MARKET WRAPS
Watch For:
U.S. Weekly Jobless Claims; U.S. PPI for December; Federal
Reserve Bank of Philadelphia President Patrick Harker speaks at The
Philadelphia Business Journal Economic Forecast virtual event; U.S.
Senate Banking, Housing, and Urban Affairs Committee nominations
hearing with Lael Brainard; Federal Reserve Bank of Richmond
President Thomas Barkin speaks to the Virginia Bankers Association
and Virginia Chamber of Commerce's financial forecast virtual
event; Federal Reserve Bank of Chicago President Charles Evans
speaks at Milwaukee Business Journal Economic Forecast event;
Federal Reserve Bank of Dallas hosts town hall meeting to discuss
recruitment of its next president.
Opening Call:
Stock futures wavered and bond yields rose ahead of fresh data
on inflation and the labor market that may provide some insight
into the path ahead for monetary policy.
Stocks largely continued their upward march this week, with
investors taking Wednesday's consumer-price index data in their
stride. Inflation reached its highest level since 1982 last month,
but was in line with expectations. Markets didn't react strongly
and the S&P 500 closed less than 1.5% off its record high.
Federal Reserve officials are signaling that an interest-rate
rise could come as soon as March. The Fed's James Bullard said
Wednesday that four rises were likely in 2022. Governor Lael
Brainard is scheduled to speak in front of the Senate Banking
Committee at 10 a.m. ET in her nomination hearing to become vice
chair and investors are waiting to hear her views on inflation and
the economic recovery.
"The main story is the market view on the central bank's next
steps. The market is balancing two things: less support from
monetary policy, but overall the underlying economy is good and we
think the earnings figures that will start to come out now will be
quite strong," said Luc Filip, head of investments at SYZ Private
Banking.
The U.S. producer-price index, an inflation metric that measures
the prices of goods exiting factories, is slated to go out at 8:30
a.m., as is the latest data on weekly jobless claims. Economists
are expecting the tight labor market to have kept a lid on layoffs,
a continuation of the trend that has kept the weekly level below
the 2019 average since early December.
Earnings season kicks off this week, with Delta Air Lines set to
post results early Thursday. Major financial firms including
BlackRock, Citigroup, JPMorgan and Wells Fargo are set to report
Friday.
Investors are on edge for bank earnings after Jefferies posted
revenue and earnings that missed analysts' estimates Wednesday,
said Jeffrey Meyers, a consultant at Market Securities. The stock
fell 9.3% and continued to decline Thursday in off-hours trading,
retreating another 0.9%.
Stocks to Watch:
Blackstone's increased takeover offer for Australia's Crown
Resorts is welcome, said Crown shareholder Forager Funds
Management.
Crown on Thursday said it received the revised non-binding
proposal from Blackstone for A$13.10/share in cash, an increase
from the A$12.50/share the investment manager offered in November.
Crown rejected the initial offer as too low.
"It is likely that a deal will get done, the increase in offer
price is a welcome step in the right direction and we are
supportive of the board continuing a push for an appropriate firm
offer for shareholders," Forager said.
KB Home's subcontractor base was hit by the Omicron variant, but
the company said it's more experienced in dealing with disruptions
after nearly two years of the pandemic.
"We've developed methods for continuing to progress our homes
despite missing parts and pieces," said Co-COO Robert McGibney on a
call with analysts. "We've adjusted our processes to sync up with
the delays and extended lead times, and we're in lockstep with our
trade partners and suppliers of communication around our future
needs and what their capacities are."
The company expects strong home buying demand to continue into
2022 and support its top-line growth.
Robinhood Markets doesn't plan on spending significant amounts
of corporate cash on crypto assets any time soon, despite growing
demand from its users for such investments, Chief Financial Officer
Jason Warnick said at WSJ's CFO Network Summit.
Warnick said "there aren't compelling reasons strategically for
our business to put any meaningful amount of our corporate cash
into cryptocurrencies."
He said the company was keeping an eye out for comments from
regulators on how to treat crypto assets. That's why Robinhood
hasn't added any new coins or currencies on top of the ones it
already offers, including Bitcoin, Dogecoin and Litecoin, Warnick
said.
