MARKET WRAPS
Watch For:
U.S. Manufacturing PMI for December; Canada Manufacturing PMI for December
Opening Call:
Today's Headlines/Must Reads
- Investors Brace for More Market Tumult as Rates Keep Rising
- Big Banks Predict Recession, Fed Pivot in 2023
- Tech Layoffs Are Happening Faster Than at Any Time During the Pandemic
- Exxon, Chevron Focus on Oil Projects in the Americas
- Tesla Misses Delivery Target as Growth Slows
Follow WSJ markets coverage here.
Stock futures rose on Tuesday as investors returned from the festive break in a generally bullish mood.
Activity in index futures was choppy, however, with the S&P 500 contract wobbling in a 55 point range in early-hours action--volatility that illustrated the uncertainty still pervading the market.
"Recessionary concerns will again top the agenda, underpinned by high inflation and rising interest rates," Interactive Investor said.
"This in turn could point to a troubled January as investors search for positive indications that the tightening policies of the central banks may begin to ease given weakening economic data."
Indeed, the IMF greeted the new year with a warning that a third of the global economy will suffer recession in 2023, a downturn that will likely trim corporate profits.
Read more here .
In addition, a burst of fresh strength in the dollar on Tuesday--a common reaction to global economic slowdown worries--was likely to further crimp earnings of U.S. multinationals.
Still, Evercore ISI reckoned that such concerns don't necessarily mean stocks can't rally.
"Forecasting an earnings recession in 2023 to accompany the economic recession that now seems inevitable, along with a 2023 year end S&P 500 price target of 4,150, would seem impossible."
Stocks to Watch
Semiconductor stocks, including Advanced Micro Devices, Nvidia and Intel gained premarket, with AMD and Nvidia each adding more than 2%. Intel rose 1.7%.
Tesla delivered fewer vehicles in 2022 than it initially targeted. Shares fell more than 3% premarket.
Li Auto reported record-high monthly delivery figures for December last Friday, rounding out 2022 with a 47% increase in deliveries for the year. Li Auto's ADRs rose more than 7% premarket. Stock in rivals NIO and XPeng also gained ahead of the opening bell.
Forex:
The euro could rise against the dollar if the nonfarm payrolls report on Friday shows signs of a slowdown in the labor market on the back of the Federal Reserve's interest rate rises, Commerzbank said.
In this case, the market might consider the European Central Bank's more cautious approach to be more appropriate, Commerzbank added.
"If first signs of a slowdown were to appear, with the labor market disappointing EUR/USD might move up further as early as this week, aiming for the 1.08 mark."
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The yen continues to recover after the Bank of Japan unexpectedly widened its yield target range in December and these gains could extend further, MUFG Bank said.
"Even though the yen has already rebounded strongly in recent months, it remains deeply undervalued leaving scope for further upside,"
BOJ Governor Kuroda said the yield curve control adjustment was aimed at improving market functioning but it reinforced market speculation that it's the first step towards tighter monetary policy with the BOJ expected to catch up with major central banks in the year ahead.
Bonds:
As markets are absorbing global central banks' communication at their monetary policy meetings in December, investors can now focus on economic realities again, Julius Baer said.
Economic realities are the rolling recessions among Western economies, and the lower level of energy prices that will slow headline inflation, it said. "Investors will thus increasingly look beyond the next one or two rate hikes and start positioning for rate cuts, which we expect for the second half of the year."
The surge of government-bond yields in December shows that central bankers across the globe managed to overwhelm already "hawkish" market expectations in their communication.
Energy:
Oil regained some momentum in Europe, rebounding from losses in Asia to post modest gains, as investor confidence in demand rising in the near term, grows.
"With the expectation of the Covid curve in China bending favorably, although at dangerously high caseload levels, green shoots on the mobility front, and a pro-growth People's Bank of China, it seems for today anyway, oil traders are looking through the weaker PMI data," SPI Asset Management said.
China's Caixin manufacturing PMI for December came in at 49.0, down from 49.4 in November.
Metals:
Gold prices hit their highest level in six months, before retreating slightly, as prospects of a recession and a tapering in interest rate hikes boosted investor confidence in the precious metal.
"We are looking for a price friendly 2023 supported by recession and stock market valuation risks, an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by year end all adding support," SaxoBank said.
