Weekly Market Update: Market trepidation continues to rise over Fed rates, Ukraine, and earnings quality
2022-01-21T16:04:31.753
2022’s rocky start for investors continued this week. Equities, bonds, and cryptocurrencies all fell as investors continued to de-risk portfolios ahead of next week’s FOMC meeting. The growing specter of four or more Fed rate hikes this year, along with continued high inflation exacerbated by pandemic effects on the global supply chain, and worries around the rising likelihood of a conflict between Russia and the West over Ukraine, all weighed on risk appetite. Global bond yields initially spiked in what turned out to be a wild ride for fixed income traders. The German 10-year Bund yield found its way into positive territory for the first time since April 2022, while the US 10-year topped 1.9% and looked on its way to 2%. Oil prices reached 7-year highs fanning inflation concerns along with European CPI readings.
By Friday the Dow and NASDAQ had moved below their 200-day moving averages and the S&P looked poised to follow. Bitcoin fell back below $40K testing a key technical level for the second time this month. The US 10-year retreated back below 1.75% and the BUND was at -8BPS once again. Volumes jumped along with the VIX into January options expiration. Potentially adding to the consternation, China’s PBOC was forced to cut key lending rates across several of their facilities. In some cases, like the 5-year LPR, it was the first rate cut since April of 2020 and viewed as another move to support the beleaguered property sector. Traders also prepared for what will be the busiest gauntlet of Q1 earnings season next week, following several high profile misses and preannouncements already. For the week, the S&P lost 5.7%, the DJIA was off 4.6%, and the Nasdaq ended down 7.6%.
In corporate news this week, big financial firms released more earnings from a lackluster quarter. Goldman Sachs stock fell by the most since mid-2020 amid higher expenses and provisions for credit losses. Schwab shares fell after its Q4 daily average trades missed estimates. Bank of America beat street consensus on profit and posted record investment banking and wealth management revenue.
Netflix stock sank on a disappointing subscriber outlook and a warning that competition is having an effect on its marginal growth. Peloton shares were tripped up on a report that the company plans to temporarily halt its production of connected fitness products due to waning consumer demand, though the company later said “rumors of halting all bike and tread production” were “false.” Procter and Gamble said it has informed retailers it plans to increase pricing on certain personal health care brands in US beginning mid-April. Microsoft announced it would buy Activision, the maker of ‘Call of Duty’ and ‘Warcraft’ video games, in a $68.7B all-cash deal, which would be the most expensive acquisition in the tech giant’s history.
SUN 1/16
WMT Trademarks filings from Dec 2021 show Walmart is preparing to create its own cryptocurrency and collection of virtual goods, such as NFTs - press
(HK) Hong Kong Monetary Authority (HKMA) issues proposal that will abolish the role of lawyers as middlemen in residential mortgage transactions, will go into effect in H2 after consultations and a trial period - SCMP
MON 1/17
UNA.NL Sets out the strategic direction in materially expanding its presence in Health, Beauty, and Hygien fields; Confirms GSK/Pfizer's Consumer Health is a highly complementary category for Unilever, with good potential for synergies and a number of routes to build scale
(DE) German day-ahead baseload power price at €251.0/MWh, +73.1% d/d
(AE) Explosions said to have occurred in 3 petroleum tanker trucks in Abu Dhabi's Mussafah; drones likely behind explosion - press
