MARKET WRAPS
Watch For:
Monthly Wholesale Trade for November; earnings from Albertsons, Bed Bath & Beyond
Opening Call:
Today's Headlines/Must Reads
- Bank Earnings Put U.S. Economy Under Microscope
- Pentagon to Mandate New Defense Capabilities for Rockets
- Chinese Banks' New Yuan Loans Rise
- Virgin Orbit Fails to Lift Satellite Load Into Orbit From Europe
- C.H. Robinson Reaches Standstill Agreement With Activist Investor
Follow WSJ markets coverage here .
Stock futures dipped on Tuesday as hawkish Fed chatter continued to weigh on sentiment.
Comments on Monday from two Federal Reserve officials that they thought interest rates would need to rise above 5%, meant the Fed was yet again looking to push back against market expectations that it would start trimming borrowing costs later this year.
Monday's switch away from riskier assets continued early on Tuesday, with traders warily eyeing a speech by Jerome Powell in Sweden, due at 9am, and then the consumer price index report on Thursday and the start of the fourth quarter company earnings season on Friday.
Deutsche Bank noted that Powell's subject was central bank independence and thus it was "uncertain whether the topic in question will lead to an in-depth policy discussion."
"But if we do get any, a key question will be whether he entertains the prospect of a further downshift in the pace of rate hikes to 25bps. That's currently the base case in markets, but clearly the CPI release on Thursday will be an influence on this and to future FOMC meetings too, " Deutsche Bank added.
Overseas indexes were mostly lower. In Europe, the Stoxx Europe 600 fell 0.6%, led by losses for retailers. In Asia, Hong Kong's Hang Seng fell 0.3%, while the Shanghai Composite Index and Japan's Nikkei rose modestly.
Stocks to Watch
Broadcom fell 1% in premarket trading after Bloomberg reported that Apple was working on its own Wi-Fi and Bluetooth chips. Broadcom makes a combined component that handles both Wi-Fi and Bluetooth functions on Apple devices.
Bloomberg also said Apple aims to have developed its first cellular modem chip by the end of 2024 or early 2025, letting it swap out electronics from Qualcomm. Shares of Qualcomm fell 0.5% in premarket trading.
Berkeley Lights said its 2022 revenue is expected to be below the previous year's level, citing a delay in several Beacon platform placements, which it now expects in 2023, and lower revenue from partnership and services contracts. Its shares declined 6% after hours.
Frontline terminated its stock-swap merger agreement with oil tanker counterpart Euronav, first disclosed in July. Frontline shares gained 14% after hours, while Euronav fell 19%.
Jefferies Financial was the first among its peers to report quarterly earnings. Jefferies said late Monday that dealmaking revenue and profits slid, sending shares down around 2.5% in off-hours trading.
Microsoft is reportedly considering a $10 billion investment in OpenAI, the creator behind the viral ChatGPT chatbot, Bloomberg reported. The talks have been ongoing for months, according to Bloomberg sources, and would entail the money being invested over multiple years. Read more here .
Virgin Orbit shares fell as much as 20% premarket. The company's first commercial launch, dubbed the "Start Me Up Mission," failed to deploy its satellites properly.
Vyne Therapeutics said the first vitiligo patient has been dosed in a clinical trial of VYN201. The stock rose 77% in after-hours trading.
Economic Insight
Erste Asset Management said the decline in inflation currently is being mainly driven by falling goods and energy prices but the labor market remains very tight and inflation persistence may have risen permanently. "To bet on a sustained decline in inflation would be bold."
Service price inflation could remain uncomfortably high and there are the very difficult-to-assess effects of central banks reducing their bond portfolios. "At least the bond environment this year is not as predominantly negative as it was last year," Erste said, expecting high volatility to stay.
Forex:
A speech by Jerome Powell later today could boost the dollar if the Fed chief continues to stress the need for higher interest rates, but it shouldn't upset the trend for a weaker currency, Swissquote said.
Powell would need to push against growing speculation in the wake of Friday's weaker wage data that rate increases will slow.
"While any hawkish readjustment could give a minor boost to the dollar, the dollar is set for further weakness this year," Swissquote said, adding that recession worries will continue to linger.
ING said the euro could extend its gains against the dollar if Tuesday's event risks allow, citing Powell's speech and the NFIB small business sentiment survey.
Assuming that neither Powell's comments nor the NFIB break growing speculation of a more relaxed Fed, the dollar could fall and boost activity and commodity currencies, ING added.
