MARKET WRAPS
Watch For:
Univ. of Michigan Preliminary Consumer Survey for January; JPMorgan 4Q; Citigroup 4Q; Wells Fargo 4Q; BlackRock 4Q
Today's Top Headlines/Must Reads:
- China's Export Decline Deepens, Threatening Growth
- Japan's 10-Year Government Bond Yield Breaches New Cap
- Europe's Mild Winter Cushions Economic Blow of Ukraine War
- BlackRock, World's Largest Asset Manager, Buys Stake in Small-Business 401(k) Startup
- Crypto.com Cuts 20% of Its Staff
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Opening Call:
Stock futures were muted on Friday ahead of earnings reports from some of the biggest banks in the United States.
Many investors are torn on what to expect. Some believe outlooks have already been cut enough and will open the door to better-than-expected results and stock gains, while others see lackluster results and downbeat forward guidance leading to further stock falls.
Recession worries were also weighing on investors headed into those results.
Stocks to Watch
A Boeing 737 MAX operated by China Southern Airlines took off from Guangzhou Friday, the first time a Chinese airline has operated the jet for a commercial flight in almost four years. Boeing shares were down 0.2%.
Hanesbrands expects its fourth-quarter sales to be slightly above the top end of its outlook range and adjusted operating profit will be at the midpoint of its previously disclosed range. Shares climbed 8.4% in after-hours trading.
LendingClub is implementing a cost reduction and reorganization plan that includes reducing its workforce by 14%, or 225 employees. Shares increased 3.6% in after-hours trading.
MediciNova has enrolled patients in its Phase 2 clinical trial evaluating MN-166 (ibudilast) in recurrent and newly diagnosed glioblastoma, an aggressive brain cancer. Shares advanced 6.4% in after-hours trading.
Tesla cut prices between 6% and 20% for its Model 3 and Model Y cars in the U.S. Shares fell 4.6% in premarket trading.
Virgin Galactic Holdings on late Thursday said Swami Iyer, president of aerospace systems, is departing but will continue to serve as an adviser to the CEO until March 3. Shares gained 17% in after-hours trading.
UnitedHealth and Delta Air Lines will also be posting quarterly numbers Friday.
Central Banks
The Federal Reserve and the European Central Bank are far from done with interest-rate rises, Pictet Asset Management said.
"So far, central bankers are managing to convince the markets they're taking inflation seriously."
But any sort of lapse, where inflation starts to rise again because of a premature easing, would be seriously damaging to their credibility.
"This, in turn, raises the risk that central banks will go too far with tightening and drag their economies into recession--which would cause a different sort of damage to their credibility," Pictet AM said.
Forex:
The dollar remained weak and close to seven-month lows against a basket of currencies as traders considered that the latest fall in U.S. inflation should enable the Federal Reserve to cut interest rates in the second half of the year, Commerzbank said.
"The market is likely to successfully ignore any future hawkish comments from Fed members."
A reversal in the Fed's communication--which has so far pointed to higher rates--could cause further dollar weakness, Commerzbank said.
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Sterling rose as the dollar weakened following further signs of cooling U.S. inflation and after data showed the U.K. economy unexpectedly grew in November.
The U.K. economy grew 0.1% month-on-month, data showed Friday. This, combined with October's 0.5% growth, have "delayed fears that the U.K. has entered a recession as early as the fourth quarter," Monex Europe said.
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The euro could extend its recent rise against the dollar, boosted by more supportive interest rate differentials, ING said.
"With short-dated (two-year) USD swaps drifting to new lows for the move, EUR/USD swap differentials continue to move in favor of EUR/USD."
This theme should play a greater role in EUR/USD over the next 12 months, ING said.
EUR/USD remains on course to rise to 1.0900 and possibly 1.0950, it added.
EUR/USD may see weekend profit-taking but losses should be limited with 1.0750 acting as a good support level in the near-term, ING said.
Read EUR/USD Could Extend Gains, Charts Show
Energy:
Oil was little changed but set for weekly gains with Fitch saying signs of Chinese demand returning lifting prices but weak economies and still high inflation likely to pose a near-term risk.
Metals:
Base metals are set for weekly gains on growing hopes for demand.
ANZ said that while China's reopening has been a strong driver of gains for metals, signs the Fed will begin easing the pace of its interest hikes have added to hopes about metals demand.
"A slowdown in rate hikes by the Fed could also see economic growth across developed markets hold up better than previously expected."
