MARKET WRAPS
Watch For:
U.S. Leading Indicators for December; Canada New Housing Price
Index for December.
Opening Call:
Stock futures were mixed Friday, but the Nasdaq was poised to
push deeper into correction territory as technology stocks remain
under pressure on multiple fronts.
Wall Street looks to end the week after a tumultuous few days of
trading. Wednesday and Thursday both saw the Nasdaq rise more than
1% and then end down more than 1%, which is the first time a
back-to-back rise and fall like that has happened in almost a
year.
The index entered correction territory earlier in the week --
down more than 10% from its high in mid-November -- and was heading
deeper into the red Friday.
One of the latest catalysts for a move lower among tech stocks,
which have a weighting with more influence in the S&P 500 and
Nasdaq than the Dow, was downbeat news about Peloton. Underwhelming
financial results from Netflix after the bell Thursday haven't
helped the picture.
"The bears took control of the ball," said Jim Reid, a
strategist at Deutsche Bank. "The S&P 500 is on track for a
third consecutive weekly decline for the first time since September
2020."
Stocks have been under pressure over the last couple of weeks,
as investors worry about tightening monetary policy from the
Federal Reserve against the backdrop of high inflation. The market
is pricing in three or four interest-rate increases this year, with
the first hike in March.
These factors have helped bond yields spike. After closing out
2021 at 1.51%, the yield on the benchmark 10-year U.S. Treasury
note neared 1.9% earlier this week. Higher bond yields discount the
present value of future cash, and have a negative influence on tech
stocks, many of which have valuations that bank on profits years
into the future.
But the declines among stocks seen Thursday, continuing Friday,
have happened even as yields fell. The 10-year note's yield was
down further Friday.
"Investors couldn't even blame a rise in yields," said Michael
Hewson, an analyst at broker CMC Markets. "The inability of U.S.
markets to hold on to yesterday's move higher is a worry and could
well indicate the potential for further losses in the coming
days."
Forex:
The dollar has been under pressure for most of January with
favorable interest rate differentials failing to prop up the
currency, RBC Capital Markets said.
The rally in commodity prices and U.S. equity weakness have been
a more important driver for the dollar in the last month, RBC's
George Davis said.
"With U.S. equities recently posting a series of bearish
long-term trend reversals, further declines could undermine the USD
via shifts in asset allocation." U.S. equity declines may trigger
outflows from U.S. assets, thereby hurting the dollar, he said.
The Turkish lira is likely to weaken this year following a
temporary stabilisation as Turkey's central bank looks set to
resume its interest rate cutting cycle after leaving rates
unchanged Thursday, Capital Economics said.
"We think that falling inflation towards the end of the year
will provide the motivation for the CBRT to press ahead with
further rate cuts amounting to 100 basis points placing renewed
downward pressure on the lira," Capital Economics economist Joseph
Marlow said.
Meanwhile, very low foreign exchange reserves mean policymakers
won't be in a position to intervene in the currency market to
bolster the lira, he says. Capital Economics expects USD/TRY to
rise to 16.00 by year-end from 13.3994 currently.
Cryptocurrencies, already pressured by market sentiment away
from risk assets, tumbled. Bitcoin was 7.5% lower over the past 24
hours to below $39,000, according to data from CoinDesk. Smaller
peer Ether dropped around 8.5% over the same period to below
$2,900.
The fall can mostly be blamed on Russia, where cryptocurrencies
are popular among citizens and the country is a hub for mining --
the process that generates new digital currency tokens. The Russian
central bank has proposed banning crypto mining as part of a wider
prohibition that includes preventing people from trading or
transacting with the likes of Bitcoin.
"The pessimism continues to grow among investors and traders
when it comes to riskier assets and this is chiefly influencing the
price of equities and bitcoin," said Naeem Aslam, chief market
analyst at AvaTrade, in a note to clients.
"The thing with bitcoin is that when it begins to fall, the
price action drops like there is no tomorrow," said Aslam, who
added that January also tends to be a volatile month for the
cryptocurrency on a historical basis.