Companies in the retail sector are raising prices at different
speeds in response to inflationary pressures, including higher
wages and labor costs, chief financial officers said at WSJ's CFO
Network Summit.
CarParts.com adjusts prices every day across its sales channels,
David Meniane, the company's chief operating and financial officer
said.
Meanwhile, E.l.f. Beauty hiked prices in spring and is
evaluating another increase, according to finance chief Mandy
Fields. While container costs may abate in the months ahead, labor
costs will likely remain elevated, Fields said.
"Once the costs have gone up, I do not see a reversal there. I
think that's why you see companies taking moves on pricing," Fields
added.
Forex:
The dollar dropped to a two-month low against the euro and a
basket of currencies, continuing Wednesday's falls after data
showed U.S. CPI inflation at a 39-year high of 7.0% in December.
Investors may need evidence of stronger growth to start buying the
currency again, said MUFG.
Although the data confirms expectations of swift interest-rate
rises, U.S. rates markets show "relatively poor" expectations for
rate rises beyond this year, said Derek Halpenny, MUFG's head of
research for global markets EMEA.
A catalyst for renewed dollar strength could be economic data
"that convinces the market of stronger growth" and raises forecasts
for the Fed's terminal rate. The DXY dollar index falls 0.2% to
94.7460. EUR/USD rises 0.3% to 1.1478, according to FactSet.
Political uncertainty surrounding calls for U.K. Prime Minister
Boris Johnson to resign are unlikely to have much impact on the
pound, MUFG Bank said.
"Firstly, we doubt we have arrived at that juncture," MUFG
analyst Derek Halpenny said. An inquiry over claims Downing Street
officials held a series of parties during lockdown could take
weeks, he said.
Secondly, a new prime minister wouldn't "dramatically" change
policy to a degree that would affect sterling's performance, he
said.
Bonds:
The yield on the benchmark 10-year Treasury note ticked up to
1.745% Thursday from 1.724% Wednesday, reversing direction after
two sessions of declines. Shorter-dated bond yields also climbed,
with the 2-year yield reaching 0.929%, up for a third day.
Capital Economics raises its previous forecasts for global
government bond yields as it continues to expect central banks'
tighter monetary policy to drive them further upward, markets
economist Franziska Palmas said.
"We continue to expect monetary tightening to push up 10-year
government bond yields across developed markets but we now forecast
them to reach a higher level than we had previously anticipated,
especially in the U.S., Germany and the U.K.," she said.
CE now forecasts the 10-year U.S. Treasury yield to reach 2.25%
by end-2022 and 2.75% by end-2023, up from its previous forecasts
of 2.00% and 2.25%, respectively. It expects the 10-year Bund yield
to rise to 0.50% by the end of 2023 versus 0.25% anticipated
previously.
The U.S. December CPI report, which comes on the back of last
week's drop in the unemployment rate, confirms Pimco's expectations
for the Fed to begin hiking interest rates in March and wind down
their balance sheet later this year, said Tiffany Wilding, US
economist at Pimco.
This latest CPI report was in line with baseline forecast for
core CPI to peak around 6% in February, before ultimately
moderating in the second half of the year, she says, but adds that
Pimco is increasingly focused on risks from Omicron variant
outbreaks.
Wilding said Pimco also remains concerned about the impact that
more disruption to production in China and other key suppliers
could have on U.S. retail inventories and prices.
Read Barron's.com: Why Bond Investors Shouldn't Sweat Rising
Yields
Commodities:
Oil prices wavered after mixed data on stockpiles from the
Energy Information Administration. The EIA stockpiles data,
released Wednesday, showed that crude oil inventories dropped by a
larger than forecast 4.5 million barrels last week.
Gasoline stock however jumped by almost 8 million barrels, when
analysts had been forecasting a smaller increase of 2.3 million
barrels. Distillate stocks also rose by 2.5 million barrels,
roughly double the increase analysts had predicted.
Gold prices eased but remain close to a one-week high reached
Wednesday after U.S. inflation data. The precious metal has gained
1.3% so far this week as investors look to it as a hedge against
inflation and as prices have been supported by a falling
dollar.
Jefferies said few were surprised by iron ore's slump to less
than $90/ton in November as the Chinese housing market stumbled.
However, the steel ingredient, known for bucking market
expectations, has since surprised onlookers with a surge back above
$130/ton.
