US FINANCIAL MARKET

Stocks Move Higher Ahead of Fed Meeting Today – Wall Street Journal, 1/26/2022

• U.S. stocks posted strong gains ahead of a Federal Reserve announcement that is expected to provide more clarity on coming interest-rate increases—the prospect of which has spooked markets this year.
• The S&P 500 added 0.9% in morning trading Wednesday. The broad index fell Tuesday and has declined in five of the past six trading days.
• The tech-focused Nasdaq Composite Index rose 1.4%, while the Dow Jones Industrial Average gained 0.4%, or 151 points.
• Economists expect the Fed to confirm expectations that it will start raising rates in March when it releases its statement at 2 p.m. ET. Traders in interest-rate futures markets are betting that the Fed will increase rates four or five times this year, according to CME Group.
• Tech stocks lifted markets Wednesday, with the S&P’s tech sector recently up 2.5%. Microsoft shares rose 4.3% after the software giant said its earnings continued to grow as its cloud-services business stayed strong.
• Semiconductors also advanced: Nvidia rose 3.9%, Micron Technology added 2.8% and AMD gained 1.8%.
• Investors are also monitoring rising tensions between Russia and Ukraine that have drawn the focus of NATO allies.
• Geopolitical turbulence has buoyed oil in recent days, pushing it to the highest levels since 2014.
• The VIX, a measure of expected volatility that is sometimes dubbed Wall Street’s fear gauge, ticked down 1.09 points to 30.07. The gauge has climbed this week as stock markets fell.
• Earnings season continues, with Tesla and Intel slated to report after markets close. Tesla shares added 2.3%.
• In bond markets, the yield on the benchmark 10-year Treasury note crept down to 1.783% Wednesday from 1.784% Tuesday.
• Brent crude, the international oil benchmark, added 1.9% to $88.80 a barrel.
• Overseas, the pan-continental Stoxx Europe 600 jumped 2%, with the biggest gains in the travel and leisure sector.
• Stock indexes in Asia closed mixed.
• China’s Shanghai Composite and Hong Kong’s Hang Seng added 0.7% and 0.2%, respectively.
• Japan’s Nikkei 225 and South Korea’s Kospi each declined 0.4%.

Omicron Deaths in U.S. Exceed Delta’s Peak as Covid-19 Optimism Rises in Europe – Wall Street Journal, 1/26/2022

• More signs emerged that the Omicron wave is taking a less serious human toll in Europe than earlier phases of the pandemic, while U.S. data showed daily average deaths from the disease exceeding the peak reached during the surge driven by the previously dominant Delta variant.
• In Western Europe, where vaccination rates are generally higher than the U.S., a record surge in cases hasn’t generated the proportionate increase in hospitalizations and deaths that were seen earlier in the pandemic.
• Even as Covid-19 cases hit record highs, the Netherlands eased restrictions imposed last month in the face of Omicron—as Covid-19 hospitalizations and deaths remained subdued. Bars, restaurants, cinemas and theaters can reopen from Wednesday, with some continuing restrictions including that they close by 11 p.m.
• Germany recorded a record 164,000 new cases in 24 hours on Wednesday, an increase of 46% compared with last week and bringing the seven-day daily average to more than 120,000 cases.
• Coronavirus-related mortality is however declining: on Wednesday, 166 deaths were reported in connection with Covid-19, a drop of 31% compared with last week and the lowest since November.
• Confirmed new Covid-19 infections in Italy, Spain and Greece are declining from the pandemic records hit earlier this month. The pressure on healthcare systems is also easing, with hospital admissions beginning to decrease in all three countries, a sign that the worst of the current wave of infections may be over.
• In the U.S., the seven-day average for newly reported Covid-19 deaths reached 2,258 a day on Tuesday, up about 1,000 from daily death counts two months ago, data from Johns Hopkins University show.
• That is the highest since February 2021 as the country was emerging from the worst of last winter’s wave.

Microsoft Earnings Grew Last Quarter With Demand for Cloud Services – Wall Street Journal, 1/26/2022

• Microsoft said its earnings continued to grow last quarter as its cloud-services business stayed strong.
• On Tuesday, the Redmond, Wash., software giant said its sales in the quarter ended in December hit $51.7 billion, up 20% from a year earlier. Its net income rose 21% to $18.8 billion.
• The results beat predictions from analysts, who were expecting $50.7 billion in revenue and $17.5 billion in net income, according to FactSet.
• Microsoft’s overall cloud revenue increased 32% from the year-earlier quarter to $22.1 billion.
• Its cloud-infrastructure service, called Azure, grew by 46%, down slightly from the prior quarter’s 48% growth
• Windows licensing revenue from PC makers increased 25% in the latest quarter, while the company’s Surface computer sales rose 8%.
• Microsoft’s gaming revenue in the quarter grew 8% from a year earlier, with its hardware sales advancing 4% on demand for the latest Xbox consoles. Revenue from gaming content and services climbed 10%.
• Microsoft’s subscription-gaming service, Game Pass, hit 25 million subscribers recently, up around 39% from a year ago.
• For the period, Microsoft expects sales of $48.5 billion to $49.3 billion, compared with analyst expectations of $48.1 billion, according to FactSet.