Bonds:
Prices for benchmark government bonds rose, partially reversing
a recent selloff that has helped put pressure on the shares of
highly valued tech stocks. That pushed down yields, with the yield
on the 10-year U.S. Treasury note falling to 1.783%, according to
Tradeweb, from 1.833% Thursday.
The rise in government bond yields won't be a linear process, DZ
Bank analyst Christoph Kutt said. "The trajectory of inflation
rates may involve downside as well as upside surprises, which the
central banks will have to address as part of their exit
strategies," he said.
The Fed's approach toward policy normalization will be "far more
forceful" than that of the European Central Bank, Kutt said. The
ECB has to be vigilant against inflation risks and the threat of
eurozone fragmentation, he said.
Commodities:
Oil's rally should continue as OPEC struggles to meet its
production targets and winter weather keeps demand strong, said TD
Securities. Demand expectations have risen this week, the firm
noted, pointing to upward revisions to forecasts from the IEA.
At the same time, signs that OPEC is struggling to meet supply
targets are building. Add to that the possibility of cold winter
weather in the Northern Hemisphere and oil's outlook is bullish,
said Bart Melek, the firm's head of commodity strategy.
"As the winter continues, strong demand across the energy
complex will add to bullish sentiment. There is a very real
possibility that colder-than-usual weather due to La Niña weather
patterns will drive demand higher, pushing the market into a
deficit sooner, rather than later."
A shortage of nickel worsened in November, according to data
from the International Nickel Study Group. The global nickel market
had a 3,000-metric-ton deficit in November, 1,400 tons larger than
in the previous month, the INSG said.
In the 11 months through November, the shortage of nickel
totaled 167,000 tons, compared with a surplus of 92,500 tons in the
same period during 2020. Nickel prices have soared this month as
stocks have dwindled.
Reports that Indonesia, a major producer, is considering a tax
on nickel exports have put additional upward pressure on prices.
Three-month nickel on the LME fell 0.7% to $23,680 a ton, but
remains more than 14% higher for the month.
Gold edged lower in early European trade on position adjustment
ahead of the weekend. The focus of gold traders is shifting to next
week's FOMC meeting, with Russia-Ukraine tensions probably factored
into the prices of precious metals, Phillip Futures said.
Rising U.S. interest rates remain a potential headwind since
this translates into a higher opportunity cost of holding
non-yielding bullion, the brokerage added.
Copper prices have seen choppy trading this week with demand
concerns presenting headwinds while falling inventories have
offered support. That range-bound trading is likely to continue
with prices averaging $9,690 a metric ton this year, said analysts
at BNP Paribas.
Weakness in China's construction sector is likely to drag on
copper demand in the first half of the year while rising mine
supply should also add to headwinds, the bank said.
Three-month copper on the LME is currently down 0.8%, joining a
rout in global markets that comes as investors slash their exposure
risk assets on fears of slowing economic growth. For the week, the
metal is on course to end with a modest 2.2% gain.
TODAY'S TOP HEADLINES
Intel to Invest at Least $20 Billion in Ohio Chip-Making
Facility
Intel Corp. plans to invest at least $20 billion in new
chip-making capacity in Ohio, according to a person familiar with
the matter, bolstering the company's semiconductor production
ambitions as greater demand for digital products and a global chip
shortage have amplified the need for more manufacturing.
The facility would be built near Columbus, Ohio, according to
the person. It would add to Intel's effort to expand its
chip-making business that has seen the company make more than $100
billion in investment pledges over the past year.
Chinese Developer Country Garden Raises $501 Million as Investor
Mood Lifts
China's largest developer by contracted sales took advantage of
a pickup in investor sentiment toward the property sector to sell
convertible bonds, after deciding against pursuing a similar deal
last week.
Country Garden Holdings Co. said Friday that it had raised 3.9
billion Hong Kong dollars, the equivalent of $501 million, by
issuing the securities a day earlier.
France's Total Exits Myanmar, Citing Shareholder Pressure Since
Coup
SINGAPORE-France's TotalEnergies SE said it is withdrawing from
Myanmar over shareholder pressure and a deteriorating human-rights
situation since the country's military seized power in a coup last
year.
