US FINANCIAL MARKET

Stocks Tumble in Wake of Turbulence on Wall Street – Wall Street Journal, 1/25/2022

• U.S. stocks opened lower, putting markets on course for another day of bumpy trading, as investors awaited the Federal Reserve’s policy meeting and parsed a docket of earnings.
• The S&P 500 fell 1.6% early Tuesday, while the technology-heavy Nasdaq Composite slumped 1.7%. The blue-chip Dow Jones Industrial Average dropped 1.1%.
• The moves follow a jarring intraday reversal Monday, when major indexes clawed back losses to post a big comeback. The Dow reversed losses of more than 1000 points for the first time in history.
• After falling more than 4% in intraday trading, the Nasdaq recorded its biggest reversal since 2008.
• Behind the selloff: fears about the Federal Reserve raising interest rates this year and withdrawing the stimulus that propelled markets in recent years.
• Some investors said they no longer expect the so-called Fed put—or the Fed’s tendency to cut rates or hold off on rate increases in response to market turmoil—to stay in place. Others have been more optimistic.
• General Electric fell over 6% after reporting a fourth-quarter loss of $3.8 billion, while Raytheon Technologies declined 0.5% after posting quarterly revenue that missed analysts’ expectations. Meanwhile, 3M shares rose 0.2% after the company reported a better-than-expected performance.
• Around 77% of companies reporting so far have surpassed analysts’ expectations, according to Refinitiv. That hasn’t been enough to lift stocks.
• The median company beating earnings expectations this quarter has slipped around half a percentage point, while companies missing earnings expectations have fallen around 4%, wrote Morgan Stanley analysts in a note to clients Monday.
• This week, investors will be parsing results from tech heavyweights like Microsoft, Apple and Tesla. These been among the companies weighing on the S&P 500 the most this year, according to Goldman Sachs.
• Federal Reserve officials are set to debate the path of monetary policy, including the speed at which they could shrink the nearly $9 trillion bond portfolio, at their two-day meeting that starts Tuesday. Chairman Jerome Powell is expected to use his postmeeting comments to lay the groundwork for a cycle of interest-rate rises.
• The yield on the benchmark 10-year U.S. Treasury note rose Tuesday to 1.755% in recent trading, from 1.735% Monday. Bond yields move inversely to prices.
• Overseas, Japan’s Nikkei 225 closed down 1.7%, with major decliners including technology and telecom giant SoftBank Group, which fell more than 5%. Australia’s S&P/ASX 200 and South Korea’s Kospi Composite both retreated more than 2%.
• Hong Kong’s Hang Seng Index shed 1.7%.
• European stocks rebounded, having closed Monday before U.S. indexes rallied. The pan-continental Stoxx Europe 600 index was up 0.8% Tuesday.

Pfizer Begins Study Testing Omicron Vaccine in People – Wall Street Journal, 1/25/2022

• Pfizer and BioNTech have started a trial evaluating an adapted version of their Covid-19 vaccine that targets the Omicron variant of the coronavirus.
• The drugmakers said Tuesday they began enrolling adults ages 18 to 55 in the U.S. and South Africa to examine the safety, tolerability and immune response generated by the vaccine if it is given either as a primary series or as a booster dose.
• Initial study results are expected in the first half of the year, Pfizer said. The drugmaker could ask U.S. regulators for authorization and begin distribution in March, should the Omicron-targeted shot prove to work safely, Chief Executive Albert Bourla has said.
• Should the vaccine be needed, Pfizer and BioNTech would still be able to manufacture 4 billion doses of the shot this year, the companies said.
• Pfizer and BioNTech say they want to be prepared with an Omicron vaccine, should regulators and researchers determine one is needed.

Israel Panel Recommends Fourth Dose for Age 18 and Over – Bloomberg, 1/25/2022

• A panel of Israeli health experts has recommended offering a fourth dose of coronavirus vaccine to all adults age 18 and over.
• The shot would be administered only to those who received the vaccine at least five months earlier or recovered from coronavirus at least five months before, the Health Ministry said in a text message. The ministry’s director-general, Nachman Ash, would have to approve the recommendation for it to go into effect.
• The recommendation was made after a ministry study showed that the fourth dose provided three to five times more protection against serious illness, and twice as much protection against infection than just a third dose.
• Israel began administering a fourth inoculation to the immunocompromised and people 60 and over earlier this month.

