US FINANCIAL MARKET
Stocks Open Lower Ahead of Powell Confirmation Hearing – Wall Street Journal, 1/11/2022
- U.S. stock indexes fell and the bond yield rally paused ahead of testimony from Jerome Powell in which the Federal Reserve chairman is set to be grilled by lawmakers on inflation and interest rates.
- Most of the stock market fell Tuesday, deepening a slide that has pushed shares of many companies into the red to start the year. Shares of fast-growing companies fell alongside stocks more closely tied to the economy, as the prospect of imminent and faster-than-expected interest-rate rises has convulsed financial markets this month.
- The S&P 500 slid 0.4% Tuesday, falling for a sixth consecutive trading day. The Dow Jones Industrial Average retreated 0.6%, its fifth straight day of decline. The Nasdaq Composite also moved lower, undoing Monday’s slim gain, shedding 0.2%.
- Investors are looking to comments from Mr. Powell on Tuesday, when Senate lawmakers will decide on his nomination for a second term as Fed Chair. While his confirmation is expected, Mr. Powell is likely to face tough questioning about his pivot on inflation and interest rates, which has spooked investors and driven volatility in markets.
- A rally in government bond yields halted, a day after the 10-year Treasury yield settled at a 52-week high.
- The yield on the benchmark bond edged down to 1.771% Tuesday from 1.779% Monday.
- Reports later in the week will be dominated by financial firms, with BlackRock, Citigroup, JPMorgan Chase and Wells Fargo set to report Friday.
- Overseas, the Stoxx Europe 600 rose 0.8%, led by gains for its tech sector. Deutsche Bank fell 1.5% and Commerzbank declined nearly 5% after the Journal reported that Cerberus Capital Management was selling more than 20 million shares of each company.
- In Asia, stock markets were mostly lower. Japan’s Nikkei 225 fell 0.9%, while Hong Kong’s Hang Seng Index was flat. In mainland China, the Shanghai Composite Index dropped 0.7%.
- In commodity markets, Brent crude, the international oil benchmark, rose nearly 1% to $81.56 a barrel Tuesday. Gold prices rose 0.4%.
Record Covid-19 Cases, Driven by Omicron, Pressure Hospitals in U.S., Europe – Wall Street Journal, 1/11/2022
- A record number of Covid-19 cases driven by the Omicron variant is putting hospitals under increasing pressure in parts of the U.S. and Europe.
- In the U.S., the seven-day average of new hospital patients with a confirmed or suspected case of Covid-19 has been running above last January’s record highs for several days.
- Close to 27,000 people were newly hospitalized with Covid-19 on average every day in the past week, according to the Department of Health and Human Services.
- In Europe, Hans Henri Kluge, Europe regional director for the World Health Organization, said Covid-19 “is challenging health systems and service delivery in many countries where Omicron has spread at speed and threatens to overwhelm in many more.”
- He said 26 countries in the region had reported more than 1% of their population was catching Covid-19 every week.
- With more than 750,000 daily cases reported on average in each of the seven days to Monday, the weekly tally of newly reported Covid-19 infections in the U.S. is close to triple the pre-Omicron record set a year ago, according to data collected by Johns Hopkins University.
- The U.S. isn’t alone in posting new case records. According to Our World in Data from the University of Oxford, France, Italy, the Netherlands and Canada are among the countries seeing record case numbers.
- Covid cases continue to rise sharply in France, albeit at a slower pace than last week. For the week through Jan. 10, France reported nearly 270,000 new cases a day, up 61% from a week earlier. In Paris, the infection rate is higher, with nearly 3.7% of residents testing positive for the virus in the week ending Jan. 7.
- Schools in Paris are bracing for a teacher strike on Thursday against a complicated health protocol for when students test positive for the virus. The procedure requires other students to get immediately tested before returning to class, and then continue testing twice over the next four days to remain.
- On Tuesday afternoon, France’s Senate will debate a bill that would bar the unvaccinated from entering restaurants, cafes and many other public venues rather than allowing them to gain access by showing a negative test.
- The bill was passed last week by France’s National Assembly.
BioNTech Says Its Covid Vaccine Revenue May Be Lower This Year – Bloomberg, 1/11/2022
- BioNTech said its revenue from the Covid-19 shot it sells together with Pfizer may be lower this year than last, predicting sales between 13 billion euros and 17 billion euros ($14.7 billion and $19.3 billion).
- The company said Covid vaccine sales last year will total 16 billion euros to 17 billion euros. It issued the 2022 prediction in an investor presentation on Tuesday and is due to release fourth-quarter financial data on March 30.
- Pfizer in December forecast vaccine sales of $31 billion this year, based on contracts for 1.9 billion doses signed through mid-November. The revenue is shared between the partners.