Western energy companies have faced growing calls to divest or
withhold revenue from the junta, while governments including the
U.S. and France have come under pressure to sanction the sector.
Myanmar's oil-and-gas industry is the country's single largest
source of foreign revenue.
Fosun Pharma, Other Chinese Drugmakers Rise After Deal to Make
Merck's Covid-19 Pill
Shares of three Chinese drugmakers rose following news they will
be among 27 companies globally to help make cheaper versions of
Merck & Co.'s Covid-19 pill for distribution in low- and
middle-income countries.
BrightGene Bio-Medical Technology Co. hit the maximum 20% daily
rise on Shanghai's science- and tech-focused STAR board, while
Shanghai Fosun Pharmaceutical (Group) Co.'s A-shares rose as much
as 10% on Friday. Fosun Pharma's H-shares jumped 13% in early
trading but have since pared gains to trade 3.5% higher.
China's Transport Ministry Summons Freight-Delivery Platforms,
Warns Ride-Hailing Firms
China's Ministry of Transport has summoned four leading
freight-delivery platform operators and warned four internet
ride-hailing companies over recent driver complaints, in a sign of
Beijing's continued scrutiny of the country's massive tech sector
after a year-long crackdown.
The ministry on Friday said it has summoned four internet
freight delivery firms, including the cargo businesses owned by
DiDi Global Inc. and 58.com Inc., to discuss recent driver
complaints about arbitrary pricing rules, membership fee increases,
unfair competition and illegal practices such as overloading.
Peloton Warns Staff of Layoffs, Changes to Production
Peloton Interactive Inc.'s chief executive officer said the
company is reviewing the size of its workforce and resetting
production levels as the company adapts to more seasonal demand for
its exercise equipment.
A note from CEO John Foley was sent to Peloton employees
Thursday following a news report that Peloton was temporarily
halting production of its connected-fitness products. The report
caused shares of the company to sink 24%.
Netflix Shares Sink as Company Sees Subscriber Growth
Slowing
Netflix Inc. said it expects to add a much smaller number of
subscribers this quarter than it did a year ago as it adjusts to
growing competition and lasting disruptions from the coronavirus
pandemic, sending the video streamer's shares down sharply.
The company on Thursday forecast an increase of 2.5 million
subscribers in the current quarter, compared with four million a
year earlier. It also slightly missed its subscriber estimate for
the fourth quarter, adding 8.3 million subscribers instead of the
projected 8.5 million.
China's Yield Advantage Over U.S. Bonds Narrows
The extra yield that Chinese government bonds offer over U.S.
Treasurys this week dropped below a percentage point for the first
time in nearly three years, as the central banks of the world's two
largest economies move in opposite directions.
The narrowing gap, reflecting both a rally in Chinese bonds and
a U.S. selloff, reduces one longstanding argument in favor of
foreign investors buying more Chinese debt. But analysts and
investors say the long-term torrent of international money pouring
into Chinese fixed-income markets is likely to continue.
The SPAC Ship is Sinking. Investors Want Their Money Back.
Wall Street's favorite pandemic bet is taking on water.
SPACs, or special-purpose acquisition companies, burst onto the
scene in 2020 as the hip way to take Silicon Valley's hottest
startups public. Unlike traditional initial public offerings, SPACs
were seen as modern and accessible, allowing any investor to put
money into the companies of the future at the same time as
professional money managers.
Investors See New Sparkle in Europe's Tech Scene
Europe's tech scene has struggled to emerge from the shadows of
giants in the U.S. and Asia, but friendly local policies and a
global overflow of investment capital are now giving the region a
gusher of cash.
Investments in European tech firms soared to $93.3 billion last
year, a record and a 142% increase over the year before, according
to CB Insights. The number of deals jumped as well, to 7,051 from
5,746 the year before and 6,051 the year before that.