GE’s Sales Decline 3%, Hit by Supply-Chain Woes – Wall Street Journal, 1/25/2022

• General Electric reported fourth-quarter revenue fell 3%, weighed down by supply-chain difficulties, and projected a return to sales growth this year as its aviation business begins to recover.
• Revenue fell to $20.3 billion from $21 billion a year earlier, missing analyst expectations of $21.31 billion, according to FactSet.
• GE’s Aviation division revenue rose 4% on segment profit of $1.2 billion while orders rose 22% in the quarter. The results were driven by commercial-service revenue, and GE said the division “continues to evaluate and manage the impact of Omicron.”
• Revenue in the health-care division, which makes CT scanners, MRI machines and other hospital equipment, fell 4% because of continuing supply shortages. Profit margins dropped to 16.5% from 19.7% in Healthcare during the quarter from shortages and inflation pressure, GE said.
• Revenue dropped 13% in the power unit, which makes turbines for power plants, to $4.66 billion, while revenue in the renewable energy unit, which mostly makes wind turbines, fell 6% to $4.19 billion.
• Overall, GE swung to a net loss attributable to common shareholders of $3.9 billion for the fourth quarter, mostly dragged down by debt repayment costs, compared with a year-earlier profit of $2.4 billion.
• The Boston conglomerate reported free cash flow from its industrial operations of $3.8 billion, bringing the full-year total to $5.1 billion, and projected 2022 cash flow of $5.5 billion to $6.5 billion.
• GE expects 2022 adjusted earnings of $2.80 to $3.50 a share, below the $4 a share projected by analysts, according to FactSet.
• The company expects revenue to grow in the high-single digits driven by Aviation growth of more than 20%.

Lockheed Martin posts better-than-expected profit, reiterates 2022 sales outlook – Reuters, 1/25/2022

• U.S. weapons maker Lockheed Martin reported better-than-expected quarterly profit on Tuesday, helped by a strong performance at its ships and helicopters unit and venture capital gains, and reiterated its sales guidance for 2022.
• Net sales were $17.7 billion during the fourth quarter, just beating analyst estimates of $17.67 billion.
• Lockheed’s biggest unit, which makes F-35 fighter jets for the United States and its allies, delivered 142 of the stealthy planes in 2021, three more than originally planned.
• Lockheed reported net operating earnings were $2 billion in the fourth quarter, or $7.47 per share, surpassing analyst estimates of $1.98 billion, or $7.12 per share, according to Refinitiv data.
• Last October, the Bethesda, Maryland-based company lowered its 2022 full-year revenue outlook to $66 billion – sending its shares tumbling – citing challenges with its supply chain. Lockheed reaffirmed that 2022 revenue guidance on Tuesday.
• The company said it now expects full-year 2022 earnings per share to be about $26.70, ahead of analysts’ expectation of $26.36 per share, according to data from Refinitiv.
• But the company also said it had been informed by the U.S. Federal Trade Commission that its planed purchase of Aerojet Rocketdyne would raise antitrust concerns, leaving Lockheed either to abandon the transaction or fight a federal lawsuit in order to close the deal.
• The $4.4 billion deal announced in late 2020 is Lockheed’s first large acquisition under new Chief Executive Jim Taiclet.
• It would reshape the competitive landscape for solid rocket fuel missiles which are used with jets and drones

Raytheon sales forecast disappoints as profit beats estimates – Reuters, 1/25/2022

• Raytheon Technologies on Tuesday forecast full-year sales below Wall Street estimates, even as demand for the company’s aerospace products and services benefited from a surge in air travel during the holiday season.
• Raytheon, whose Pratt and Whitney unit supplies aircraft engines to companies like Boeing and Airbus, said fourth-quarter revenue rose to $17.04 billion from $16.42 billion a year earlier.
• Sales fell 10% in its key missile and defense business, where demand remained strong but higher prices, labor shortages and supply chain constraints reduced its ability to make deliveries.
• Ratheon’s net income rose five-fold to $686 million, or 46 cents per share, in the fourth quarter ended Dec. 31 from a year earlier.
• Raytheon forecast full-year sales for 2022 to be in the range of $68.5 billion to $69.5 billion, below the average Refinitiv-IBES estimate of $70.09 billion.

AmEx plays down Omicron impact as spending hits record levels – Reuters, 1/25/2022

• American Express’s finance chief on Tuesday played down the Omicron coronavirus variant’s impact on travel spending after a surge in volumes helped the credit-card giant sail past quarterly profit expectations.
• In the quarter to Dec. 31, spending on travel and entertainment on AmEx cards more than doubled. That pushed up total revenue excluding interest expense by 30%.
• Net income came in at $1.7 billion, or $2.18 per share, higher that analyst estimates of $1.87 per share, according to Refinitiv.
• The profit growth was, however, held back by a 29% surge in expenses due to increased compensation and higher usage of travel-related benefit. The expense jump was in line with figures from other major financial institutions.
• AmEx expects net revenue growth of between 18% and 20% in 2022 and earnings per share of $9.25 to $9.65.

Verizon’s Profit Rises After TracFone Takeover – Wall Street Journal, 1/25/2022

• Verizon Communications’ fourth-quarter profit inched up as the company replaced revenue lost from its digital-media spinoff with new customers under pay-as-you-go wireless giant TracFone.
• Quarterly revenue slipped 1.8% to $34.07 billion, reflecting the divestiture of the media business.
• Wireless-service revenue grew 6.5% to $17.76 billion.
• Verizon, the largest mobile network operator in terms of subscribers, also added 558,000 postpaid phone connections in the December quarter, a figure that trailed growth of competing carriers.
• Fourth-quarter net income attributable to Verizon rose to $4.61 billion from $4.59 billion a year earlier.
• On a per-share basis, Verizon’s profit stayed flat at $1.11.
• Verizon said its total connections—a figure that includes connected devices like smartwatches and tablets but excludes phone service resold through partners like Charter Communications and Comcast — ended the year at 115.4 million. That tally reflected roughly 20 million new TracFone customers.
• For the current year, Verizon forecast organic wireless service revenue growth of at least 3%. The company said its regular capital spending this year will range between $16.5 billion and $17.5 billion.
• It plans to spend an additional $5 billion to $6 billion dedicated to network upgrades supporting its C-band spectrum deployments, up from about $2.1 billion last year.

