Daily Markets: Trading Year Begins Anew as Investors Kick Off 2022

Today’s Big Picture

Welcome to 2022! In 2021, we saw double-digit return for U.S. equities, but now the investing clocks are being reset and we begin the trading year anew. As we put December's thin trading behind us, we face not only the usual start of the month economic data but also the beginning trickle of quarterly earnings reports. The economic data will tell us what degree omicron slowed the global economy, while earnings will also give us insights into the impact of inflation and rising input costs during the December quarter. The week’s action will pick up as CES 2022, a showcase for technology and consumer products and historically one of the largest trade association events, takes the center stage. Amid all of this, market watchers will no doubt be scrutinizing the latest omicron data and headlines, while also following developments on the Build Back Better bill in Washington, which if passed, could add 0.4% to GDP in 2022.

Asian markets closed mixed today as Japan’s Nikkei and Hong Kong’s Hang Seng fell 0.40% and 0.53%, respectively, while India’s Sensex rose 1.60%, South Korea’s Kospi finished the day ahead 0.37%, and Taiwan’s TAIEX rose 0.28%. The Shanghai stock market was closed today in observance of the New Year’s holiday. By mid-day trading, European equity indices are up across the board and U.S. futures point to a positive start to the new trading year.

Data Download

Coronavirus

A record 10 million people were diagnosed with Covid-19 in the seven days through Sunday, almost twice the pandemic’s previous weekly high, as omicron spreads across the globe. Dr. Anthony Fauci shared testing negative to end isolation period guidance is under consideration. Current rules have already reduced the quarantine period from two weeks to five days and some states have advised simply wearing masks as all times in an effort to contain the spread by infected people that have been vaccinated and boosted.

UK Health Secretary Sajid Javid says restrictions should be a "last resort" and wants to avoid lockdowns in 2022. Israel will start offering a fourth dose of the coronavirus vaccine to people aged 60 and over, becoming the first country in the world to widely disseminate the extra jab to fight off the omicron strain.

Goldman Sachs (GS) joined JPMorgan Chase (JPM) and Citigroup (C) in adopting a more cautious stance regarding the omicron variant and is now asking its U.S. employees to work from home if they can until January. 18. Up until this announcement the firm’s position was that employees should be boosted back at the office.

International Economy

Today sees several Eurozone countries reporting December Purchasing Managers Index (PMI) figures. While overall Eurozone expectations are flat MoM, consensus expectations from country to country are understandably mixed. Overall Eurozone saw PMI post an in line 58.0 as compared to November’s 58.0 and expectations of 58.0.

Germany reported PMI surprised to the downside 0.50 at 57.4 as compared to both November’s 57.9 as well as consensus expectations of no change. The recent announcement that the country will be taking some nuclear power generation offline, and expectations are that energy input prices will put pressure on manufacturing going forward.

France’s Manufacturing PMI for December came in at 55.6, 0.65 higher than consensus of 55.0 and higher than November’s reported 54.9. France had earlier announced that it too would be taking nuclear power generation sources offline leaving the country at the mercy of Russian natural gas providers. The U.S. has started increasing LNG exports to Europe to relieve some of this energy input price pressure.

December Manufacturing PMI for Italy came in at 62 which was down compared to November’s reading of 62.8 but stronger than the expected 61.5.

Spain’s December Manufacturing PMI slowed MoM to 56.2 from November’s reading of 57.1, matching the consensus forecast for the month.

Reports suggest OPEC+ will stick to its plans for a February output increase when it meets tomorrow, implying a short-lived impact on demand from omicron.

Domestic Economy

Later this morning, Markit Economics will release its December US Manufacturing PMI, which is expected to dip to 57.8 from November’s reading of 58.3. November Construction Spending is expected to rise an additional 0.60% on top of November’s 0.20% increase.

Overall GDP growth expectations for 2022 are lower than 2021 with the pressures of a stretched supply chain continuing to affect almost every sector of the economy. While top-line unemployment figures have been steady around 4.3% adjusting for “The Great Resignation” puts those figures more in the 6%+ range. Still, companies’ strong balance sheets coupled with good old American ingenuity and entrepreneurship point to a path forward through the coming transition to the next stage of the economic cycle.