Americans Should Pay More for Gas, not Less
They are a jalopy badly in need of repairs, but America's
fuel-economy rules have been rolling along since 1975, burning more
oil and spewing more pollution than their builders intended. Still,
when it comes to one of the few roadworthy policies available, a
tuneup makes more sense than a trip to the scrap heap.
Many economists will tell you that higher gas taxes make more
sense than forcing car makers to sell more efficient vehicles, and
they are right. Politics is the art of the possible, though. Last
month, the Biden administration tightened up the Corporate Average
Fuel Economy standards that the Trump administration had loosened.
Unfortunately, CAFE's design flaws remain: Auto makers selling
larger cars face less stringent targets than those selling smaller
ones. That difference is generally even wider between passenger
cars and light trucks-a category that actually includes larger
crossovers and some SUVs, such as Toyota Rav4, Nissan Rogue and
Ford Escape. The discrepancy mattered less in the 1970s when most
people drove normal passenger cars.
Eurozone Inflation Seen Falling in 2022, But More Slowly Than
Expected
Eurozone inflation climbed to a record-high level of 5.0% in
December but should start decelerating from January. However, more
persistent supply-side price pressures observed in energy, food and
non-energy goods suggest a very gradual inflation moderation in
2022, Barclays says.
For Barclays, the eurozone inflation outlook remains uncertain
with risks skewed to the upside. The surge in wholesale energy
prices has so far mainly boosted inflation in counties with a
relatively high share of variable-rate utility tariffs in the
overall consumer bill, such as Spain and Belgium. This leaves
countries with a larger share of regulated and fixed-rate utility
tariffs--including Germany, France and Italy--exposed to delayed,
and potentially sharp, consumer price hikes.
U.K. Retail Sales Slumped in December as Omicron Cases Raged
U.K. retail sales sank in December, sharply missing analysts'
forecasts, as the nation witnessed surging Covid-19 cases and
tightened social-distancing guidance.
Retail sales volumes dropped 3.7% from a month earlier, the
Office for National Statistics said Friday. Economists polled by
The Wall Street Journal had forecast a more modest decline of
0.6%.
Fed Launches Review of Possible Central Bank Digital
Currency
WASHINGTON-The Federal Reserve on Thursday launched a review of
the potential benefits and risks of issuing a U.S. digital
currency, as central banks around the world experiment with the
potential new form of money to keep pace with private-sector
payments innovations.
Fed officials have been divided on the matter, making it
unlikely they will decide soon on whether to create a digital
dollar. Unlike private cryptocurrencies like bitcoin, a Fed version
would be issued by and backed by the U.S. central bank, a
government entity, as are U.S. paper dollar bills and coins.
Why Omicron's Milder Infections Are Straining U.S. Hospitals
The fast-spreading Omicron variant has fueled a rise in Covid-19
cases to levels far beyond any recorded in the U.S. since the start
of the pandemic. But there is a growing body of evidence that
infections from the Omicron variant are less severe than previous
variants. So why are hospitals in some parts of the country
stretched to capacity?
A preliminary study released last week, conducted by Kaiser
Permanente and funded by the U.S. Centers for Disease Control and
Prevention, showed "substantially reduced risk of severe clinical
outcomes in patients who are infected with the Omicron variant
compared with Delta," said Dr. Rochelle Walensky, director of the
CDC. The study by Kaiser, a California-based hospital and
health-insurance company, examined nearly 70,000 Covid-19 cases in
Southern California from Nov. 30 to Jan. 1. It found rates of
hospitalization, admission to intensive-care units, mechanical
ventilation and death were all substantially lower in patients
infected with Omicron. Hospital stays were also shorter.
Blinken to Meet Russia's Foreign Minister Amid Ukraine Border
Crisis
KYIV, Ukraine-As Secretary of State Antony Blinken prepares for
a high-stakes meeting with Russian counterpart Sergei Lavrov on
Friday, Ukraine's foreign minister warned that his country's
soldiers and civilians could "pay with their blood" for any delays
to a sanctions package that could be imposed on Moscow immediately
should it choose to invade.