Johnson & Johnson Posts Higher Quarterly Sales as It Prepares for Split – Wall Street Journal, 1/25/2022

• Johnson & Johnson finished 2021 with its strongest quarter to date for Covid-19 vaccine sales, contributing to year-over-year revenue growth across the company as it prepares to separate its consumer-health division.
• Overall, higher sales from all three of Johnson & Johnson’s segments —consumer health, pharmaceuticals and medical devices—contributed to a 10% rise in revenue.
• In the fourth quarter, Johnson & Johnson posted sales of $24.8 billion, compared with $22.48 billion a year earlier.
• In the consumer business, greater sales of Tylenol and digestive-health products helped bring revenue 1.1% higher year over year. Higher sales of beauty products also contributed to the lift as people returned to social activities.
• Pharmaceutical and medical-device sales grew more briskly, rising by 17% and 4%, respectively.
• Its net earnings were $4.74 billion, a rise from $1.74 billion.
• In 2022, Johnson & Johnson’s total sales will likely reach $98.9 billion to $100.4 billion, the company said, which would be a mid-single-digits percentage rise from 2021. The company forecast an adjusted per-share profit of $10.40 a share to $10.80 a share this year.

IBM marks strong start to new chapter as cloud revenue booms – Reuters, 1/25/2022

• IBM on Monday beat Wall Street estimates for revenue in the fourth quarter, as its focus on the cloud paid off in Big Blue’s first earnings after exiting the slow-growing managed infrastructure business.
• IBM’s revenue rose 6.5% to $16.7 billion, adjusted for the separation of the managed infrastructure services business, now Kyndryl. Analysts on average had expected $15.96 billion, according to IBES data from Refinitiv.
• Revenue at IBM’s consulting business rose 13.1%, while cloud revenue jumped 16% to $6.2 billion in the quarter.
• Excluding items, IBM earned $3.35 per share, beating estimates of $3.30.
• Shares of the IT giant jumped as much as 7% aftermarket before easing to trade flat, with the company reiterating its forecast for mid-single-digit revenue growth in 2022, compared with 3.9% last year.

IMF Cuts 2022 World Economic-Growth Forecast to 4.4% on Weaker U.S., China Outlooks – Bloomberg, 1/25/2022

• The International Monetary Fund cut its world economic growth forecast for 2022 as the Covid-19 pandemic enters its third year, citing weaker prospects for the U.S. and China along with persistent inflation.
• The global economy will expand 4.4% this year, down from an estimate of 4.9% in October, the Washington-based IMF said in its World Economic Outlook on Tuesday.
• The fund forecast 3.8% growth for 2023, up from the prior projection, but cumulative expansion for the two years will still be 0.3 percentage point less than previously forecast.
• The fund slashed its forecast for growth in the U.S. by 1.2 percentage points to 4%. The revision reflects removal of assumptions for a positive impact from President Joe Biden’s Build Back Better social-spending plan, which stalled in Congress; earlier withdrawal of Federal Reserve support; and continued supply-chain bottlenecks
• It trimmed China’s growth forecast by 0.8 point to 4.8%, citing disruptions caused by the pandemic, the nation’s zero-tolerance policy for Covid-19 and disruption in the housing sector.
• India will see the fastest growth among major economies at 9% from 8.5%, due to credit-growth improvements
• The world economy expanded 5.9% last year, the IMF estimated, the most in four decades of detailed data. That followed a 3.1% contraction in 2020 that was the worst peacetime decline in broader figures since the Great Depression.
• Supply-chain disruptions are spurring more broad-based inflation than anticipated, the IMF said, with the annual rate projected to average 3.9% in advanced economies this year, up from a prior 2.3% estimate, and 5.9% in emerging and developing nations.

Nvidia Quietly Prepares to Abandon $40 Billion Arm Bid – Bloomberg, 1/25/2022

• Nvidia is quietly preparing to abandon its purchase of Arm from SoftBank Group after making little to no progress in winning approval for the $40 billion chip deal, according to people familiar with the matter.
• Nvidia has told partners that it doesn’t expect the transaction to close, according to one person, who asked not to be identified because the discussions are private. SoftBank, meanwhile, is stepping up preparations for an Arm initial public offering as an alternative to the Nvidia takeover, another person said.
• The U.S. Federal Trade Commission sued to stop the transaction in December, arguing that Nvidia would become too powerful if it gained control over Arm’s chip designs.
• The acquisition also faces resistance in China, where authorities are inclined to block the takeover if it wins approvals elsewhere, according to one person. But they don’t expect it to get that far.