Boeing Reports Loss as 787 Charges Mount – Wall Street Journal, 1/26/2022

• Boeing said production problems and delivery delays with its 787 Dreamliner jet would cost it another $4.5 billion as the plane maker reported its third annual loss in a row.
• Sales fell 3% to $14.8 billion.
• Boeing on Wednesday reported a loss of $4.3 billion for 2021 after a $4.16 billion deficit in the final quarter, following a year when it slowly increased production of new jets but struggled to deliver them.
• The latest charge includes $3.5 billion to compensate customers for the delays, with unanticipated production costs now forecast to double to $2 billion over the next two years as Boeing slowed output.
• Boeing also took another $402 million charge on its KC-46A tanker jet.
• Boeing stopped short of issuing formal guidance but did forecast higher 737 and 787 deliveries in 2022 compared with last year, saying it expects to improve the stability of its operations.
• Boeing said its supply chain would be a watch item for future production rates. It said it would increase production this year of its wide-body 777 to three planes a month. It said it was on track to produce 31 of its 737 MAX jets a month early this year, up from 26 currently.

AT&T Logs Wireless Gains as It Preps WarnerMedia Split – Wall Street Journal, 1/26/2022

• AT&T swung to a fourth-quarter profit as the company improved its wireless revenue and shed the burden of its customer-losing pay-TV business in 2021.
• Overall revenue fell to $41 billion from $45.7 billion a year earlier, reflecting the satellite-TV operations’ absence.
• After issuing preliminary results earlier this month, AT&T on Wednesday reported a final net gain of 884,000 postpaid phone subscribers over the December quarter, leading the wireless industry.
• The company previously reported that its HBO unit, which includes HBO Max, ended 2021 with 73.8 million subscribers world-wide. That figure topped the target of 70 million to 73 million subscribers issued earlier in the year.
• The HBO unit’s domestic subscriptions hit 46.8 million at the end of the year.
• In the December quarter, AT&T’s overall profit rose to $5.0 billion, or 69 cents a share, compared with a year-earlier loss of $13.89 billion, or $1.95 a share.
• A $15.5 billion accounting charge from the write-down of the telecom giant’s DirecTV unit skewed the year-earlier result.
• On Wednesday, AT&T projected overall 2022 revenue will grow in the low single digits above last year’s $153.2 billion benchmark, which excludes its already-divested pay-TV business. This year’s revenue target assumes a full year of WarnerMedia ownership.
• AT&T plans to divest WarnerMedia before then, though its shareholders will retain a 71% ownership stake in the new company, which will be called Warner Bros. Discovery.
• The media division set a full-year revenue target between $37 billion and $39 billion.
• The telecom company also forecast annual capital expenditures in the $20 billion range with free cash flow in the $23 billion range.
• AT&T expects to cut its annual dividend payment to between $8 billion and $9 billion after the separation of its media unit, down from the roughly $15 billion it paid out last year.

Anthem quarterly profit beats estimates as COVID costs subside – Reuters, 1/26/2022

• Anthem beat quarterly profit expectations on Wednesday as the U.S. health insurer spent less on COVID-19 related healthcare services and recorded solid membership growth for its government health plans.
• Anthem said its benefit expense ratio – the percentage of premiums paid for medical services – worsened to 89.5% from 88.9% a year earlier. Analysts on average expected 89.45%, according to Refinitiv data.
• Adjusted for the repeal of the industry-wide health insurance fee last year, the ratio decreased nearly 1%, helped by lower spending on COVID-19 related services.
• Excluding special items, Anthem earned $5.14 per share in the quarter ended Dec. 31, ahead of the analysts’ average estimate of $5.11.

General Dynamics beats profit forecasts on higher aerospace sales – Reuters, 1/26/2022

• General Dynamics missed analyst revenue estimates on Wednesday, but beat fourth-quarter profit forecasts as its aerospace business grew strongly despite supply chain bottlenecks and lingering labor shortages.
• Sales in General Dynamics’ aerospace unit which makes Gulfstream jets rose to $2.56 billion from $2.44 billion a year earlier, while overall revenue fell to $10.29 billion from $10.48 billion.
• In the quarter the company delivered 39 Gulfstream business jets versus 40 a year ago.
• In October, the company said it planed to deliver 40 in the fourth quarter.
• Net earnings fell to $952 million, or $3.39 per share, in the quarter ended Dec. 31, from $1 billion, or $3.49 per share, a year earlier.
• The company beat its own October annual earnings per share guidance of $11.50 by $0.05.

