US FINANCIAL MARKET
U.S. Stocks Move Higher, Extending Rally – Wall Street Journal, 2/9/2022
- U.S. stocks rose and government-bond yields fell Wednesday following a recent climb, potentially easing some pressure on technology shares.
- The S&P 500 rose 1.1% shortly after the opening bell. The broad index rose Tuesday as investors snapped up shares of companies across industries. The Dow Jones Industrial Average climbed 287 points, or 0.8%, and the Nasdaq Composite added 1.2%.
- Shares of Facebook parent Meta rose 2.4% after falling 20% last week. Google parent Alphabet added 1.7% in morning trading.
- The yield on the benchmark 10-year Treasury note ticked down to 1.940% Wednesday from 1.954% Tuesday, its highest closing level since July 2019. Yields move inversely to prices.
- European bonds yields also fell Wednesday, with the yield on the 10-year German bund ticking down to 0.218% from 0.264% Tuesday, according to Tradeweb.
- Uber Technologies and Walt Disney are slated to post results late Wednesday.
- Shares of Chipotle rose 7.5% after it said it had increased menu prices again and was likely to raise them further this year.
- Lyft fell 0.7% after the ride-hailing company posted weaker-than-expected ridership numbers.
- CVS fell 4.7% after the drugstore chain reported quarterly results that beat expectations, but provided a mixed full-year outlook.
- As of late last week, 34 companies in the S&P 500 had given lower earnings guidance than analysts expected, while 13 companies had issued higher guidance, according to FactSet.
- Fresh inflation data due Thursday is expected to give investors additional clues as to how quickly the Fed may raise rates after slashing them in 2020 to cushion the economy from the impact of Covid-19.
- Overseas, the pan-continental Stoxx Europe 600 rose 1.7%. Shares of Dutch payment company Adyen jumped around 9% after it reported a profit rise that beat market expectations.
- In Asia, major stock indexes closed with gains. Hong Kong’s Hang Seng jumped 2.1% and Japan’s Nikkei 225 added 1.1%.
- China’s Shanghai Composite and South Korea’s Kospi gained 0.8% each.
New York State to Drop Indoor Mask Mandate – Wall Street Journal, 2/9/2022
- New York state will drop its indoor mask mandate for businesses effective Thursday, according to people familiar with the matter, continuing a push by governors across the U.S. to roll back some Covid-19 restrictions.
- Gov. Kathy Hochul, a Democrat, won’t renew a rule announced in December that required people to wear masks in restaurants, offices and other public spaces where not all attendees are vaccinated, the people briefed on her decision said.
- The rule is set to expire on Thursday.
- New York’s move to end the state mask mandate follows steps by other governors around the country to end certain restrictions related to the spread of Covid-19.
- The office of California Gov. Gavin Newsom, also a Democrat, said the state’s indoor mask mandate will expire Feb. 15.
- The governors of New Jersey and Connecticut said school districts will be able to decide on their own masking policies in the coming weeks.
- Delaware’s governor signed an order to lift the state’s universal indoor mask mandate effective Friday. Oregon’s state health authorities have said indoor-mask requirements will lapse at the end of March.
Lyft’s Revenue Jumps 70% as Higher Fares Offset Fewer Riders – Wall Street Journal, 2/9/2022
- Lyft said revenue increased 70% in the fourth quarter, as longer trips and higher fares offset weaker-than-expected ridership numbers.
- The San Francisco-based company reported $969.9 million in revenue for the three months through December, beating the $941 million FactSet consensus.
- Lyft reported 18.7 million active riders in the quarter, compared with 18.9 million in the previous quarter and 12.6 million in the year-earlier period. It had 22.9 million active riders at the end of 2019.
- Lyft said revenue per active rider reached a record $51.79 in the fourth quarter, up $6.16 from the previous quarter, largely driven by longer rides, which tend to be more expensive, according to Mr. Zimmer. Trips to airports more than doubled year-over-year, he said.
- Lyft reported adjusted earnings before interest, taxes, depreciation and amortization of $74.7 million for the latest period, roughly in line with expectations, helping it post its first annual positive adjusted EBITDA.
- For the quarter, the company reported a loss of $258.6 million, narrowing from $458.2 million a year earlier.
- Analysts expected the loss to narrow to about $174 million.
- For the first three months of 2022, the company said it expects revenue of as much as $850 million. That compares with revenue of $609 million in the year-earlier quarter and is below the consensus estimate of $980 million from analysts polled by FactSet.
- Lyft projects adjusted EBITDA for the three months through March of as much as $15 million, compared with an adjusted loss before items of $73 million in the year-earlier quarter.
