US FINANCIAL MARKET
Stocks Rise After Nasdaq Enters Correction – Wall Street Journal, 1/20/2022
- U.S. stocks rose early Thursday, paring some of the sharp losses that have come as investors reposition their portfolios, spooked by the prospect of tightening monetary policy and slowing growth.
- The Nasdaq Composite Index rose 1.6%, a day after a late tech selloff dragged down indexes. The S&P 500 climbed 1.1% and the blue-chip Dow Jones Industrial Average added 1%.
- The morning’s buying shows investors are trying to gauge how far this selloff will go. On Wednesday, the ragged, weekslong selloff pushed the Nasdaq down more than 10% below its record close, putting it in correction territory.
- Those kinds of plateaus usually bring in bargain hunters, but on its own is no indication a selloff is over, observers say.
- Faced with the prospect of multiple interest-rate rises, cooling growth and inflation at multidecade highs, investors have been reassessing the pandemic-era playbook that focused on outsize gains for growth stocks, such as tech.
- In recent sessions, investors have rotated into sectors expected to perform better in the coming year, such as financials and energy.
- The yield on the 10-year U.S. Treasury note was up slightly from Wednesday at 1.829%, after rising steadily in recent weeks. Benchmark German bund yields fell further into negative territory, a day after they briefly turned positive.
- The yield on the 10-year German government bond fell to minus 0.037% Thursday from minus 0.014% Wednesday.
- Netflix will be one of the first tech giants to post its fourth-quarter results, after markets close, when PPG Industries also will report.
- Hong Kong-listed Chinese stocks jumped after an interest-rate cut by China’s central bank lifted shares of property developers and tech giants.
- The Hang Seng Index rose 3.4%, while mainland China’s Shanghai Composite Index edged down 0.1%. Elsewhere in Asia, the Nikkei 225 rose 1.1%. The pan-continental Stoxx Europe 600 edged up 0.1%.
- U.S. crude-oil futures fell 0.2% to $85.63 a barrel. This follows a rally partly driven by the potential for supply disruptions in Russia and the Middle East. On Wednesday, crude futures hit their highest level since October 2014. Observers say the next big target is $100 a barrel.
Goldman Leads London Office Return; Hamster Fears: Virus Update – Bloomberg, 1/20/2022
- Goldman Sachs Group and Citigroup led banks asking London staff to get back to their desks, after the U.K. dropped its work-from-home guidance.
- Goldman employees are being asked to return in line with the government’s announcement on Wednesday, according to a person familiar with the matter. Citigroup has emailed its London staff telling them to come into the office at least three days a week.
- Ireland’s government will end an 8 p.m. curfew for bars and restaurants by the end of next week, allowing them to stay open until midnight, the Irish Independent reported, without saying where it got the information.
- Germany reported a second straight record in new Covid-19 cases as the omicron variant continues its rapid spread in Europe’s biggest economy.
- There were 133,536 new infections in the 24 hours through early Thursday, after they exceeded 100,000 for the first time the previous day, according to data from the RKI public-health institute. The seven-day incidence rate per 100,000 people climbed to 638.8, also another record.
- The risk of ending up hospitalized after a Covid-19 infection is 36% lower for people who were exposed to the omicron than the delta variant, according to a study from Danish health authorities in Denmark.
- The study showed that 0.6% of those infected with the new variant were admitted to hospital, compared with 1.5% of those who tested positive for delta.
- Hong Kong officials said they were more confident about the possibility that hamsters are spreading Covid in the city as newly uncovered infections are genetically distinct from the virus initially found in a pet shop clerk.
- Western Australia, one of the world’s final Covid-Zero holdouts, delayed its Feb. 5 reopening to the rest of Australia and the world on concerns an omicron wave would cause “a flood of disease.”
- It will make a decision on any further easing in the near future once the country’s east coast has reached the peak of infection and there’s a better understanding of the true impact of omicron, Premier Mark McGowan said. A review of border controls will be considered over the course of next month.
United Airlines cuts capacity forecast, flags cost pressure on Omicron turmoil – Reuters, 1/20/2022
- United Airlines Holdings on Wednesday trimmed its capacity forecast and warned of higher costs, after posting a smaller-than-expected fourth-quarter loss, citing turbulence from the Omicron coronavirus variant.
- Fourth-quarter revenue came in at $8.19 billion, compared with $3.4 billion a year ago, beating the consensus estimate of $7.97 billion.
- On an adjusted basis, the carrier reported a loss of $1.60 per share for the quarter through December, compared with a loss of $7.00 per share a year ago. Analysts surveyed by Refinitiv, on average, had expected a quarterly loss of $2.11 per share.