The meeting in Geneva follows a string of meetings Mr. Blinken's
deputy, Wendy Sherman, held earlier this month with European allies
and her Russian counterpart at NATO's headquarters, followed by
more gatherings Mr. Blinken held this week in Kyiv and Berlin.
Afghans Housed at Military Base in Kosovo Risk Being Denied
Entry to U.S. for Alleged Terrorist Ties
WASHINGTON-Afghan evacuees housed on a U.S. military base in
Kosovo are at risk of being denied entry to the U.S. because of
their alleged links to the Taliban and other terrorist groups, U.S.
officials have said, potentially leaving them without a home
country.
Fewer than 10 Afghans have been declared ineligible for entry
after security officials found disqualifying information about them
during an extensive vetting process, according to a person familiar
with the issue. About 90 other individuals continue to be vetted at
the Camp Bondsteel base in Kosovo, according to administration
officials.
Biden Seeks to Reassure Ukraine, Vowing a Strong Response to
Russia and Transferring Weapons
President Biden said Thursday that any Russian troop movement
into Ukraine would be considered an invasion, seeking to clear up
confusion over his position on a potential incursion as the
administration gave approval for U.S.-made weapons to be
transferred to Kyiv.
"I've been absolutely clear with [Russian] President [Vladimir]
Putin. He has no misunderstanding," Mr. Biden said at a White House
event. "If any-any-assembled Russian units move across the
Ukrainian border, that is an invasion."
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
Nothing major scheduled
Economic Indicators (ET):
0830 Nov Retail trade
0830 Dec New Housing Price Index
Stocks to Watch:
Zymeworks' Stock Falls Following Restructuring Plan That Calls
for Deep Job Cuts
Zymeworks Inc. slid nearly 10%, to $12.17, a day after
disclosing a restructuring that targets cutting at least 25% of
jobs by year's end.
The restructuring, days into Kenneth Galbraith's term as chief
executive, amounts to a reset of the company's strategy to focus on
its product candidate, zanidatamab (formerly known as ZW25), and
its second product candidate, ZW49.
As part of the restructuring, half of the company's senior
management team have left or are leaving, including Scientific
Chief Anthony Polverino, who played a key role in setting and
driving Zymeworks' R&D strategy; Commercial Chief James Priour;
and People Chief Kathryn O'Driscoll.
"A smaller, more focused workforce is essential for us to
improve our operating performance and accomplish our key priorities
in a more cost-efficient manner," Mr. Galbraith said.
The Canadian clinical-stage biopharmaceutical company said it
ended 2021 with about $250 million in cash and short-term
investments, which it said should be enough to cover its operations
through at least late 2022. Zymeworks is slated to report
fourth-quarter results in late February.
Other News:
No items published
Market Talk:
No items published
Expected Major Events for Friday
00:01/UK: Jan UK Consumer Confidence Survey
05:00/JPN: Dec Steel Production
07:00/UK: Dec UK monthly retail sales figures
13:30/CAN: Dec New Housing Price Index
13:30/CAN: Nov Retail trade
13:30/US: U.S. Weekly Export Sales
15:00/US: Dec Leading Indicators
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Friday
Ally Financial Inc (ALLY) is expected to report $1.95 for
4Q.
Ames National (ATLO) is expected to report for 4Q.
Bank of the James Financial Group Inc (BOTJ) is expected to
report for 4Q.
Bridgford Foods Corp (BRID) is expected to report for 4Q.
Chemung Financial (CHMG) is expected to report $1.26 for 4Q.
Chino Commercial Bancorp (CCBC) is expected to report for
4Q.
Colony Bankcorp (CBAN) is expected to report $0.41 for 4Q.
FIGS Inc (FIGS) is expected to report for 4Q.
First Hawaiian Inc (FHB) is expected to report $0.47 for 4Q.
Flywire Corp (FLYW) is expected to report for 4Q.
Greene County Bancorp (GCBC) is expected to report for 2Q.
Huntington Bancshares (HBAN) is expected to report $0.30 for
4Q.
MetroCity Bankshares Inc (MCBS) is expected to report $0.66 for
4Q.