Jefferies reckons worse-than-usual seasonal supply disruptions
in Brazil and expectations of a recovery in Chinese demand have
been driving the unexpected gains. "We forecast a small surplus in
the iron ore market this year, with an average benchmark price of
$90/ton...but risk to this price assumption is to the upside if
Chinese credit growth continues to accelerate from the 2H21
trough."
TODAY'S TOP HEADLINES
TPG Prices IPO at $29.50 a Share
Private-equity firm TPG Inc. priced its initial public offering
at $29.50 a share, people familiar with the matter said, in the
first big test of the IPO market in the new year.
The pricing is at the midpoint of TPG's projected range for the
offering of $28 to $31 apiece. The stock will start trading
Thursday on the Nasdaq Stock Market under the ticker TPG.
Blackstone Sweetens Proposal for Australia's Crown Resorts
Troubled Australian casino operator Crown Resorts Ltd. said it
received a sweetened takeover proposal from Blackstone Group Inc.
that its directors would likely unanimously recommend if the U.S.
investment firm were to make a binding offer.
Crown on Thursday said it received the revised nonbinding
proposal from Blackstone for 13.10 Australian dollars ($9.54) per
share in cash, an increase from the A$12.50 a share Blackstone
offered in November and Crown later rejected as too low.
Moderna Expects to Report Vaccine Data for Young Children in
March
Moderna Inc. on Wednesday said it expects to report data from
its Covid-19 vaccine trial in children ages 2 to 5 in March.
If the data are supportive and, subject to regulatory
consultation, Moderna may proceed with regulatory filings for the
vaccine for young children thereafter, the U.S. pharmaceutical and
biotechnology company said.
Seadrill Subsidiary Speeds Through Bankruptcy in a Day
Seadrill New Finance Ltd. received court approval for a chapter
11 plan Wednesday to hand control to creditors after a single day
in bankruptcy, bringing its parent company, offshore rig operator
Seadrill Ltd., one step closer to completing its own
restructuring.
Seadrill New Finance, a Seadrill Ltd. financing subsidiary, sped
through bankruptcy after filing for chapter 11 protection on
Tuesday in the U.S. Bankruptcy Court in Houston.
O-I Glass Subsidiary Floats $610 Million Asbestos Bankruptcy
Settlement
A bankrupt subsidiary of O-I Glass Inc., one of the world's
largest makers of glass container products, has proposed a $610
million settlement to resolve costly litigation arising from
manufacturing thermal insulation products that contained asbestos,
a cancer-causing mineral.
The proposed settlement, made public in papers filed Wednesday
in the U.S. Bankruptcy Court in Wilmington, Del., would create a
trust to compensate individuals who allege personal harm from the
insulation products. A corporate predecessor stopped making the
products more than 60 years ago.
Tight U.S. Labor Market Has Kept Lid on Layoffs
A tight U.S. labor market has kept applications for unemployment
benefits close to record lows for the past two months, while
workers calling in sick because of the Omicron variant of Covid-19
have increased pressure on employers.
Economists surveyed by The Wall Street Journal estimate that
initial jobless claims, a proxy for layoffs, fell slightly to
200,000 for the week ended Jan. 8, from 207,000 the prior week.
Initial claims and their four-week moving average-which smooths out
volatility in the weekly figures-have in recent weeks continued to
hover near their lowest levels since 1969.
What to Watch in Bank Earnings, From Interest Rates to Omicron's
Impact
As the pandemic drags on, what does the new normal for banks
look like? Investors are about to get some answers.
Big U.S. banks unveil fourth-quarter results starting later this
week, with JPMorgan Chase & Co., Wells Fargo & Co. and
Citigroup Inc. slated to report Friday.
Fed's Bullard: Four Interest Rate Rises in 2022 Now Appear
Likely
Federal Reserve Bank of St. Louis President James Bullard said
the U.S. central bank will need to move more aggressively on rate
rises this year as it seeks to stem an inflation surge, amid a job
market that could see the unemployment rate fall below 3% by the
end of the year.
"We want to bring inflation under control in a way that does not
disrupt the real economy, but we are also firm in our desire to get
inflation to return to 2% over the medium term," Mr. Bullard said
in a Wall Street Journal interview Wednesday.