- Analysts surveyed by FactSet estimate adjusted EBITDA of $78 million in the first quarter.
Chipotle CEO Says Another Price Increase Likely as Costs Grow – Wall Street Journal, 2/9/2022
- Chipotle Mexican Grill said it increased menu prices again and is likely to raise them further this year, as its chief executive officer said higher costs are unlikely to abate.
- For Chipotle’s fourth-quarter ended Dec. 31, it reported per-share earnings of $5.58, after adjusting for one-time items, exceeding analysts’ expectations of $5.25 a share, according to FactSet.
- The chain reported net income of $133.5 million, down from $191 million a year earlier.
- The chain’s total sales were $2 billion, above expectations.
- The Newport Beach, Calif., company said that price increases helped boost its sales during the period.
- It raised prices by 4% in December, with menu prices now up around 10% overall compared with last year, the company said.
- Chipotle’s same-stores sales were up 15.2% for the period compared with last year.
- The chain said Tuesday that it expected to have at least 7,000 Chipotle restaurants in North America over time, up from a previous goal of 6,000 locations.
CVS Expects Sales Boost From Covid-19 to Wane – Wall Street Journal, 2/9/2022
- CVS Health got a sales boost from doling out more than 59 million Covid-19 vaccines and tens of millions of tests last year, but doesn’t expect the same benefit this year, the company said Wednesday.
- CVS’s total revenue, which includes its health-insurance and pharmacy-services businesses, grew by 10.1% from a year earlier to $76.60 billion, the company said.
- Analysts surveyed by FactSet expected sales of $75.66 billion.
- In the three months ended Dec. 31, CVS said sales in its retail business rose 12.7% from a year earlier to $27.11 billion.
- CVS same-store sales, those from stores or digital channels operating for at least 12 months, grew by 13.4% in the fourth quarter from a year earlier, when the vaccines were just being authorized.
- The company posted a quarterly profit of $1.31 billion, or 98 cents a share, up from $973 million, or 74 cents a share, in the year-ago period.
- Covid-19 vaccinations, in-store testing and take-home test kits made up around 35% of operating profit for CVS’s retail segment in the fourth quarter.
- For the current year, CVS expects vaccine volume to fall 70% to 80% versus last year and in-store Covid-19 testing to fall 40% to 50%, Chief Financial Officer Shawn Guertin told analysts on the conference call.
- It expects to sell more at-home tests in 2022 from the prior year, he said.
GlobalFoundries Stock Is Rising. Earnings Bucked the Chip Shortage. – Barron’s, 2/9/2022
- GlobalFoundries stock is trading sharply higher late Tuesday after the contract-chip manufacturer posted fourth-quarter earnings that topped Street estimates amid a continue global shortage of semiconductor components.
- For the quarter, GlobalFoundries reported revenue of $1.85 billion, up 74% from a year ago and 9% sequentially, beating the Street consensus forecast for $1.81 billion.
- Gross margin was 20.7%, up from 17.6% in the third quarter and negative 20.5% one year earlier.
- Silicon wafer shipments were up 5% from a year earlier.
- Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $584 million, up 251% from a year ago.
- On an adjusted basis, the company earned 18 cents a share in the quarter, beating the Street consensus view at 11 cents.
- For the March quarter, the company is projecting revenue of $1.88 billion to $1.92 billion, with gross margin of 20.9%, and adjusted profits of 21 cents to 27 cents a share.
- Street consensus estimates had been for revenue of $1.85 billion and profits of 17 cents a share.
Enphase Energy jumps after company posts record revenue, gives upbeat guidance – CNBC, 2/9/2022
- Shares of Enphase Energy rose more than 16% during extended trading Tuesday after the company reported record revenues for the fourth quarter. The company beat analyst estimates on both the top- and bottom-line.
- Enphase, which makes microinverters and backup energy storage for solar systems, said sales jumped 17% quarter over quarter despite ongoing supply constraints and logistical challenges. The company also issued upbeat guidance.
- Revenue of $412.7 million and earnings per share of 73 cents beat expectations of 58 cents per share on $397 million in revenue.
- Even in an inflationary environment the company reported a gross margin of 40.2% during the latest quarter, down slightly from the 40.8% reported during the third quarter.
- The company said it expects 2022 first-quarter revenue to be between $420 million and $440 million.
- That’s ahead of the $409 million analysts surveyed by StreetAccount were expecting.
- Due to supply chain bottlenecks, including at ports, the company’s lead time — or how long it takes for a consumer to receive the product — is between 14 and 16 weeks. Under normal circumstances the timeframe would be closer to eight weeks.