- It expects to restore 82% to 84% of pre-pandemic capacity in the quarter through March, with revenue recovering to just 75% to 80% of 2019 levels.
- Costs this year are now expected to be higher than in 2019, instead of going down.
- United estimated current-quarter costs to be 14% to 15% higher than in the same period in 2019.
American Airlines loss narrows on strong holiday travel demand – Reuters, 1/20/2022
- American Airlines Group reported a smaller fourth-quarter loss on Thursday, boosted by strong travel demand during the holiday season.
- Operating revenue for the quarter rose to $9.43 billion from $4.03 billion a year earlier.
- Available seat miles, the carrying capacity of an airplane available to create revenue, rose 84% from a year earlier.
- On an adjusted basis, American reported a loss of $1.42 per share for the quarter through December, compared with a loss of $3.86 per share a year ago. Analysts surveyed by Refinitiv, on average, had expected a quarterly loss of $1.48 per share.
- Its revenue in the current quarter is estimated to be down 20% to 22% versus the first quarter of 2019 due to the Omicron coronavirus variant’s impact on demand in the first two months of the quarter.
- It expects its capacity in the quarter through March to be down about 8% to 10% compared to the same period in 2019. Full-year capacity is projected to be 5% lower than in the pre-pandemic year.
Union Pacific beats quarterly estimates on strong industrial demand – Reuters, 1/20/2022
- Union Pacific on Thursday reported better-than-expected revenue and profit, as the railroad operator benefited from higher shipment prices even as overall volume fell due to supply chain snarls and a global semiconductor shortage.
- Union Pacific’s fourth-quarter total operating revenue rose 12% to $5.73 billion, beating average analyst estimates of $5.58 billion, according to Refinitiv data.
- However, overall volume shipped during the quarter fell 4% as supply chain disruptions hit automotive and intermodal freight.
- Operating ratio, a key profitability metric, at the largest U.S. railroad operator by market value improved to 57.4% from 61%, a year ago.
- Net income for the U.S. railroad operator in the fourth quarter ended Dec. 31 rose to $1.71 billion, or $2.66 per share, from $1.38 billion, or $2.05 per share, a year ago.
Baker Hughes posts Q4 profit as higher oil prices spur drilling demand – Reuters, 1/20/2022
- Shares of Baker Hughes rose sharply on Thursday after the company reported an adjusted quarterly profit and topped analysts’ earnings expectations as higher crude oil and natural gas prices fuel demand for its equipment and services.
- Revenue for the quarter was $5.52 billion, which beat Wall Street forecasts of $5.49 billion.
- The company reported some $7.7 billion of orders in 2021 in its Turbomachinery and Process Solutions unit, driven largely by those related to liquefied natural gas (LNG).
- Adjusted net income for the fourth quarter was $224 million, or 25 cents per share, missing analysts’ estimates by 3 cents, according to data from Refinitiv IBES. The same quarter last year, Baker reported a loss of $50 million, or 7 cents per share, last year.
Travelers Posts Earnings Growth on Surging Premium Volume – Wall Street Journal, 1/20/2022
- Travelers posted a 2% increase in fourth-quarter net income to hit a company record, with strong growth in premium volume contrasting with a year-earlier period hard-hit by the Covid-19 pandemic’s disruptions to the economy.
- Travelers, one of the nation’s biggest sellers of insurance to businesses and a top consumer-car insurer, reported net income of $1.33 billion, up from $1.31 billion. Its closely watched core income, which excludes realized capital gains and other items judged nonrecurring items, also was up 2%, to $1.29 billion from $1.26 billion.
- But net written premiums surged 10% to $8 billion as the insurer benefited from an economy vastly different from the year before, when business shutdowns and other disruptions caused by the Covid-19 pandemic were widespread across the U.S.
- Travelers’ catastrophe costs, net of reinsurance, increased 7% to $36 million from $29 million. The most-recent damage included tornadoes that hit Kentucky and neighboring states and wildfires that destroyed suburban areas outside Boulder, Colo.
Foreign Investment Bounced Back Last Year but Did Little to Ease Supply Strains – Wall Street Journal, 1/20/2022
- Foreign investment by businesses around the world rebounded strongly last year to exceed its pre-pandemic total, but little of that U.S.-led surge went toward boosting manufacturing capacity despite the widespread shortages of goods that have helped push inflation to its highest rate in decades.
- A United Nations agency on Wednesday said that businesses invested $1.65 trillion outside their home countries in 2021, a 77% increase from $929 billion in 2020, when foreign direct investment fell sharply in response to the disruptions and uncertainties caused by the Covid-19 pandemic. That jump brought FDI flows back above their 2019 level of $1.5 trillion.
