Weekly Market Update: Markets reset expectations with higher rates and less stimulus ahead
Fri, 07 Jan 04:03 PM EST/09:03 PM GMT
2022 trading started off volatile, with large swings across stock and bond markets. Investors fled some of the most popular trades of the past year as the Fed looked poised to begin raising rates as soon as March. The December FOMC minutes underscored the Fed was even closer to liftoff than previously thought, and that the balance sheet will in all likelihood shrink at a much faster pace than during the last cycle once tapering is finished and rates start to rise. Bonds and other long duration assets, notably US technology shares came under significant pressure as traders aggressively rotated into banks and other traditionally defensive sectors that offered exposure to yield. Omicron infections continued to explode, increasing workforce absenteeism and stretching health care facilities in many nations around the world. Federal, state and local governments were forced to adopt new measures while dealing with modest additional closures, but the overall narrative that this current wave is less severe and will likely be shorter lived largely held.
On Friday, the December jobs report highlighted the pressure the Fed faces. Rates remained on an upward trajectory while futures markets saw expectations for a March Fed liftoff cemented after the unemployment rate dropped below 4% and wage gains easily surpassed expectations. Despite missing December non-farm payroll expectations, the monthly employment report continued to suggest that labor shortages have added to sustained cost pressures in the economy. Also, the Euro rose on Friday after Euro Zone December Preliminary CPI hit a fresh record high. Bitcoin dropped 10% this week, falling back towards $40K for first time since October, as investors began to question its ability to offer a true store of value amid a drawdown in assets correlated to rising interest rates. Oil prices rose after OPEC+ producers agreed to continue pumping more crude, betting that Omicron won't have the sort of devastating effect on demand as previous Covid waves. For the week, the S&P fell 1.9%, the DJIA was off 0.3%, and the Nasdaq tumbled 4.5%.
In corporate news this week, Walmart announced plans to hire over 3,000 delivery drivers in order to expand its home delivery service to reach 30M households. Humana shares took a deep drop after the health insurer cut its Medicare Advantage enrollment guidance, despite affirming FY21 and FY22 earnings outlook.
Ford management doubled its all-electric F-150 Lightning production estimates to 150K units annually amid high demand. GM began taking orders for its Silverado EV pickup truck this week, with sales expected to start in spring 2023. Stellantis announced its Chrysler brand would launch its first battery EV by 2025, and aimed to have an all-EV lineup by 2028.
On the COVID front, a CDC advisory panel voted nearly unanimously to recommend 12- to 17-year-olds should get the Pfizer booster shot at least five months after their second dose. The FDA shortened the interval for a booster dose of Moderna’s vaccine to five months for those 18 and older.
SUN 1/2
TSLA Reports Q4 deliveries 308.6K v 266Ke v 241.3K q/q; FY21 deliveries 936.0K v 499.6K y/y
(HK) Macau Dec Casino Rev (MOP) 7.96B v 6.75B prior; Y/Y +1.8% v 0.0% prior (-5.5%e)
T AT&T and Verizon have rejected FAA request to delay rollout of 5G, they offered a counter proposal that would allow limited deployments to go ahead this week - letter to USDOT
005930.KR May invest >KRW35.0T into chip business in 2022; invested KRW32.9T in chip facilities in 2020 - Korean press
(CN) China property developers have a combined $197B in debt coming due in January [relates to various types of payments (including bond, trust product and wage costs)] - financial press
MON 1/3
(TR) Turkey Dec CPI M/M: 13.6% v 8.5%e; Y/Y: 36.1% v 27.4%e (inflation accelerated for a 7th straight month and highest annual pace since Sept 2002)
*(IT) ITALY DEC MANUFACTURING PMI: 62.0 V 61.5E (18th month of expansion)
OPEC reportedly sees tighter Q1 as it considers next oil-production hike; Now estimates Q1 oversupply ~25% smaller - press
PFE FDA takes multiple actions to expand use of PFE-BNTX COVID-19 Vaccine; Amends EUA to expand use of a single booster dose to include children aged 12-15 years; Shorten time between primary vaccine and booster to at least 5 months (prior 6 months); and allow for a third primary dose for certain immunocompromised children 5 through 11 years of age
*(US) DEC FINAL MARKIT MANUFACTURING PMI: 57.7 V 57.7E (confirms 18th consecutive month of expansion; Lowest since Dec 2020)