Taco Bell parent Yum Brands misses earnings estimates as higher costs weigh on profits – CNBC, 2/9/2022
- Yum Brands on Wednesday reported mixed results for its fourth quarter as higher costs weighed on profits, leading to an earnings miss.
- Net sales rose 8% to $1.89 billion, topping expectations of $1.88 billion.
- Yum reported same-store sales growth of 5% compared with the year-ago period and 4% on a two-year basis.
- Taco Bell reported the highest jump in same-store sales growth of Yum’s portfolio.
- The Mexican-inspired chain saw its same-store sales climb 8% after several weaker quarters, hurt by a lack of late-night and morning customers.
- Nearly 20% of Taco Bell transactions in the U.S. are digital orders, executives said on an earnings call.
- KFC’s same-store sales rose 5% in the quarter. In the U.S., its second-largest market, same-store sales jumped 4%.
- Pizza Hut reported same-store sales growth of 3%. The chain’s U.S. same-store sales ticked up just 1% in the quarter as the market faced tough comparisons with last year’s same-store sales growth.
- Yum reported fourth-quarter net income of $330 million, or $1.11 per share, down from $332 million, or $1.08 per share, a year earlier.
- In 2022, Yum expects to return to its long-term goal of same-store sales growth in a range of 2% to 3% and unit growth of 4% to 5%.
Fox Posts Higher Revenue on Ad Sales Strength – Wall Street Journal, 2/9/2022
- Fox, parent of Fox News and the Fox broadcast network, reported higher revenue in the latest quarter, as advertising sales continued to improve driven by its news programming, live sports and streaming platforms.
- Revenue at Fox increased nearly 9% to $4.44 billion for the quarter ended Dec. 31, topping analysts’ consensus expectations of $4.25 billion.
- Fox’s advertising revenue rose about 6% over last year due to pricing strength at its Fox network, as well as from live sports and Tubi.
- The company’s cable programming unit, which includes the Fox Business Network and Fox Sports 1 channel as well as Fox News, generated $1.64 billion in revenue, a 10% increase from the same quarter last year.
- Revenue from Fox’s TV stations rose to $2.76 billion from $2.56 billion in the year-earlier period due to an increase in advertising revenues, which benefited from live sports, growth at Tubi and the continuing recovery from Covid-19 restrictions in local markets.
- The company posted a loss attributable to stockholders of $85 million, or 15 cents a share, for the fiscal second quarter, compared with a profit of $224 million, or 37 cents a share, in the year-earlier period.
Bunge profit tops expectations as crush margins boost agribusiness unit – Reuters, 2/9/2022
- Bunge reported a stronger-than-expected 17.1% jump in adjusted quarterly profit on Wednesday as large oilseed crops in North America and Europe and strong demand for processed meal and oil bolstered its core agribusiness unit.
- That strength would carry into 2022, the global farm commodities trader forecast, amid rising demand for food and biofuel and tightening crop supplies, although the segment would likely not match last year’s record performance.
- Revenue totaled $16.683 billion, up from $12.61 billion a year earlier and above an analyst estimate of $15.167 billion.
- The company posted adjusted net income of $533 million, or $3.49 per share, in the quarter ended Dec. 31, compared with $455 million or $3.05 per share, a year earlier.
- Bunge expects 2022 adjusted earnings of at least $9.50 per share, which the company said would be the second-highest in the its recent history.
Oil Jumps as U.S. Crude Stockpiles Fall to Lowest Since 2018 – Bloomberg, 2/9/2022
- Oil climbed after a government report showed U.S. crude inventories fell to the lowest since 2018.
- Futures in New York rose as much as 1.3% on Wednesday after domestic crude stockpiles fell 4.76 million barrels, according to an Energy Information Administration report.
- Additionally, inventories at the nation’s biggest storage hub at Cushing, Oklahoma, fell 2.8 million barrels.
- Crude futures, as well as other commodities, are in backwardation, indicating tight supply, and vital North Sea crudes are being bid at record premiums.
Car Insurers Rush to Raise Rates as Inflation Takes a Toll – Wall Street Journal, 2/9/2022
- Car insurers are rapidly raising rates to try to get ahead of inflation, which has boosted the prices of car repairs, replacements and rentals.
- Many insurers are boosting premiums by 6% to 8% while some are asking for double-digit increases, according to industry executives and analysts. The rising rates are an example of inflation leading to more price increases as businesses try to compensate for higher costs.
- Car and home insurer Allstate is raising rates by an average of 7.1% across 25 states, its executives said on an earnings call, and more increases are ahead.