Markets

The last few days of 2021 ended on a bit of a whimper amid renewed omicron-related headlines that raised fresh questions over return to office plans and whether schools kick-off 2022 online. Despite the subdued finish, the week was largely positive despite the typical seasonal drop in trading volumes and lack of market-moving news flow between the Christmas and New Year’s holidays. All the major stock market indices added to their month of December and 4Q 2021 gains, with the S&P 500 rising more than 4% for the month and nearly 11% for the quarter. For those that missed it, here are the 2021 returns for the major U.S. market indices:

• S&P 500 +26.9%
• Nasdaq Composite +21.4%
• Dow Jones Industrial Average +18.7%
• Russell 2000 +13.7%

Stocks to Watch

Before we kick off trading for 2022, no companies are expected to report their quarterly results.

Shares of China Evergrande Group (EGRNF) were suspended from trading on the Hong Kong Stock Exchange on Monday pending the release of "inside information." Last week, the property developer missed another round of interest coupon payments this time worth $255 million as it struggles to repay more than $300 billion in liabilities.

Tesla (TSLA) reported production of more than 305,000 vehicles and deliveries of over 308,000 vehicles vs. the consensus forecast of 263,422 and the 180,570 delivered in 4Q20. In 2021, the company delivered over 936,000 vehicles vs. 499,550 in 2020. Tesla wasn’t the only EV to report December figures:

• Li Auto (LI) delivered 14,087 Li ONEs in December, a 130.0% increase YoY, which brought its 4Q 2021 deliveries to 35,221, up 40.2% QoQ and 143.5% YoY.
• Nio (NIO) delivered 10,489 vehicles during the month, up 49.7% YoY. For the December quarter, NIO delivered 25,034 vehicles, a new quarterly record, and a 44.3% YoY increase.
• XPeng (XPEV) delivered 16,000 Smart EVs in December, exceeding the monthly delivery benchmark of 15,000 units for the second consecutive month despite ongoing global supply chain challenges.
• BYD Company (BYDDF) sold more than 93,945 electric vehicles in December up, 225.7% YoY and up 3% MoM from 91,219 units in November despite the Covid-19 outbreak in Xi'an, northwest China, which forced a temporary shutdown of one of its production sites.

The Macau Gaming Inspection and Coordination Bureau reported December gross revenue rose +1.8 YoY to HKD 7.962 billion, up +0.1% from November. Investors will watch the follow through on these monthly figures through the lens of Las Vegas Sands (LVS) and Wynn Resorts (WYNN) shares as well as MGM Resorts (MGM), Melco Resorts (MLCO) to name a few.

Walgreens Boots (WBA) reportedly received a takeover offer from private equity firm Bain Capital for its Boots drugstore chain in the UK.

IPOs

Expected IPOs this week include those for The Better Being Company (BBCI), Cadre Holdings (CDRE), Hear.com (HCG), and WCG Clinical (WCGC). Readers looking to dig more into these and other pending transactions should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Jefferies Financial Group (JEF) is one of the few companies slated to report its quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon

• January 4: US - ISM Manufacturing Index – December
• January 5: Japan – Markit/JMMA PMI Manufacturing – December
• January 5: China – Markit/Caixin PMI Manufacturing – December
• January 5: France – Consumer Confidence Survey – December
• January 5: Eurozone – Markit PMI Services – December
• January 5: Eurozone – Markit PMI Composite Index - December
• January 5: US - Weekly MBA Mortgage Applications
• January 5: US - ADP Employment Change Report – December
• January 5: US - Markit PMI Services – December
• January 5: US - Weekly EIA Crude Oil Inventories
• January 6: Japan – PMI Services - December
• January 6: China – Markit/Caixin Services PMI - December
• January 6: Germany – Manufacturing Orders – November
• January 6: Eurozone - PPI - November
• January 6: US - Weekly Initial & Continuing Jobless Claims
• January 6: US - Factory Orders – November
• January 6: US - ISM Non-Manufacturing Index – December
• January 6: US - Chicago PMI - December
• January 7: Germany – Industrial Production – November
• January 7: Eurozone – Business Climate, Consumer Confidence, Economic Confidence, CPI – December
• January 7: Eurozone - Retail Sales - November
• January 7: US - Employment Report – December
• January 7: US - Consumer Credit – November

Thought for the Day

“It’s your outlook on life that counts. If you take yourself lightly and don’t take yourself too seriously, pretty soon you can find the humor in our everyday lives. And sometimes it can be a lifesaver.” ~ Betty White

Disclosures

• Li Auto (LI), Nio Inc. (NIO), Tesla (TSLA), XPeng (XPEV) are constituents of the Tematica BITA Cleaner Living Index
• Li Auto (LI), Nio Inc. (NIO), Tesla (TSLA), XPeng (XPEV) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Walgreens Boots Alliance (WBA) is a constituent 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