(AT) Austria said to have confirmed mandatory vaccination for everybody aged 18 and higher from Feb 1st - press
(DE) Germany Fin Min Lindner: it is time to build up fiscal buffers again; I am in favour of reducing debt - pre-Eurogroup meeting comments
(RU) Reportedly US and EU no longer considering unplugging Russia from SWIFT system - German press
RIO.AU Reports Q4 Pilbara Iron Ore production 84.1Mt v 86.0Mt y/y; Shipments: 84.1Mt v 88.9Mt y/y
BNTX According to Israeli study, some preliminary data shows 4th dose of COVID-19 vaccine Comirnaty raises antibodies but doesn't protect against Omicron variant - financial press
TSLA Said to be targeting 2022 deliveries of 1.5-2.0M units v 937K y/y v 1.35Me; Opened bidding for EV camera modules - press
TUES 1/18
BOSS.DE Reports prelim Q4 EBIT €100M v €13M y/y, Rev €906M v €862Me; Says benefitted from ongoing robust consumer sentiment in key markets
(UR) Russia said to have pulled people out of their embassies in Kyiv and Lviv inside the Ukraine - NYT
(EU) EU27 Dec New Car Registrations: -22.8% v -20.5% prior; EU sales of electric vehicles (EVs) surpassed diesel vehicle sales in Dec (1st time ever)
TM Confirms it targets to produce 700K vehicle units in Feb 2022 (prior had goal of 900K); Expects to miss FY21/22 production target of 9M units citing chip shortage; Notes current demand is very strong
BP Exec: strong and growing demand (incl. 45% increase in Q3 2021 v Q2 2021) has brought profit margins of electric fast chargers close to fuel pumps - press interview
*(DE) GERMANY JAN ZEW CURRENT SITUATION SURVEY: -10.2 V -8.8E; EXPECTATIONS SURVEY: 51.7 V 32.0E
BABA US said to be examining cloud unit for potential national security risks - press
SHOP Reportedly steps up China expansion through tie-up with JD.com - JD blog
GS Reports Q4 $10.81 v $12.10e, Rev $12.6B v $12.1Be
ATVI Confirms to be acquired by Microsoft for $95.00/shr valued at $68.7B all-cash deal; Microsoft sees deal will be accretive to non-GAAP earnings per share upon close, planned during FY23
*(US) JAN EMPIRE MANUFACTURING: -0.7 V +25.0E (1st negative reading since June 2020)
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +4.6% v +0.3% prior
*(US) JAN NAHB HOUSING MARKET INDEX: 83 V 84E
VZ Confirms launch of its 5G Ultra Wideband network tomorrow; Voluntarily decided to limit our 5G network around airports
JBHT Reports Q4 $2.28 v $1.99e, Rev $3.50B v $3.29Be
WEDS 1/19
ASML.NL Reports Q4 Net €4.39 v €3.78e, Rev €4.99B v €5.14Be; Expected impact of the fire in part of a building at our Berlin site is included into FY22 outlook; Sees significant growth opportunities beyond 2025
(CN) China Cyberspace Regulator said to want platform companies with >100M users or >CNY10B Rev to obtain approval for investments or fundraising
*(UK) DEC CPI M/M: 0.5% V 0.3%E; Y/Y: 5.4% V 5.2%E (5th month above target and highest annual pace since Mar 1992)
*GERMAN 10-YEAR YIELD TURNS POSITIVE FOR THE 1ST TIME SINCE APR 2019
ASML CEO: demand in 40-50% above maximum capacity; May take 2-3 years to achieve balance between demand and supply - post earnings comments
IEA Monthly Oil Report (OMR): steady rise in supply could see a significant surplus materialize in Q1 2022 and going forward; Saudi Arabia and Russia could break their output records
UNH Reports Q4 $4.48 v $4.30e, Rev $73.7B v $73.0Be; Affirms FY22 outlook
BAC Reports Q4 $0.82 v $0.76e, Rev $22.1B v $22.1Be
FAST Reports Dec net sales $476.0M +11.0% y/y
PG Reports Q2 $1.66 v $1.65e, Rev $21.0B v $20.3Be; Sees paying more than $8B in dividends in FY22; Says price increases accounted for roughly half of Q2 Rev growth
PLD Reports FFO Q4 $1.12 v $1.10e, Rev $1.28B v $1.06Be; Guides init FY22 strong; "Demand shows no signs of slowing"
*(US) DEC HOUSING STARTS: 1.702M V 1.650ME; BUILDING PERMITS: 1.873M V 1.703ME
(US) FTC Chair Khan: We need to make sure merger laws are in line with realities; Merger guidelines review will go beyond technology sector - CNBC