"This could see EUR/USD pressing last May's high at 1.0785. This week there is an outside risk of 1.0950 should Thursday's December consumer price index data show another soft reading."
Energy:
Oil prices edged down in Europe as risk sentiment soured following comments from some Fed officials who said interest rates would need to rise above 5%, higher than markets are currently pricing in, and remain there for some time.
Metals:
Gold and base metals struggled in early London trading, as hawkish comments from some Fed officials added pressure to markets.
TODAY'S TOP HEADLINES
Virgin Orbit Satellite Mission Fails, Sending Shares Down
LONDON-A Virgin Orbit Holdings Inc. rocket carrying satellites from the U.K. failed to reach orbit after it suffered an anomaly over the Atlantic Ocean, a blow to Richard Branson's ambitions in the growing market for commercial satellite launches.The mission was the first attempt to launch satellites from the U.K. A customized Boeing 747 dubbed Cosmic Girl took off from Spaceport Cornwall, southwestern England, and successfully released a rocket, the company said.
The rocket reached space but experienced an anomaly before it could achieve its target orbit. Cosmic Girl returned safely to Space Cornwall with the flight crew.Shares in Virgin Orbit, which are listed on the Nasdaq stock exchange, fell 21% in off-hours trading after the problem was disclosed.The Start Me Up mission, named after the hit Rolling Stones song, marked the first international mission for Virgin Orbit and its first commercial launch from Western Europe.
Disney Requires Workers to Come to Office Four Days a Week, Starting in March
Walt Disney Co. Chief Executive Robert Iger told employees Monday that they would be required to work from a Disney office four days a week, marking one of the most comprehensive return-to-office policies at a large U.S. company since the pandemic.
In an all-staff email, Mr. Iger wrote that starting March 1, employees who are currently working in a hybrid home and office situation will be expected to come to the office Monday through Thursday.
C.H. Robinson Reaches Standstill Agreement With Activist Investor
Logistics heavyweight C.H. Robinson Worldwide Inc. has reached an agreement to work with its activist investors as analysts said new board member Jim Barber would be a strong candidate to lead the company.
The pact between C.H. Robinson and activists Ancora Advisors LLC, known as a standstill agreement, renewed for a year a deal reached last year as the investment group placed two representatives on the company's board of directors and questioned the direction of the business.
Vista Equity Partners to Buy Software Maker Duck Creek in $2.6 Billion Deal
Vista Equity Partners has agreed to buy Duck Creek Technologies Inc. in a take-private transaction valued at roughly $2.6 billion, less than three years after the software company's shares went public with a market value of about $5 billion.
Under the agreement disclosed Monday, Vista would pay $19 a share for the software-as-a-service provider, representing a 46% premium to Friday's closing price of $12.99. Duck Creek shares surged on Monday to close at $19.03, just above the offering price.
Morgan Stanley CEO Contender Jonathan Pruzan to Retire
Morgan Stanley Chief Operating Officer Jonathan Pruzan is retiring after 29 years at the bank, narrowing a race to succeed Chief Executive James Gorman.
Mr. Pruzan, 54, will step down on Jan. 31, the Wall Street firm said in a Securities and Exchange Commission filing Monday.
BYD's Shares Fall After Warren Buffett Cuts Stake in Company Again
Shares of BYD Co., the Chinese rival to Tesla, fell Tuesday after Warren Buffett further trimmed his holding in the company.
The listed Chinese electric vehicle maker slid as much as 2.9% in morning trade in Hong Kong, while the benchmark Hang Seng Index was 0.4% lower. BYD's shares in Shenzhen dropped as much as 2.3%.
Bank Earnings Put U.S. Economy Under Microscope
If the U.S. is heading into a recession, it could show up in the biggest banks' financial results.
Rising interest rates have slowed inflation from the highest level in decades and begun to cool the hot labor market. American consumers and businesses might show signs of financial strain, and some bank chiefs have sounded dire warnings about the economy.
Chinese Banks Issued Higher-Than-Expected New Yuan Loans in December
Chinese banks issued higher-than-expected new yuan loans in December, as Beijing pivoted to supporting economic growth after Covid-19 infections roiled the country in the wake of an abrupt reopening.
New yuan loans stood at 1.4 trillion yuan ($206.72 billion) in December, higher than the CNY1.2 trillion issued in November, the People's Bank of China said Tuesday. Economists polled earlier by The Wall Street Journal had expected new yuan loans to be at CNY1.1 trillion in December.
China's Passenger Car Retail Sales Grew 1.9% in 2022
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