- The wave of infections due to the highly transmissible omicron variant has intensified booster campaigns in Europe and the U.S., though it’s still not clear how many countries will pursue yet another round of shots later in the year.
Albertsons Struggles With Rising Costs, Blunting Sales Surge – Bloomberg, 1/11/2022
- Albertsons is wrestling with higher labor and logistics costs as it seeks to cash in on surging sales.
- Wage increases and additional hiring tied to increased sales of fresh products pushed up employee costs, Albertsons said in a statement Tuesday as it reported earnings for the period ended Dec. 4.
- Higher prices charged to consumers and incremental sales from administering Covid-19 vaccines helped boost revenue in quarter. Still, inflation weighed on profitability.
- Albertsons’ gross margin was little changed relative to a year earlier after excluding the impact of fuel price swings.
- Albertsons also said it logged higher supply-chain costs, echoing comments from other retailers on Tuesday including Urban Outfitters and American Eagle Outfitters.
- Albertsons raised its full-year profit outlook to as much as $2.95 a share, compared with a previous forecast of no more than $2.60. Analysts had expected $2.64.
American Airlines expects Q4 revenue to fall lesser than expected – Reuters, 1/11/2022
- American Airlines Group on Tuesday forecast a smaller-than-expected fall in fourth-quarter revenue, sending shares of the No. 1 U.S. carrier up about 2% before the bell.
- The company said it expects revenue for the quarter to be down about 17%, compared with its prior expectation of an about 20% fall.
- The company expects cost per available seat mile—the standard measure in the industry showing what it costs to fly one seat one mile—to be up between 13% and 14%, compared with its previous guidance of a rise of between 8% and 10%.
- The company expects to report pretax margin to be down between approximately 12% and 13% versus its previous forecast of a fall in the range of 16% to 18%.
American Eagle signals weak revenue growth in holiday quarter – Reuters, 1/11/2022
- American Eagle Outfitters on Tuesday signaled its revenue growth in the holiday quarter was hampered by supply chain snarls and disruptions caused by the Omicron surge, sending its shares down 2% in premarket trading.
- The company forecast fourth-quarter revenue to rise in the mid-to-high teens percentage, lower than market estimates of 21.5% growth, according to Refinitiv data.
- The weak outlook underscored the impact of a renewed surge in U.S. COVID-19 cases, which forced worsened staffing and inventory shortages at several retailers and forced some to cut operating hours during the busiest shopping period of the year.
- But Abercrombie said it sales have started rising in the post-holiday period, while American Eagle raised its long-term revenue target to $5.8 billion from $5.5 billion.
CVS raises 2021 profit view as COVID-19 vaccines, tests drive retail strength – Reuters, 1/11/2022
- CVS Health on Tuesday raised its adjusted earnings forecast for 2021, citing strong retail sales helped by higher demand for COVID-19 vaccines as well as over-the-counter testing in November and December.
- The company, best known for its chain of drugstores, raised its forecast for 2021 adjusted profit per share to a range of $8.33 to $8.38, up from at least $8.00 previously.
Omicron-hit Christmas weighs on Lululemon’s holiday quarter – Reuters, 1/11/2022
- Lululemon Athletica said on Monday the Omicron coronavirus variant had dented its holiday-quarter performance, pushing the yoga-wear maker to cut staff and store hours during the busiest shopping period of the year, sending its shares down.
- Lululemon, which had a strong start to the holiday season, has been affected by several Omicron-driven shortfalls, including increased capacity constraints and reduced store hours in some locations, Chief Executive Calvin McDonald said.
- The Vancouver, Canada-based company said it now expects fourth-quarter net revenue to be toward the low end of its previous forecast of $2.13 billion to $2.17 billion.
- It also expects quarterly adjusted profit per share to be toward the low end of its earlier outlook of $3.25 to $3.32.
- Analysts on average had estimated Lululemon to post a profit of $3.34 per share on revenue of $2.17 billion for the holiday quarter.
Planet Fitness to Buy Franchisee Sunshine Fitness for $800 Million – Wall Street Journal, 1/11/2022
- Planet Fitness on Tuesday said it agreed to buy Sunshine Fitness Growth Holdings LLC, one of its top franchisees, for $800 million in cash and stock.
- Planet Fitness said Sunshine Fitness, the first franchisee in its system, operates 114 locations in Alabama, Florida, Georgia, North Carolina and South Carolina.
- Planet Fitness, a Hampton, N.H., operator and franchiser of fitness centers, ended 2021 with 2,254 locations world-wide. The company said it would own about 10% of its store base upon completion of the transaction, expected during the first quarter.
- Planet Fitness said it plans to fund the $425 million cash portion of the purchase price with cash on hand and proceeds from a new series of securitized notes.