Paymentus Holdings Inc (PAY) is expected to report for 4Q.
Prudential Bancorp Inc (PBIP) is expected to report $0.22 for
1Q.
Schlumberger (SLB) is expected to report $0.39 for 4Q.
Toast Inc (TOST) is expected to report for 4Q.
Unity Bancorp Inc (UNTY) is expected to report $0.86 for 4Q.
Wayne Savings Bancshares Inc (WAYN) is expected to report for
4Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Advanced Micro Devices Cut to Neutral From Overweight by Piper
Sandler
Ameresco Raised to Outperform From Market Perform by Raymond
James
American Assets Trust Cut to Neutral From Buy by Mizuho
Ashland Global Holdings Cut to Equal-Weight From Overweight by
Wells Fargo
Ball Corp Cut to Equal-Weight From Overweight by Morgan
Stanley
Burlington Stores Cut to Sell From Hold by Loop Capital
Calithera Biosciences Raised to Outperform From Market Perform
by SVB Leerink
Carvana Cut to Sector Weight From Overweight by Keybanc
CME Group Raised to Neutral From Sell by Rosenblatt
Consolidated Edison Cut to Sell From Neutral by Guggenheim
EOG Resources Price Target Raised to $110.00/Share From $108.00
by Keybanc
Essential Props Realty Cut to Neutral From Buy by B of A
Securities
Essential Props Realty Cut to Neutral From Buy by Mizuho
Etsy Raised to Overweight From Sector Weight by Keybanc
Evolus Raised to Buy From Hold by Truist Securities
Evoqua Water Technologies Raised to Outperform From Perform by
Oppenheimer
First Community (SC) Cut to Market Perform From Outperform by
Raymond James
Ford Motor Cut to Hold From Buy by Jefferies
Getty Realty Cut to Underperform From Neutral by B of A
Securities
Hawaiian Electric Raised to Neutral From Sell by Guggenheim
Holly Energy Partners Cut to Underweight From Equal-Weight by
Barclays
Hudson Pacific Properties Cut to Underperform From Neutral by
Mizuho
International Paper Cut to Neutral From Buy by B of A
Securities
Kilroy Realty Raised to Buy From Neutral by Mizuho
Magellan Midstream Cut to Equal-Weight From Overweight by
Barclays
Northwest Natural Raised to Neutral From Sell by Guggenheim
Paramount Group Raised to Buy From Neutral by Mizuho
PetMed Express Raised to Buy From Neutral by Sidoti &
Co.
Safehold Cut to Neutral From Buy by Mizuho
Sealed Air Raised to Overweight From Equal-Weight by Morgan
Stanley
Shell Midstream Partners Cut to Equal-Weight From Overweight by
Barclays
Silvergate Capital Raised to Buy From Neutral by Goldman
Sachs
South Jersey Industries Cut to Neutral From Buy by
Guggenheim
Spire Inc Cut to Neutral From Buy by Guggenheim
Tenet Healthcare Raised to Strong Buy From Outperform by Raymond
James
UiPath Raised to Outperform From Perform by Oppenheimer
United Parcel Service Raised to Neutral From Underperform by
Exane BNP Paribas
US Bancorp Cut to Market Perform From Outperform by Keefe,
Bruyette & Woods
Ventas Raised to Buy From Neutral by Mizuho
Vertex Pharmaceuticals Raised to Outperform From Market Perform
by BMO Capital
VF Corp Cut to Hold From Buy by Williams Capital
Vroom Raised to Overweight From Sector Weight by Keybanc
W. P. Carey Raised to Neutral From Underperform by B of A
Securities
Walmart Cut to Sector Weight From Overweight by Keybanc
Welltower Raised to Buy From Neutral by Mizuho
WestRock Cut to Neutral From Buy by B of A Securities
World Fuel Services Raised to Buy From Underperform by B of A
Securities
WW International Cut to Underweight From Sector Weight by
Keybanc
Zynga Cut to Neutral From Buy by BTIG
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
January 21, 2022 06:15 ET (11:15 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.