- However, figures compiled by the U.N. Conference on Trade and Development showed that manufacturing largely missed out on the rebound, with the number of new projects to expand capacity falling slightly from 2020, and remaining well below their 2019 level.
- The U.S. led the rebound in foreign investment, with overseas businesses pumping $323 billion into the world’s largest economy, which has recovered strongly from the initial impact of the pandemic.
- That increase of 114% left inflows at their highest level since 2016, making the U.S. clearly the leading recipient of foreign investment.
US ECONOMY & POLITICS
U.S. Jobless Claims Rose to 286,000 Last Week – Wall Street Journal, 1/20/2022
- Filings for jobless claims rose sharply from near the lowest levels on record, as workers and businesses contend with Omicron-related disruptions in a tight labor market.
- Initial claims for unemployment benefits, a proxy for layoffs, rose to 286,000 during the week that ended on Jan. 15, following an increase for the week ended Jan. 8, the Labor Department said Thursday.
- The four-week average, which smooths out volatility, was 231,000, an increase of 20,000 from last week’s average.
U.S. Existing-Home Sales Reached a 15-Year High of 6.1 Million Last Year – Wall Street Journal, 1/20/2022
- U.S. home sales surged to a 15-year high in 2021, as ultralow interest rates and remote work fueled an extremely competitive housing market.
- Existing-home sales declined 4.6% in December from the prior month to a seasonally adjusted annual rate of 6.18 million, NAR said. December sales fell 7.1% from a year earlier.
- Existing-home sales rose 8.5% from a year earlier to 6.12 million, the National Association of Realtors said Thursday.
- The median existing-home price in 2021 rose to a record $346,900, up 16.9% from 2020, NAR said.
- There were 910,000 homes for sale at the end of December, down 18% from November and down 14.2% from December 2020, NAR said. This is the lowest level on record since NAR began tracking total existing-home inventory in 1999.
- At the current sales pace, there was a 1.8-month supply of homes on the market at the end of December, also a record low.
Democrats Fail in Push to Change Senate Filibuster, Sinking Elections Bill – Wall Street Journal, 1/20/2022
- Democrats failed in their effort to change the Senate’s filibuster procedures to muscle through blocked elections legislation, dealing a setback to President Biden and party leaders on what they have termed their top domestic policy priority.
- With Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona siding with all Republicans in the evenly split Senate, 52 lawmakers opposed the rule change, while 48 were in favor, shy of the majority required.
- “I think we can get things done,” Mr. Biden said at a press conference when asked about an effort to change the law. “I predict that we’ll get something done on the electoral reform side of this,” he added.
- Sen. Mitt Romney (R., Utah) has said a bipartisan group of senators discussing changes now includes about a dozen people.
EUROPE & WORLD
China Cuts Benchmark Rates to Bolster Flagging Economy – Wall Street Journal, 1/20/2022
- China’s central bank lowered its benchmark lending rates, stepping in to support a slowing economy that has been weighed down by a slump in the property market during a politically important year for leader Xi Jinping.
- The People’s Bank of China said Thursday that it cut its five-year loan prime rate, a benchmark for medium- and longer-term loans including mortgages, to 4.60% from 4.65%—the first such cut since April 2020.
- The Chinese central bank also lowered the one-year loan prime rate by 10 basis points to 3.70%, the second cut to that rate in as many months.
- The moves were widely expected by analysts and traders after the central bank on Monday lowered rates on its one-year medium-term lending facility by 10 basis points, to 2.85%, underscoring Beijing’s shift to a looser policy stance as economic clouds gather.
- On Sunday, China’s top law-enforcement body issued a rare warning about the political implications of domestic economic weakness, warning that, “with the economic downturn, some deep-seated problems may surface.”
- Last month, the Communist Party’s top decision-making body, the Politburo, enshrined stability as the “top priority” for China’s economy in 2022, in a meeting chaired by Mr. Xi.
Chinese Stocks Rally in Hong Kong After Beijing Cuts Key Rates – Wall Street Journal, 1/20/2022
- Chinese stocks listed in Hong Kong jumped, with rate cuts by China’s central bank sparking a strong rally in the shares of companies from property developers to the country’s internet giants.
- On Thursday, the Hang Seng Index rose 3.4%, taking its 2022 year-to-date gain to 6.6%.
- The benchmark turned in its worst performance in a decade last year, as global investors dumped stocks in industries that were targeted by Beijing’s regulatory actions and stricter rules.