Rivian’s Chief Operating Officer Departed Amid Production Ramp-Up – Wall Street Journal, 1/11/2022
- The chief operating officer of electric-truck maker Rivian Automotive left the company last month as the startup was ramping up production of its first three models.
- Rivian ultimately produced more than 1,000 vehicles by the end of 2021, a company spokeswoman said Monday. Rivian had warned last month that the company would likely fall a few hundred short of its goal to build 1,200 vehicles last year.
- Rod Copes retired from Rivian in December, the spokeswoman confirmed Monday. Mr. Copes’s retirement was planned for months, she said, and his duties have been absorbed by the leadership team.
Gloomy outlook for global recovery, World Economic Forum survey finds – Reuters, 1/11/2022
- Only one in 10 World Economic Forum members surveyed expects the global recovery to accelerate over the next three years, a poll of nearly 1,000 business, government and academic leaders found, with only one in six optimistic about the world outlook.
- Climate change was seen as the number one danger by respondents in the WEF’s annual risks report on Tuesday, while erosion of social cohesion, livelihood crises and mental health deterioration were identified as risks which had increased the most since the start of the COVID-19 pandemic.
- Extreme weather was considered the world’s biggest risk in the short term and a failure of climate action in the medium and long term – two to 10 years, the survey showed.
Dimon Sees ‘Huge Pressure’ on Wages for First Time in His Life – Bloomberg, 1/11/2022
- Jamie Dimon said that, for the first time in his life, there’s “huge pressure” on the U.S. labor market.
- “The price of labor’s going up, we’re going to have to deal with it,” the JPMorgan Chase & Co. chief executive officer said in an interview on Fox Business that aired Tuesday.
- Still, Dimon said the situation isn’t as bad as other potential economic scenarios. “It’s much worse to complain about 15% unemployment and a recession than it is to complain about wages going up too fast,” he said.
- In the wide-ranging interview, Dimon also said he expects banks will report loan growth numbers that are better now than they were a quarter ago, ahead of the firm’s fourth-quarter earnings report on Friday.
- Loan growth has been elusive all year as consumers and companies, flush with stimulus cash, held off on borrowing more.
US ECONOMY & POLITICS
Powell Confirmation Hearing Could Shed More Light on Plans to Contain Inflation – Wall Street Journal, 1/11/2022
- Federal Reserve Chairman Jerome Powell is expected to win a second term leading the central bank but could face a grilling Tuesday at his Senate confirmation hearing, where he is likely to be pressed over how the central bank will tighten policy to combat inflation.
- Mr. Powell and his colleagues at their meeting last month penciled in three quarter-point rate increases this year, and over the past week, they have signaled those rises could start in March.
- “There’s a real risk now, I believe, that inflation may be more persistent and…the risk of higher inflation becoming entrenched has increased,” Mr. Powell explained at a news conference last month.
- In prepared testimony for Tuesday’s hearing, Mr. Powell said the central bank would use its tools “to prevent higher inflation from becoming entrenched.”
- Mr. Powell has said that using pre-pandemic labor market benchmarks might no longer be appropriate to guide officials’ policy decisions, another clue that rate increases could start in March.
- “We can begin to see that the post-pandemic economy is likely to be different in some respects. The pursuit of our goals will need to take these differences into account,” Mr. Powell said in his written testimony. Monetary policy needs to “take a broad and forward-looking view, keeping pace with an ever-evolving economy.”
- Fed officials have dropped hints they may start shrinking their asset portfolio soon after they raise rates, which would be another form of tightening policy.
Fed’s Bostic: ‘I’m Totally Open’ to Prospect of March Rate Rise – Wall Street Journal, 1/11/2022
- Federal Reserve Bank of Atlanta President Raphael Bostic said Monday he is open to the U.S. central bank raising its now near zero short-term rate target as soon as its March policy meeting, adding he expects the Fed will likely raise its interest rate target three times over the course of the year.
- “Every meeting has the potential for some policy action” and “I’m totally open to March being a meeting where interest rate changes are considered,” Mr. Bostic said in an interview with The Wall Street Journal.
- The Fed official also said his current outlook moves forward actions he had expected by the central bank because of a surge in inflation and a very strong job market.
- Mr. Bostic, who won’t have a vote this year on the rate setting Federal Open Market Committee due to its annual rotation of regional Fed leaders, said he was upbeat about the economic outlook.
Biden to Cast Election-Law Votes as ‘Turning Point’ for Nation in Speech – Wall Street Journal, 1/11/2022
- President Biden plans to throw his weight behind congressional Democrats’ push to pass long-stalled elections bills, even if it requires changing Senate rules, in a speech in Atlanta on Tuesday designed to build support for the imperiled legislation with votes just days away.