PC Shipments Faced Tough Fourth Quarter, but Pandemic Supplies a
Brace
Shortages and bottlenecks weighed on personal-computer shipments
in the fourth quarter, but the pandemic-induced revival of the PC
market is expected to continue, according to industry data.
International Data Corp. and Canalys said PC shipments in the
fourth quarter rose about 1%, while Gartner Inc. said world-wide PC
shipments declined 5% in the December quarter, which it said was
the first year-over-year decline after six straight quarters of
growth.
Economists React: Inflation Expected to Cool This Year
The U.S. inflation report for December showed prices
accelerating at the fastest pace in almost 40 years. But history
isn't much of a guide in this case, economists say, because today's
inflation is caused primarily by factors related to the Covid-19
pandemic and should fade in the coming months.
The past few months of price increases come from both a surge in
consumer demand following the Biden administration's economic
stimulus programs and supply shortages caused by a logjam at
factories and U.S. ports.
Fed Beige Book: Economy Grew at Modest Pace to Close 2021
The U.S. economy grew at a modest pace in the closing weeks of
2021 as ongoing supply-chain issues and a shortage of available
workers held back production, the Federal Reserve said
Wednesday.
But demand remained strong and consumer spending grew, ahead of
a rise in Covid-19 cases caused by the Omicron variant, the Fed
said in its periodic collection of business anecdotes from around
the country known as the Beige Book.
Energy Dependence Ties Europe's Hands in U.S.-Russia Crisis
Europe's growing dependence on Russian gas and oil is limiting
the continent's room to maneuver in the mounting U.S.-Russia crisis
over security in the region and making it highly vulnerable in the
event of an escalation.
Officials from the U.S., Russia and Europe meet Thursday in
Vienna at the Organization for Security and Cooperation in Europe
to discuss the tensions. Earlier this week, the U.S. and Russia
failed to narrow differences over Moscow's deployment of more than
100,000 troops along the border with Ukraine, a major thoroughfare
for gas consumed in Western Europe, and Moscow's demands for
changes to Europe's security architecture. Russia has denied
preparing to invade its western neighbor.
In U.S.-Russia Talks Over Ukraine, Kyiv Gets a Voice
VIENNA-Ukraine has been the focus of talks this week between
Russia and U.S.-led Western allies but wasn't present at
negotiations in Geneva or Brussels. On Thursday in Vienna, Kyiv
gets a seat at the table. Whether Russia will engage remains an
open question.
All the parties will gather at a regular meeting of the
Organization for Security and Cooperation in Europe, a 57-country
grouping that helped to foster peace during the Cold War.
Moderna Expects to Report Vaccine Data for Young Children in
March
Moderna Inc. on Wednesday said it expects to report data from
its Covid-19 vaccine trial in children ages 2 to 5 in March.
If the data are supportive and, subject to regulatory
consultation, Moderna may proceed with regulatory filings for the
vaccine for young children thereafter, the U.S. pharmaceutical and
biotechnology company said.
Novak Djokovic Set to Play Fellow Serb in Australian Open as
Visa Decision Looms
SYDNEY-Novak Djokovic is slated to play fellow Serb Miomir
Kecmanović in next week's opening round of the Australian Open,
although the defending champion's participation remains in doubt as
the government considers canceling his visa for a second time.
On Thursday, the No. 1-ranked men's tennis player and 20-time
major winner was waiting to hear whether immigration minister Alex
Hawke would use his power to cancel his visa as matchups for the
first Grand Slam tournament of the year were made, although
slightly later than scheduled. Djokovic is the top seed in the
men's singles competition.
College Enrollment Continues to Shrink
College undergraduate enrollment continued to shrink this fall
and has now declined by more than a million students since the
Covid-19 pandemic began in 2020, according to a report released
Thursday by the National Student Clearinghouse Research Center, a
nonprofit research group.
Compared with last year, college undergraduate programs lost
465,300 students, or 3.1% of their total. Since the start of the
pandemic, enrollment has declined by nearly 7%.