(CN) China Cyberspace Administration has released a revised set of internet security rules to go into effect on Feb 15th
TUES 1/4
*(DE) GERMANY NOV RETAIL SALES M/M: +0.6% V -0.3%E; Y/Y: -0.2% V -3.1%E
(FR) French IHU Mediterranee Infection Institute scientists reportedly discovered new COVID-19 variant B.1.640.2, probably of Cameroonian origin - press
*(DE) GERMANY DEC NET UNEMPLOYMENT CHANGE: -23.0K V -15.0KE; UNEMPLOYMENT CLAIMS RATE: 5.2% V 5.3%E
F Planning to nearly double all-electric F-150 Lightning production to 150,000 units annually
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +0.3% v -1.5% prior
*(US) NOV JOLTS JOB OPENINGS: 10.6M V 11.1ME
GM Reports Q4 sales 440.7K vehicles, -43% y/y
(US) Fed's Kashkari (dove, non-voter): Expects two rate hikes in 2022
(US) Atlanta Fed GDPNow: Cuts Q4 GDP forecast to 7.4% from 7.6%
(HK) Hong Kong has discovered its first untraceable case of covid (within the last 3 months)
WEDS 1/5
WMT To expand in home delivery to reach 30M households and will hire >3.0K delivery drivers
STLA.NL Chrysler brand to launch first battery EV by 2025; The brand will also seek to have an ALL EV lineup by 2028
(KZ) Kazakhstan President Kassym-Jomart Tokayev said to accept govt resignation - Russian press
(HK) Hong Kong confirms to tighten COVID-19 restrictions for 2 weeks from Jan 8th; To tighten social distancing measures until Jan 20th - press
(US) US lawmakers said to have started early talks on another round of COVID-19 relief for businesses; Relief might be valued at $68B and focused on restaurants, gyms, venues - WaPo
RPM Reports Q2 $0.79 v $0.86e, Rev $1.64B v $1.58Be
(LT) ECB's Kazaks (Latvia): ECB will take action if inflation outlook picks up, early 2023 rate hike is possible scenario
*(US) DEC ADP EMPLOYMENT CHANGE: +807K V +410KE (largest increase since May 2021); Notes private sector payrolls are still ~4M jobs short of pre-COVID-19 levels
FB Reportedly has halted development of new software OS that would power its VR devices and upcoming AR glasses; Company denies the story - The Information
(US) Association of American Railroads weekly rail traffic report for week ending Jan 1st: 395K total units, -6.3% y/y
*(US) FOMC DEC MINUTES: BALANCE SHEET COULD SHRINK FASTER THAN LAST CYCLE; SOME PARTICIPANTS SAY RATES COULD RISE BEFORE MAXIMUM EMPLOYMENT IS REACHED
COST Reports Dec total SSS +11.5% y/y (ex-gas and FX)
PFE CDC advisory panel votes 13-1 to recommend 12- to 17-year-olds should get COVID booster at least 5 months after 2nd dose - press
(HK) Macau to ban all flights from outside China, from Jan 9th to Jan 23rd; as part of COVID protection measures
*(CN) CHINA DEC CAIXIN PMI SERVICES: 53.1 V 51.9E (4th month of expansion)
(CN) China has launched its digital Yuan (DCNY) wallet in the Android and Apple app stores - Press
THURS 1/6
*(DE) GERMANY DEC CPI NORTH RHINE WESTPHALIA M/M: +0.5% V -0.3% PRIOR; Y/Y: 5.2% V 5.1% PRIOR
WBA Reports Q1 $1.68 v $1.35e, Rev $33.9B v $32.9Be; Raises FY22 outlook
CAG Reports Q2 $0.64 v $0.68e, Rev $3.06B v $3.06Be
BBBY Reports Q3 -$0.25 v $0.00e, Rev $1.88B v $1.96Be; Announces further SG&A and expense optimization of ~$100M annualized; Cuts FY21 outlook and guides Q4 weak
STLC.CA Discloses Q4 shipments lower than expected due to unplanned outages and covid-related impacts
HUM Affirms FY21 $20.50 v $20.65e; Affirms FY22 $21.50 v $24.50e, but cuts FY22 membership growth outlook; Expects COVID will be net neutral to the Medicare Advantage business in 2022 - ahead of investor conf
DKS Raises again FY21 $15.50-15.60 (prior $14.60-14.80) v $14.82e, SSS +25.8-26.1% (prior 24-25%) - filing
*(US) INITIAL JOBLESS CLAIMS: 207K V 195KE; CONTINUING CLAIMS: 1.75M V 1.68ME
(US) Pres Biden: One year ago today a President tried to prevent the peaceful transfer of power; Have to make sure another attack never happens again
*(US) DEC ISM SERVICES INDEX: 62.0 V 67.0E
(US) New York allows mobile sports betting to begin this Saturday, Jan 8th; DraftKings, FanDuel, Rush Street & Caesars are approved to open NY state mobile sites - press
(US) Atlanta Fed GDPNow: Cuts Q4 GDP forecast to 6.7% from 7.4%
QDEL Reports prelim Q4 Rev $633-637M v $502Me
005930.KR Reports Q4 prelim (KRW) Op 13.8T v 15.2Te (v 9.1T y/y) , Rev 76.0T v 75.6Te (v 61.6T y/y)
FRI 1/7
066570.KR Reports Q4 prelim (KRW) Op 681.6B v 647.0B y/y; Rev 21.0T v 18.8T y/y
*(EU) EURO ZONE DEC ADVANCE CPI ESTIMATE Y/Y: 5.0% V 4.8%E (record high); CPI CORE Y/Y: 2.6% V 2.5%E
*(US) DEC CHANGE IN NONFARM PAYROLLS: +199K V +447KE (below lower-end of all analysts' expectations)
*(US) DEC UNEMPLOYMENT RATE: 3.9% V 4.1%E
*(US) DEC AVERAGE HOURLY EARNINGS M/M: 0.6% V 0.4%E; Y/Y: 4.7% V 4.2%E