- Insurers are feeling pressure on all sides of their business. Traffic is at or near pre-pandemic levels across the U.S., and accidents have risen from their lockdown lows.
- More accidents mean more replacement cars and repairs. Used-car prices have soared as semiconductor chip shortages reduced the supply of new cars. The higher prices are reflected in insurer payments for totaled vehicles.
Tesla recalls 26,681 U.S. vehicles over windshield defrosting software – Reuters, 2/9/2022
- Tesla is recalling 26,681 vehicles in the United States because a software error may result in windshield defrosting problems, the National Highway Traffic Safety Administration (NHTSA) said Wednesday.
- Tesla told U.S. regulators the error may cause a valve in the heat pump to open unintentionally and trap the refrigerant inside the evaporator. Tesla will perform an over-the-air software update to address the issue.
- The recall covers some 2021-2022 Model 3, Model S, Model X, and 2020-2022 Model Y vehicles that may not comply with a federal motor vehicle safety standard. It is the latest in a string of recent recalls for the Texas-based EV manufacturer.
US ECONOMY & POLITICS
U.S. Households Took On $1 Trillion in New Debt in 2021 – Wall Street Journal, 2/9/2022
- Americans took on more new debt in 2021 than in any year since before the 2008-09 financial crisis.
- Total household debt rose by $1.02 trillion last year, boosted by higher balances on home and auto loans, the Federal Reserve Bank of New York said Tuesday. It was the largest increase since a $1.06 trillion jump in 2007.
- Total consumer debt now sits at around $15.6 trillion, compared with $14.6 trillion a year earlier.
- The increase is largely a function of a sharp rise in prices for homes and cars. The price of the average U.S. home rose close to 20% in 2021, boosting mortgage balances and pricing out many middle-class buyers. Rising prices for new and used cars drove auto-loan originations to a record $734 billion.
- The rise in consumer borrowing isn’t cause for alarm, New York Fed economists said. Wealth increased across all income levels during the pandemic, according to the Federal Reserve, though much of the gains accrued to the richest Americans.
- What’s more, some 87% of the new debt is tied to homes that can appreciate over time, allowing borrowers to build wealth.
- Today’s home buyers also are in better financial shape. Subprime borrowers accounted for just 2% of the mortgage debt originated in the fourth quarter of 2021, down from an average of 12% in the years before the financial crisis.
GOP Senators Clash With Biden Administration on Highway Expansions – Wall Street Journal, 2/9/2022
- Top Senate Republicans are pushing back on a Biden administration effort to discourage states from using funds in the roughly $1 trillion infrastructure law to expand highways, as a separate partisan battle over government spending slows the release of much of the public-works money.
- In a Wednesday letter, Senate Minority Leader Mitch McConnell (R., Ky.) and Sen. Shelley Moore Capito (R., W.Va.) wrote to U.S. governors that they should ignore recent guidance from the Biden administration about how to use the funds.
- The two senators, who each supported the law when it passed this summer, criticized a December memo from the Biden administration encouraging states to use new funding to maintain and improve highways before they use it to add lanes.
- The Biden administration memo “is an internal document, has no effect of law, and states should treat it as such,” Mr. McConnell and Mrs. Capito wrote.
EUROPE & WORLD
Toyota, Honda Strike Pessimistic Note About 2022 Car Supply – Wall Street Journal, 2/9/2022
- Japanese car makers said the stress on production from the pandemic was continuing, and a shortage of components was likely to stretch through this year, striking a more pessimistic tone than their peers in Detroit.
- Honda on Wednesday reported a 32% decline in net profit for the October-December quarter, which it said was largely due to falling vehicle sales.
- Also Wednesday, Toyota again ratcheted down production forecasts, citing semiconductor shortages and the effects of the Omicron wave of Covid-19.
- The semiconductor shortage is expected to reduce production of Toyota and Lexus vehicles by 100,000 to 200,000 units in March alone compared with the company’s earlier forecast.
- Subaru also said it encountered unanticipated shortages in January. “We had to halt operations at our domestic production base,” said Chief Financial Officer Katsuyuki Mizuma. Subaru said it expected sales of 740,000 vehicles in the year ending in March, down by 90,000 from the previous projection in November.
- General Motors and Ford expressed more confidence early this month that the global pinch in chip supplies would ease.
- GM said it expected to deliver 25% to 30% more vehicles to dealers this year, while Ford said it expected global vehicle deliveries to increase between 10% and 15%.