Write to sarka.halas@wsj.com TODAY IN CANADA
Earnings:
Cogeco Commun 1Q
Corus Entertain 1Q
Opsens 1Q
Economic Indicators:
None scheduled
Stocks to Watch:
Delta 9 Cannabis Sees 4Q Rev C$16.6M-C$17.4M; Sees 2021 Rev
C$61.8M-C$62.6M
Expected Major Events for Thursday
00:01/UK: CBI and PwC Financial Services Survey
01:01/UK: Dec KPMG and REC UK Report on Jobs
04:30/JPN: Dec Corporate Insolvencies
06:00/JPN: Dec Preliminary Machine Tool Orders
09:00/ITA: Nov Industrial Production
09:30/UK: 4Q Bank of England Credit Conditions Survey
09:30/UK: 4Q Bank of England's Bank Liabilities Survey
13:00/RUS: Weekly International Reserves
13:30/US: 01/08 Unemployment Insurance Weekly Claims Report -
Initial Claims
13:30/US: U.S. Weekly Export Sales
13:30/US: Dec PPI
14:45/US: Consumer Comfort Index
15:30/US: 01/07 EIA Weekly Natural Gas Storage Report
21:30/US: Federal Discount Window Borrowings
21:30/US: Foreign Central Bank Holdings
23:50/JPN: Dec Corporate Goods Price Index
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Thursday
Avalon Advanced Materials Inc (AVL.T) is expected to report for
1Q.
Bank Of South Carolina (BKSC) is expected to report for 4Q.
Chase Corp (CCF) is expected to report for 1Q.
Cogeco Communications Inc (CCA.T,CGEAF) is expected to report
$1.98 for 1Q.
Cogeco Inc (CGO.T) is expected to report for 1Q.
Corus Entertainment Inc - Class B (CJR.B.T,CJREF) is expected to
report $0.33 for 1Q.
Cronos Group Inc (CRON,CRON.T) is expected to report $-0.11 for
3Q.
Delta Air Lines (DAL) is expected to report $0.06 for 4Q.
FRMO Corp (FRMO) is expected to report for 2Q.
Franklin Resources (BEN) is expected to report.
Jewett-Cameron (JCT-T,JCTCF) is expected to report for 1Q.
Li-Cycle Holdings Corp (LICY) is expected to report for 4Q.
National American University Holding Inc (NAUH) is expected to
report for 2Q.
SandRidge Mississippian Trust I (SDTTU) is expected to report
for 3Q.
Schmitt Industries (SMIT) is expected to report for 2Q.
Teligent Inc (TLGTQ) is expected to report for 3Q.
US Global Investors (GROW) is expected to report for 1Q.
Unico American (UNAM) is expected to report for 3Q.
Video Display Corp (VIDE) is expected to report for 3Q.
Washington Federal (WAFD) is expected to report $0.70 for
1Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
8X8 Cut to Neutral From Outperform by Baird
Ambarella Raised to Overweight From Equal-Weight by Wells
Fargo
Biogen Cut to Neutral From Overweight by Piper Sandler
Cogent Communications Cut to Underweight From Equal-Weight by
Wells Fargo
Empire State Realty Trust Cut to Underweight From Overweight by
Keybanc
Fiserv Cut to Hold From Buy by Jefferies
Globe Life Raised to Overweight From Neutral by Piper
Sandler
Highwoods Properties Raised to Outperform From Neutral by
Baird
Hudson Pacific Properties Cut to Neutral From Outperform by
Baird
iRhythm Technologies Raised to Buy From Neutral by BTIG
Kratos Cut to Neutral From Buy by Goldman Sachs
LendingClub Raised to Buy From Neutral by Janney Montgomery
Scott
PayPal Holdings Cut to Hold From Buy by Jefferies
Premier Financial Cut to Neutral From Overweight by Piper
Sandler
Snowflake Raised to Overweight From Equal-Weight by Barclays
Solo Brands Raised to Buy From Neutral by Citigroup
Southwest Airlines Cut to Peer Perform From Outperform by Wolfe
Research
Spirit Realty Capital Raised to Buy From Neutral by Janney
Montgomery Scott
Synnex Raised to Buy From Hold by Cross Research
Take-Two Interactive Raised to Outperform From Market Perform by
BMO Capital
Wells Fargo Raised to Overweight From Neutral by Piper
Sandler
Wolfspeed Raised to Overweight From Equal-Weight by Wells
Fargo
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
January 13, 2022 06:14 ET (11:14 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.