- Regulators on the mainland are also drafting rules that could give cash-strapped Chinese property developers access to funds from apartment sales that are currently held in escrow, according to media reports, which analysts said could relieve some pressure on the companies’ finances.
EXCLUSIVE TikTok owner ByteDance’s 2021 sales growth 70%, slows yr/yr -sources – Reuters, 1/20/2022
- TikTok owner ByteDance saw its total revenue grow by 70% year on year to around $58 billion in 2021, according to two people familiar with the matter, slower growth than a year earlier as China tightens its regulation of big tech companies.
- In 2020, the Beijing-based company’s total revenue grew by over 100% to $34.3 billion, Reuters has reported.
- ByteDance retained its second-ranked position in China’s online advertising market last year, with a market share of 21%, according to a recent report published by researcher Interactive Marketing Lab Zhongguancun.
- The overall growth of online ad sales in China declined to 9.3% in 2021 from 13.8% a year earlier, the report says.
- In 2021, users spent approximately $2.3 billion in TikTok and the iOS version of Douyin, a 77% jump year-over-year, according to app tracker Sensor Tower.
Puma tops quarterly forecasts despite supply chain problems – Reuters, 1/20/2022
- German sportswear maker Puma reported stronger-than-expected preliminary quarterly sales and core profit on Thursday, as strong global demand helped offset the effects of the COVID-19 pandemic and supply chain constraints.
- Puma said fourth-quarter sales rose a currency-adjusted 14% to 1.77 billion euros ($2.01 billion), above analysts’ average forecast for 1.63 billion euros, according to a Refinitiv poll.
- The company said quarterly earnings before interest and taxes (EBIT) rose to 65 million euros from 63 million in the same period of 2020, well ahead of analysts’ average forecast for 47 million euros.
- Puma will publish final full-year results on Feb. 23, 2022.
Deliveroo meets top growth forecast as dining in trend stays intact – Reuters, 1/20/2022
- British food delivery company Deliveroo hit the top of its forecast for 60-70% growth in gross transaction value in 2021 after GTV rose by more than a third in the fourth quarter despite a tough yearly comparison when new lockdown restrictions were coming into force.
- Deliveroo founder and Chief Executive Will Shu said the performance was “really encouraging”, although he cautioned that the first quarter of 2022 would be the hardest comparison because many of its markets were in full lockdown in the first three months of 2021.
- He said the average order value of 21.40 pounds ($29.12) in the fourth quarter was down 5% year on year, reverting back to pre-COVID levels. However it was slightly up on the third quarter and the frequency of orders from its 8 million active monthly customers had increased to 3.4 per month, from 3.3 in the third quarter.
- The company, which has yet to make a profit even as demand has boomed, said it maintained its guidance for gross profit margin as a percentage of GTV at 7.5-7.75%.
DHL expects freight rates to stay high in 2022 – Reuters, 1/20/2022
- German logistics company Deutsche Post DHL does not expect freight costs to ease this year and is advising customers to agree longer-term contracts as a hedge, the head of the DHL freight business said in an interview.
- “The short-term rate will rise a little in air and ocean freight, the long-term rate will probably remain at the 2021 level,” Tim Scharwath told Reuters.
- “In air freight, the rate might even go up a little bit more in the short term, there is even tighter capacity there.”
- The DHL freight unit expects the high rates to continue to buoy profits in 2022: “Our goal is to keep the operating result at least at the high level we had in the first nine months of 2021,” Scharwath said.
Toyota to curb more production in Japan as COVID spreads – Reuters, 1/20/2022
- Toyota Motor is slowing production at as many as 11 plants in Japan because of rising COVID-19 infections among its workers and those at parts suppliers, it said on Thursday.
- That disruption, which comes amid a shortage of semiconductors that is already forcing it to curb output, could cut production plans this month by about 47,000 vehicles, a Toyota spokesperson said.
- Toyota on Tuesday said it expects to fall short of an annual target to build 9 million vehicles because it did not have enough chips. The company’s business year ends on March 31.
- There has been a surge in cases of the Omicron coronavirus variant in Japan since the start of the year. Daily coronavirus cases on Thursday rose to a record 46,199.
- John Marshall was appointed Chief Justice of the U.S. Supreme Court (1801)
- As a result of the First Opium War, Hong Kong was ceded to the British. (1841)
- The Beatles released their first album in the United States, Meet the Beatles. (1964)
- President Reagan became the oldest president to take office (69 years and 349 days). (1981)
- Hundreds of thousands of people watched in front of the Capitol as President Barack Obama and Vice President Joe Biden are sworn into office. Obama makes history as the first African-American U.S. president. (2009)