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