in B.C., Alberta; Around 150M Board Feet of Production to Be Removed in Dec, Jan

   
 
 

Expected Major Events for Tuesday

00:01/UK: Nov BRC-KPMG Retail Sales Monitor

02:00/JPN: Nov Imported Vehicle Sales

07:00/GER: Oct Manufacturing orders

07:00/GER: Oct Manufacturing turnover

08:59/JPN: Oct Provisional Labour Survey - Earnings, Employment & Hours Worked

09:30/UK: Nov S&P Global / CIPS UK Construction PMI

11:00/FRA: Oct OECD CPI

13:30/CAN: Oct International merchandise trade

13:30/US: Oct U.S. International Trade in Goods & Services

13:55/US: 12/03 Johnson Redbook Retail Sales Index

15:00/CAN: Nov Ivey Purchasing Managers Index

21:30/US: 12/02 API Weekly Statistical Bulletin

23:50/JPN: Nov International Reserves / Foreign Currency

23:50/JPN: Nov Provisional Trade Statistics for 1st 20 days of Month

All times in GMT. Powered by Onclusive and Dow Jones.

   
 
 

Expected Earnings for Tuesday

AeroVironment (AVAV) is expected to report $-0.09 for 2Q.

Alico (ALCO) is expected to report $-0.25 for 4Q.

AltiGen Communications (ATGN) is expected to report for 4Q.

AutoZone Inc (AZO) is expected to report $25.12 for 1Q.

Avid Bioservices Inc (CDMO) is expected to report $-0.01 for 2Q.

Barnes & Noble Education Inc (BNED) is expected to report $0.77 for 2Q.

CSP Inc (CSPI) is expected to report for 4Q.

California First Leasing Corp (CFNB) is expected to report for 1Q.

Casey's General Stores (CASY) is expected to report $3.09 for 2Q.

Cenntro Electric Group Ltd (CENN) is expected to report for 3Q.

Conn's (CONN) is expected to report $-0.55 for 3Q.

Couchbase Inc (BASE) is expected to report for 3Q.

Dave & Buster's Entertainment Inc (PLAY) is expected to report $0.03 for 3Q.

Emcore (EMKR) is expected to report $-0.20 for 4Q.

Evertz Technologies (ET.T,EVTZF) is expected to report $0.17 for 2Q.

FTI Consulting (FCN) is expected to report $1.32 for 4Q.

Fastenal Co (FAST) is expected to report.

Guidewire Software Inc (GWRE) is expected to report $-0.79 for 1Q.

Healthequity Inc (HQY) is expected to report $-0.10 for 3Q.

IES Holdings Inc (IESC) is expected to report for 4Q.

J.Jill (JILL) is expected to report for 3Q.

MongoDB Inc (MDB) is expected to report $-1.57 for 3Q.

Oil Dri Corporation of America (ODC) is expected to report for 1Q.

Orvana Minerals (ORV.T,ORVMF) is expected to report for 4Q.

Qualstar Corp (QBAK) is expected to report for 3Q.

SentinelOne Inc (S) is expected to report for 3Q.

Skillsoft Corp (SKIL) is expected to report for 3Q.

Smart Share Global Ltd - ADR (EM) is expected to report for 3Q.

Smith & Wesson Brands Inc (SWBI) is expected to report for 2Q.

Sprinklr Inc (CXM) is expected to report for 3Q.

Stitch Fix Inc (SFIX) is expected to report $-0.47 for 1Q.

Toll Brothers Inc (TOL) is expected to report $3.95 for 4Q.

Zuora Inc (ZUO) is expected to report $-0.20 for 3Q.

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ANALYST RATINGS ACTIONS

Allegiant Travel Cut to Equal-Weight From Overweight by Morgan Stanley

Angel Oak Mortgage Cut to Underperform From Buy by B of A Securities

Callon Petroleum Raised to Neutral From Underweight by JP Morgan

Comcast Raised to Equal-Weight From Underweight by Wells Fargo

Diamondback Energy Raised to Buy From Accumulate by Johnson Rice

Domino's Pizza Raised to Buy From Neutral by BTIG

EOG Resources Cut to Hold From Buy by Johnson Rice

Huntington Bancshares Raised to Overweight From Equal-Weight by Morgan Stanley

Laredo Petroleum Cut to Underweight From Neutral by JP Morgan

MGM Resorts Raised to Buy From Hold by Truist Securities

Murphy Oil Raised to Overweight From Neutral by JP Morgan

NetApp Cut to Hold From Buy by Loop Capital

Signature Bank Cut to Equal-Weight From Overweight by Morgan Stanley

Silvergate Capital Cut to Underweight From Equal-Weight by Morgan Stanley

Spire Inc Cut to Neutral From Overweight by JP Morgan

Starbucks Cut to Hold From Buy by Deutsche Bank

Terex Cut to Hold From Buy by Deutsche Bank

United Airlines Raised to Overweight From Equal-Weight by Morgan Stanley

VF Corp Cut to Neutral From Outperform by Credit Suisse

Wabash Natl Cut to Hold From Buy by Vertical Research

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

 

(END) Dow Jones Newswires

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

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