- While House and Senate Democrats support the proposals, the bills need 60 votes to advance in the 50-50 Senate. Both are expected to fall well short of that mark due to opposition from GOP lawmakers, prompting a parallel effort by Democrats to change the filibuster procedure to ease their passage.
- But two Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, have resisted such an approach, leaving any progress uncertain.
- In his speech Tuesday, Mr. Biden will argue Democrats’ case that new federal laws are needed to counter recent state measures, which party lawmakers paint as a threat to access to the polls, particularly for minority voters.
- Mr. Biden will say that the votes “will mark a turning point in this nation,” according to excerpts released by the White House. “Will we choose democracy over autocracy, light over shadow, justice over injustice? I know where I stand,” Mr. Biden’s speech reads. “And so the question is where will the institution of [the] United States Senate stand?”
McConnell Issues Threat to Democrats on Filibuster Changes – Wall Street Journal, 1/11/2022
- Republican Leader Mitch McConnell (R., Ky.) issued a pre-emptive threat to Senate Democrats considering an overhaul of the chamber’s longstanding filibuster rule, detailing a plan to force tough votes on GOP-sponsored bills if Democrats make even modest changes.
- Those votes would include contentious subjects such as blocking vaccines mandates or stopping fracking bans, his office said.
- Aides familiar with Mr. McConnell’s thinking say the threat is intended to cause heartburn for Democrats as Senate Majority Leader Chuck Schumer (D., N.Y.) tries to unify his caucus ahead of possible votes to amend or abolish the filibuster’s 60-vote threshold in the next week.
- “Since Sen. Schumer is hellbent on trying to break the Senate, Republicans will show how this reckless action would have immediate consequences,” the Senate minority leader said in a statement to The Wall Street Journal.
- With the House and White House under Democratic control, any Democratic bills that passed the Senate under such a deal likely would make it to President Biden’s desk for his signature.
- The Republican bills, even if they passed, would be unlikely to become law.
U.S. small business sentiment rises modestly in December – NFIB – Reuters, 1/11/2022
- U.S. small business confidence increased modestly in December amid growing concerns about inflation and worker shortages, a survey showed on Tuesday.
- The National Federation of Independent Business said its Small Business Optimism Index rose 0.5 point to 98.9 last month. Twenty-two percent of owners said inflation was the single most important problem for operations, up from 18% in November.
- Even as inflation concerns mounted last month, the NFIB survey showed the share of owners raising average selling prices decreased two points to 57%. Price hikes were the most frequent in wholesale, construction and retail industries.
- The proportion of businesses planning to raise prices fell five points to 49%.
- According to the NFIB survey, 49% of owners reported job openings that could not be filled, up a point from November. It said 48% reported raising compensation. That was the highest in 48 years and was up four points from November. About a third planned to raise compensation in the next three months.
EUROPE & WORLD
Apple chipmaker TSMC notches another quarterly sales record on strong demand – CNBC, 1/11/2022
- Top chipmaker TSMC notched a new quarterly sales record at the end of 2021 boosted by continued demand from top clients including Apple and Qualcomm for semiconductors.
- The Taiwanese foundry, which manufacturers chips for other companies, reported December revenue of 155.38 billion new Taiwan dollars (about $5.6 billion) — a record number for a single month, and up 4.8% from November.
- For the fourth quarter, revenue totaled 438.18 billion new Taiwan dollars. That’s the sixth straight quarterly sales record TSMC has recorded.
Electric Vehicles Drive Growth for China Car Sales – Wall Street Journal, 1/11/2022
- China’s car market snapped a three-year decline last year, helped by strong sales of electric vehicles, though the global chip shortage and Covid-19 outbreaks in the country disrupted some production.
- Sales of passenger cars in 2021 rose 4.4% from a year earlier to 20.1 million vehicles, the China Passenger Car Association said Tuesday.
- Helping drive growth in China were robust sales of electric and plug-in hybrid cars, which last year accounted for 15% of overall passenger-car sales. Sales of these new-energy vehicles more than doubled to 2.99 million vehicles, the association said.
- Chinese brands such as XPeng and NIO, along with Tesla, showed record sales last year.
- China’s major homegrown EV makers sold a record number of cars last year. BYD said it sold nearly 600,000 new-energy passenger cars in 2021. XPeng, NIO and Li Auto all delivered more than 90,000 vehicles each last year.
- Volkswagen, the biggest foreign brand in China, said its group sales in the country declined about 14% last year to 3.3 million vehicles, hit by the global chip shortage. Nissan Motor’s sales fell 5.2%, and Honda Motor’s dropped 4%.
- For 2022, China’s passenger-car market is likely to grow by 5%, with new-energy cars accounting for a quarter of total sales, the association forecast. Analysts also expect the market to expand, though some expect the pace to be slower.
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