(US) Atlanta Fed GDPNow: Raises Q4 GDP forecast to 5.1% from 5.0%
(US) Association of American Railroads weekly rail traffic report for week ending Jan 15th: 494K total units, -6.6% y/y
*(US) TREASURY $20B 20-YEAR BOND REOPENING DRAWS 2.210% V 1.942% PRIOR, BID-TO-COVER 2.48 V 2.59 PRIOR AND 2.39 OVER LAST 8 REOPENINGS
AA Reports Q4 $2.50 v $2.04e, Rev $3.34B v $3.29Be
GEF To implement a $50/ton price increase on all uncoated recycled paperboard (URB) grades and a minimum 6% increase on tube and core and protective packaging products
*(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: CUTS BOTH 1-YEAR AND 5-YEAR RATES
THURS 1/20
ALO.FR Reports Q3 Rev €3.92B v €3.73B y/y; Affirms FY21/22 and medium-term objectives
(DE) Germany Dec PPI M/M: 5.0% v 0.8%e; Y/Y: 24.2% v 19.3%e
3333.HK Ad-hoc bondholders group said to hire Harneys [law firm], considers enforcement action
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE UNCHANGED AT 3.50%; AS EXPECTED; To raise RRR
*(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED; Reiterates forward guidance that interest rate is likely to be raised in Mar 2022
*(EU) EURO ZONE DEC FINAL CPI Y/Y: 5.0% V 5.0%E; CPI CORE Y/Y: 2.6% V 2.6%E (record high for annual pace)
TRV Reports Q4 $5.20 v $3.86e, Rev $9.01B v $8.71Be
(RU) Russia Central bank confirms to propose banning crypto mining and circulation; Proposals still up for discussions - press
*(US) INITIAL JOBLESS CLAIMS: 286K V 225KE; CONTINUING CLAIMS: 1.635M V 1.56ME
*(US) JAN PHILADELPHIA FED BUSINESS OUTLOOK: 23.2 V 19.0E
*(US) DEC EXISTING HOME SALES: 6.18M V 6.43ME
(US) Sen Manchin (D-WV) indicates he is open to reengaging on revised Build Back Better plan; 'We’ll be talking to everybody who wants to talk' - NBC reporter
PTON Reportedly to temporarily halt production of connected fitness products amid waning consumer demand - CNBC
US reportedly gives Baltic states approval to send weapons to Ukraine - press
(US) Fed seeks public comment on Central Bank Digital Currency; Outlines potential benefits of CBDC
NFLX Reports Q4 $1.33 v $0.82e, Rev $7.71B v $7.70Be; Acknowledges competition is affecting marginal growth; Expects being FCF positive for FY22 and beyond; In 2022 will expand its portfolio of games; Notes US dollar appreciation will cost ~$1B in FY22 Rev
CSX Reports Q4 $0.42 v $0.41e, Rev $3.43B v $3.30Be
SON Implementing additional $50/ton price increase for uncoated recycled paperboard; Effective Feb 18th
PPG Reports Q4 $1.26 v $1.19e, Rev $4.19B v $4.03Be; Guides Q1 well below ests
3333.HK Says risk management committee is actively looking for solutions and communicating with creditors; proposes to engage additional professionals, including China International Capital Corporation Limited and BOCI Asia Limited as financial advisors; to engage Zhong Lun Law Firm LLP as legal advisor
PTON CEO: Confirms Peloton is mulling layoffs; rumors of halting all bike and tread production false
FRI 1/21
(RU) Russia Foreign Min Lavrov: Russia wants NATO to leave Romania and Bulgaria as part of security proposals to US
INTC Confirms to invest more than $20B to build two new factories in Ohio, US; Construction expected to begin late in 2022, production to come online in 2025
*(CN) CHINA PBOC CUTS RATE ON STANDING LENDING FACILITY (SLF) BY 10BPS); Effective Jan 17th
SLB Reports Q4 $0.41 v $0.39e, Rev $6.22B v $6.09Be; Expects oil demand to exceed prepandemic levels before end-2022 and to further strengthen in 2023
(UK) Daily Baltic Dry Bulk Index -4.0% at 1,415 points (lowest since Feb 2021)
(UA) Lithuania and Latvia plan to send Ukraine Stinger air defense missiles - press
(DE) Germany Chancellor Scholz: Germany will not send weapons to Ukraine
GM Reportedly plans to invest $6.5B into two Michigan production sites; Aims to create 4K jobs - local press