Metals Outlook
Bet on ferrous and base metals this year rather than battery materials and thermal coal, Goldman Sachs said.
"While we continue to think 1Q23 will be a tough quarter for base metals and steel due to ongoing weak European and global demand, our expectation of a China reopening in 2Q, extreme lows in global base-metal inventories and ongoing supply side disruptions make us positive on a 2H commodity price recovery."
That recovery should be led by steel, mid- to high-grade iron ore and coking coal, as China's steel market recovers, as well as copper, aluminum and zinc, which should be supported by low stockpiles and supply challenges.
TODAY'S TOP HEADLINES
BlackRock, World's Largest Asset Manager, Buys Stake in Small-Business 401(k) Startup
BlackRock Inc. is taking a minority stake in a 401(k) provider that caters to small businesses, a long-ignored segment of the retirement market that is starting to attract more interest.
BlackRock, the world's largest asset manager, on Friday said it is making the investment in Human Interest Inc., a San Francisco company that has offered 401(k) plans since 2015.
Crypto.com Cuts 20% of Its Staff, Citing Economic Downturn and FTX Collapse
SINGAPORE-Crypto.com is cutting a fifth of its global workforce, in a second round of layoffs in six months, after a plunge in the value of many cryptocurrencies and the collapse of rival FTX.
The cryptocurrency exchange's co-founder and chief executive officer, Kris Marszalek, blamed "a confluence of negative economic developments" for the reductions, which followed staff cuts that took place last July. The additional reductions were necessary to position Crypto.com for long-term success, he said in a blog post on Friday.
Boeing 737 MAX Flies Again With Chinese Airline After Nearly Four-Year Halt
SINGAPORE-China returned Boeing Inc.'s 737 MAX to its skies Friday after almost four years, a significant milestone for the U.S. company, which relies on China as a major market.
Two of the jets, operated by China Southern Airlines, took off from the southern city of Guangzhou in what industry experts say are the first commercial flights since March 2019 by a Chinese airline using the aircraft.
Tesla Cuts Prices Across Models Sold in U.S.
Tesla Inc. cut prices for some of its vehicles sold in the U.S. by nearly 20%, aiming to lure new buyers at a time Wall Street is concerned appetite for the car maker's vehicles is weakening.
The cuts, which span Tesla's lineup, are likely to allow some buyers to qualify for a $7,500 U.S. government tax credit.
FAA Cites Personnel Failure in System Outage That Halted Flights
The Federal Aviation Administration said its preliminary investigation into a nationwide flight disruption this week found that it was the result of actions by personnel who failed to follow procedures.
A breakdown in the FAA's Notice to Air Missions, or Notam pilot-alert system, led the agency to halt all domestic departures for nearly two hours early Wednesday, snarling thousands of flights and contributing to around 1,300 cancellations. The agency said late Thursday that the Notam system was functioning normally.
Europe's Mild Winter Cushions Economic Blow of Ukraine War
Russia's economic war with the West looks set to claim a much smaller toll on Europe than the brutal recession many economists warned about just months ago, due to falling energy prices and government intervention to buttress the continent's economy.
A mild winter so far, efforts by businesses and households to cut energy consumption, successful moves by governments to find new natural-gas suppliers and hundreds of billions of euros in fiscal support mean Europe's recession is likely to be shallow and brief-if it happens at all-according to fresh data and estimates.
China's Export Decline Deepens, Threatening Growth
HONG KONG-The export boom that carried China's economy through much of the Covid-19 pandemic has lost momentum, adding urgency for Beijing to seek growth drivers elsewhere as the global economy struggles.
The decline for Chinese exports got steeper in the final month of 2022, falling 9.9% from a year earlier, compared with a 8.7% drop in November, according to data from China's customs bureau. While the decline wasn't as steep as the 10.5% drop forecast by economists polled by The Wall Street Journal, it marked the biggest dip since February 2020, when a nationwide lockdown brought economic activity to a halt.
Japan's 10-Year Government Bond Yield Breaches New Cap
TOKYO-The yield on benchmark 10-year Japanese government bonds breached the 0.5% cap set by the Bank of Japan less than a month ago, as pressure grows on the central bank to tighten policy.
Strong inflation data this week have sparked speculation among investors that the BOJ will join the Federal Reserve and other central banks in unwinding its easing program by lifting the cap again, or even scrapping its yield-curve control policy altogether.
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01-13-23 0632ET