Central-bank buying of gold also provides a soft floor for prices, it added.
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Industrial metals were mixed, despite most macro-led markets opening on a more bullish tone.
"Traders are optimistic that China's reopening will benefit global risk assets and commodity demand, even as the country continues to struggle with Covid," Peak Trading Research said.
TODAY'S TOP HEADLINES
Exxon, Chevron Focus on Oil Projects in the Americas
The globe is shrinking for Exxon Mobil Corp. and Chevron Corp. as the two largest U.S. oil companies pull back on big international oil projects and concentrate on a handful of more lucrative assets closer to home.
The two fossil-fuel giants plan to spend most of their annual budgets in the Americas this year, with Chevron saying it will pour 70% of the capital allocated for production into oil fields in the U.S., Argentina and Canada, and Exxon saying it will spend a similar portion of its budget in the Permian Basin of New Mexico and West Texas, Guyana, Brazil and liquefied natural-gas projects.
Crypto Magnates Cameron Winklevoss and Barry Silbert Trade Barbs
Tensions between crypto magnates Cameron Winklevoss and Barry Silbert erupted into an open dispute on Twitter at the start of the new year, with Mr. Winklevoss accusing Mr. Silbert of "bad faith stall tactics" that are hurting rank-and-file customers.
The back-and-forth on Monday deals another blow to a sector struggling for credibility, especially since the collapse of FTX and its affiliated trading firm, Alameda Research. The fall of the two companies led to outflows from other crypto exchanges and the near-erasure in value of coins tied to FTX and Alameda, domino effects in a closely linked industry.
More Bosses Order Workers Back to the Office as Job Market Shifts
Employers are losing their patience with empty desks in the office.
Companies including investment giant Vanguard Group, workplace technology company Paycom Software Inc. and others have sent directives to employees in recent weeks, urging workers to follow existing hybrid schedules or to come into the office on additional days in 2023, according to internal memos viewed by The Wall Street Journal and interviews with employees. In some cases, bosses have told those who fail to comply that they could face termination within weeks.
Southwest Says It Maintains Normal Schedule as Airline Processes Bags, Refunds
Southwest Airlines Co. returned to more-normal operations this weekend, contending with some weather challenges as it sought to regain credibility with regulators and travelers following the carrier's meltdown over the holidays.
Southwest restored its full schedule Friday after slashing flying plans much of the week in an effort to regain its footing after the cascade of cancellations. It scrapped just a few dozen flights Saturday and Sunday-less than 1% of what it had scheduled each day, according to FlightAware.
Elon Musk's Tesla Comes Up Short of 2022 Delivery Target as Growth Slows
Tesla Inc. delivered fewer vehicles in 2022 than it initially targeted, capping a year during which the stock suffered its worst annual performance as demand appeared to soften and Covid-related production disruptions persisted.
Elon Musk's electric-vehicle maker said Monday that it delivered about 1.31 million vehicles last year, up roughly 40% from 2021. The company would have needed to hand over more than 1.4 million vehicles to meet its initial goal of increasing deliveries by 50% or more.
General Electric Set to Spin Off Health Unit-Putting Focus Back on Power Division
General Electric Co. will start 2023 by splitting off its healthcare unit, completing a key step in the slow-motion breakup of the industrial giant. For the rest of the year it will face questions about the next big step: shedding its power businesses.
GE HealthCare Technologies Inc. will start trading this week, leaving the once-sprawling conglomerate with three divisions: jet engines, natural gas-powered turbines and wind turbines. The gas and wind turbines are expected to be combined with other GE energy businesses into a new company called GE Vernova that will split off in early 2024.
Chinese EV Stocks Rise After Strong December Deliveries
Shares of Chinese electric-vehicle makers rose Tuesday in Hong Kong, led by Li Auto Inc., after strong December delivery data.
Li Auto's shares rose after it posted record-high monthly delivery figures for December last Friday, rounding out 2022 with a 47% increase in deliveries for the year.
TikTok Ban Debate Moves From Washington to Main Street
One of the earliest public debates about blacklisting TikTok in the U.S. isn't taking place in Washington. It is happening in South Dakota's second-most populous city.
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01-03-23 0615ET