Adyen shares surge 10% after Dutch payments giant smashes earnings expectations – CNBC, 2/9/2022
- Dutch payments processor Adyen reported a 51% jump in core earnings in the first half of 2021, topping expectations and sending its stock price sharply higher.
- The company said Wednesday that net revenue in the period came in at 556.5 million euros ($635.9 million), up 47% year-on-year. Earnings before interest, tax, depreciation and amortization (EBITDA) rose 51%, to 357.3 million euros.
- That was higher than the 552 million euros of net revenue and 346 million euros of EBITDA expected by analysts, according to Reuters.
- Adyen’s profit margin climbed to 64% in the second half, up from 61% in the first half. Its total processed transaction volume climbed 72% to 300 billion euros.
- The firm said it saw in-store shopping roar back to life in the second half of 2021, with point-of-sale volumes on its platform nearly doubling year-on-year to 41.8 billion euros, outpacing the growth of online volumes.
Shipping Firm Maersk Expects Supply-Chain Snarls to Ease This Year – Wall Street Journal, 2/9/2022
- Danish container-ship company A.P. Moller-Maersk said it expects supply-chain bottlenecks to last until June and sealed a $1.68 billion deal to help shore up its inland-distribution business.
- Maersk, which moves 17% of the world’s shipping containers on its vessels, said Wednesday that the buyout of U.S.-based Pilot Freight Services will bolster its ability to move big and bulky freight in North America.
- In its report Wednesday, Maersk said revenue at its shipping unit rose 77%, driven by higher freight rates as demand remained elevated and congestion persisted across global-supply chains.
- However, that increase in revenue was partially offset by higher costs from handling goods, including a 71% rise in fuel costs.
- Overall, shipping volumes slipped 4%, Maersk said. Freight rates in the quarter rose 83% from a year earlier.
- Looking ahead, Maersk said it expects full year 2022 underlying earnings before interest, taxes, depreciation and amortization of around $24 billion.
GSK sees sales growth in 2022 after quarterly beat, prepares for spin-off – Reuters, 2/9/2022
- Britain’s GSK forecast growth in 2022 after racking up 1.4 billion pounds ($1.9 billion) in COVID-related sales in 2021, beating quarterly forecasts in its first earnings report since rejecting Unilever’s bid for its consumer arm.
- Sales of sotrovimab, branded Xevudy, stood at 828 million pounds in the fourth quarter, up from 114 million in the third quarter and above market expectations of 774 million pounds.
- Revenue from shingles vaccine Shingrix, a key earnings driver over past quarters, slipped 7% to 597 million pounds but still surpassed consensus of 548 million pounds.
- Adjusted earnings for the group stood at 25.6 pence per share for the three months to Dec. 31, while turnover rose 13% to 9.53 billion pounds at constant currency rates, topping a consensus of 23.8 pence apiece on sales of 9.49 billion pounds.
- The company said sales in 2022, after the consumer unit spin-off, were expected to grow 5% to 7% and adjusted operating profit was forecast to rise 12% to 14%. This includes the boost from a settlement with Gilead (GILD.O) but not sales of its COVID-19 products.
- Analysts had forecast group earnings of 120.8 pence per share, or a rise of about 8% from 2021, on sales of 36.28 billion pounds.
Samsung Unveils New Galaxy S22 Smartphones and Keeps Old Prices – Wall Street Journal, 2/9/2022
- The world’s largest smartphone maker is answering a year of rising inflation and increasing component costs with a tactical move: holding down prices.
- In the industry’s first major launch of the year, Samsung Electronics Co. introduced three versions of its flagship Galaxy S22 devices on Wednesday.
- The prices remain the same as last year: the base model will retail for $800, while the larger Galaxy S22+ will cost $1,000. The top-of-the-line Galaxy S22 Ultra, featuring a 6.8-inch screen and an “S Pen” stylus, is priced at $1,200.
- Roh Tae-moon, president of Samsung’s mobile business division, said he is willing to stomach the extra costs to woo a wider range of buyers, following a year of slow shipment growth for the South Korean tech giant.
- The average wholesale price for smartphones has risen by 2% or less in recent years.
- But during the first three quarters of 2021, the prices rose 10% from the prior year, according to Strategy Analytics, a market research firm. They are expected to rise again this year by 5%.
- Jefferson Davis was chosen as the president of the Confederate States of America. (1861)
- The battle of Guadalcanal ended with an American victory. (1943)
- Senator Joseph McCarthy claimed he had evidence there were card-carrying members of the Communist Party in the State Department. (1950)
- The Beatles made their first appearance on The Ed Sullivan Show. (1964)
- Lithuanians voted overwhelmingly for independence from the Soviet Union. (1991)