Daily Markets: Can Earnings Turn Market Sentiment Around?

Today’s Big Picture

Asian markets closed down across the board today, with the exception of Hong Kong’s Hang Seng which edged up 0.06%. Japan’s Nikkei fell 2.80%, India’s Sensex declined 1.08%, Taiwan’s TAIEX and South Korea’s KOSPI lost 0.82% and 0.77%, respectively and China’s Shanghai Composite closed off 0.33% on the day. By mid-day trading, European equity indices are mixed and U.S. futures point to a positive open.

So far in 2022, omicron-led disruptions, inflationary pressures, and concerns over the pace of interest rate hikes have weighed on equities. The accelerating pace of quarterly earnings will be the focus for investors, and in particular, how companies are contending with these pressures. As a result, earnings will likely shape how the stock market performs over the next several days, and technical analysts will be looking to see if the S&P 500 holds its 100-day moving average level or break lower.

Data Download

Coronavirus

The Biden administration is planning to distribute ~400 million non-surgical N95s sourced from the government's Strategic National Stockpile through pharmacies and community health centers to help ensure Americans can access the more-protective masks. The Federal government through the U.S. Post Office has set up a website where households can register to receive 4 free rapid antigen covid-19 tests. The tests are scheduled to start shipping at the end of January.

Reports indicate British health officials are aiming to be ready to start charging Britons for COVID-19 tests that are currently free at the end of June.

International Economy

German inflation for December remained flat compared to both consensus estimates and November CPI reading of 5.70%.

Inflation in the UK rose yet again in December to an annualized rate of 5.40%, surprising 0.20% over estimates and 0.30% over the November reading. This not only continues to put pressure on UK consumers but also raises the spectre of potential rate hikes by the Bank of England. December Producer Price Index Output declined slightly to 9.30% from the previous reading of 9.40%.

Flow resumed this morning in a pipeline connecting Northern Iraq and the port of Ceyhan in Turkey. Yesterday saw what has been deemed an accident take the 450 thousand barrels a day pipeline offline. Officials were able to control the fire and make repairs in short order.

On the geopolitical front, Secretary of State Antony J. Blinken will meet with Russia’s foreign minister on Friday to explore a diplomatic path to avoiding a conflict in Eastern Europe.

Domestic Economy

U.S. Housing Starts & Building Permits will be released at 8:30 AM ET this morning with the starts consensus estimating a slight drop from the previous 1,679K reading to 1,650K in December and permits expected to drop slightly as well from 1,717K to 1,705K for the month.

Later today U.S. Weekly Mortgage Applications will be released by the Mortgage Bankers Association (MBA). Given the Fed’s recent statements on rate hikes, expectations are that applications will be increasing as fence-sitters wade into the market.

Markets

Renewed concerns over the potential pace of Federal Reserve interest rate hikes and the pace of the economy, as well as disappointing bank earnings, led the S&P 500 to fall 1.8 yesterday. The Nasdaq Composite dropped 2.6% and the Russell 2000 suffered with its 3.1% fall, while the Dow Jones Industrial Average lost 1.5%. From a sector perspective, 10 of the 11 S&P 500 sectors closed the day lower with losses ranging from 0.7% (real estate) to 2.5% (information technology). The lone exception was the energy sector, which finished yesterday 0.4% higher, on the back of another 2% increase in oil prices.

Stocks to Watch

Before trading in U.S. equity markets get under way today, Bank of America (BAC), Comerica (CMA), Fastenal (FAST), Morgan Stanley (MS), Procter & Gamble (PG), and US Bancorp (USB) will report their latest quarterly results.

Lithography systems company ASML Holdings (ASML) reported December quarter results that topped EPS expectations with revenue that rose 26.0% YoY to €4.99 billion, modestly missing the €5.11 billion consensus. Noting, "We experience higher demand for our systems than our production capacity can accommodate,” ASML lifted its 2022 revenue forecast to +20% YoY to €22.3 billion vs. the €21.97 billion consensus.

Citing supply-chain and COVID-19 related challenges, Orion Energy Systems (OESX) issued downside guidance that calls for revenue of ~ $30.5 million vs. the $40.5 million consensus and reduced its 2022 revenue outlook to $130 million vs. its prior view of at least $150 million and the $149.8 million consensus.

Ford Motor (F) shared its December quarter earnings report will contain several one-time items and adjustments including a gain of $8.2 billion on its equity investment in Rivian (RIVN), following Rivian's November IPO. Ford will reclassify its ~$900 million first-quarter 2021 non-cash gain on the Rivian investment as a special item and therefore not be included in Ford's full-year adjusted EBIT or adjusted EPS.

AT&T (T) and Verizon (VZ) have once again delayed the implementation of their 5G networks around key U.S. airports. While the FAA worries that new cellular frequencies could endanger aircraft by throwing off radio altimeter readings, the FCC and other regulators around the world feel otherwise.

Apple (AAPL) warned a bill known as the American Innovation and Choice Online Act is making its way through Congress could impact the company's App Tracking Transparency (ATT) tool it rolled out last year and may aid “those who have been irresponsible with users’ data.”

Google’s (GOOGL) YouTube announced it is closing its original programming effort, focusing instead on the millions of creators who populate the video platform with content.

Shares of Unilever (UL) dropped 14% yesterday after the company confirmed it offered ~$68 billion to acquire GlaxoSmithKline's (GSK) consumer business.

The UK’s Competition and Markets Authority announced it is investigating the anticipated acquisition of Avast plc (AVST) by NortonLifeLock (NLOK) to determine if it will result in “a substantial lessening of competition.”

Riley Financial (RILY) agreed to acquire FocalPoint Securities for total consideration of up to $175 million.

IPOs

Several IPOs including those for Verdant Earth Technologies Limited (VDNT), Jupiter Neurosciences (JUNS), Four Springs Capital Trust (FSPR), and Samsara Vision (SMSA) are expected to price this week. Readers looking to dig more into the IPO calendar and expected pricings should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Alcoa (AA), Discover Financial Services (DFS), and United Airlines (UAL) will be among the companies reporting their latest quarterly results.

Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

• Thursday, Jan. 20
  • Germany: PPI – December
  • France: Manufacturing Business Climate Index- January
  • Eurozone: CPI – December
  • Eurozone: European Central Bank Monetary Policy Decision
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Philadelphia Fed Index – January
  • US: Existing Home Sales – December
  • US: Weekly EIA Crude Oil Inventories
  • US: Weekly EIA Natural Gas Inventories
• Friday, Jan. 21
  • Japan: CPI – December
  • UK: Retail Sales – December
  • Eurozone: Consumer Confidence - January
  • US: Leading Indicators – December

Thought for the Day

“Life isn’t always about doing the things we like to do. it’s about doing things we have to do.” ~David Goggins

Disclosures

• NortonLifeLock (NLOK), Avast plc (AVST) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Apple (AAPL), Verizon (VZ) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks Economy Coronavirus Smart Investing Earnings