Abbott’s Rapid Covid-19 Tests Boost Quarterly Sales Growth – Wall Street Journal, 1/26/2022

• Abbott Laboratories, one of America’s largest producers of rapid tests for Covid-19, said that testing-related sales were $2.3 billion globally in the last three months of 2021 but forecast that demand for the tests will slow this year.
• Covid-19 tests contributed to overall sales of $4.47 billion for Abbott’s diagnostics division, up 2.9% year over year.
• Along with growth elsewhere in the company, including in its nutrition and medical-device businesses, that trend helped propel Abbott’s quarterly revenue 7.2% higher, to $11.47 billion.
• Rapid-test sales from Abbott’s BinaxNow, Panbio and ID NOW brands grew to $2.1 billion, from $1.9 billion in 2020’s fourth quarter, as the comparable stretch of 2021 included a spike in world-wide cases from the Omicron variant.
• After factoring in rising costs, Abbott’s net earnings fell to $1.99 billion, from $2.16 billion in the year-earlier quarter.
• The company’s adjusted earnings of $1.32 a share still beat Wall Street analysts’ consensus projections for adjusted earnings of $1.21 a share and sales of $10.71 billion, according to FactSet.
• Looking ahead, Abbott said it expects adjusted earnings of at least $4.70 a share in 2022.
• Analysts had been guessing that Abbott’s 2022 adjusted earnings would come in at $4.78 a share.
• Abbott forecast that Covid-19 testing-related sales will be $2.5 billion in 2022—significantly down from last year’s total of $7.7 billion. Most of this year’s testing sales will likely occur earlier in the year, Abbott said.

Hess profit sails past estimates on surging oil prices – Reuters, 1/26/2022

• U.S. oil producer Hess posted quarterly profit that handily beat Wall Street estimates on Wednesday, boosted by crude prices surging on the back of recovering demand and fears of a supply crunch.
• Oil and gas net production, excluding Libya, fell to 295,000 barrels of oil equivalent per day (boepd), from 309,000 boepd a year earlier.
• The average selling price for Hess’ crude rose 56.8% to $71.04 per barrel, including hedging, while gas prices jumped 42.4% to $4.77 per thousand cubic feet (mcf).
• Adjusted profit came in at $265 million, or 85 cents per share, in the fourth quarter ended Dec. 31, compared with a loss of $176 million, or 58 cents per share, a year earlier.
• Hess on Tuesday forecast higher output and capital spending for exploration and production this year.

Nasdaq profit tops Street views on IPO surge, investment products demand – Reuters, 1/26/2022

• Nasdaq on Wednesday reported a nearly 16% jump in fourth-quarter profit, topping Wall Street estimates, buoyed by the frenetic pace of U.S. initial public offerings, and strong demand for its investment-related products.
• Net revenue rose 12% to $885 million from a year ago.
• Revenue at Nasdaq’s solutions segment surged 19% to $581 million, with its analytics products, which help customers make investment decisions across multiple asset classes, becoming key growth drivers.
• Like other financial institutions, inflationary pressures weighed on Nasdaq, with operating expenses rising 15%, mainly on higher employee compensation.
• Stripping out one-time items, Nasdaq earned $1.93 per share, topping analysts’ mean estimate by 15 cents, according to IBES data from Refinitiv.

Chip Shortage Leaves U.S. Companies Dangerously Low on Semiconductors, Report Says – Wall Street Journal, 1/26/2022

• U.S. manufacturers and other companies that use semiconductors are down to less than five days of inventory for key chips, the Commerce Department said Tuesday, citing the results of a new survey.
• In 2019, companies typically maintained 40 days of inventory for key chips, according to the Commerce Department report. Now for the same chips—defined as 160 products that companies identified as being the most challenging to acquire—companies are operating with fewer than five days of inventory, the report said.
• Commerce Secretary Gina Raimondo said the survey results show the urgency for Congress to approve the U.S. Innovation and Competition Act, which includes $52 billion to boost domestic chip production.
• The thin inventories are a source of particular concern because of how a single shutdown can then ripple through the supply chain. With these wafer-thin inventories, a closure of an overseas factory earlier in a company’s supply chain, for more than a few days, can cause it to exhaust its inventories.

America’s Roads Are Crammed With Trucks – Wall Street Journal, 1/26/2022

• Trucks are taking over American roads, fueled by a rise in pandemic online shopping and disruptions to global supply chains.
• Truck mileage—tractor trailers and delivery trucks combined—on all roads hit a record of nearly 300 billion miles in the 12 months ending September 2021, roughly 2% above the same period in 2019, before the start of the pandemic, according to data from FTR Transportation Intelligence, a freight forecasting firm.
• Overall traffic, which mostly comprises passenger cars, remained about 3.5% below where it was in the same period of 2019.
• FTR estimates truck mileage will grow 4.5% in 2022 over 2021 and 2.9% in 2023.