MARKET WRAPS

Watch For:

Retail Sales for December; Industrial Production and Capacity Utilization for December; University of Michigan Preliminary Consumer Survey for January; results from BlackRock, JPMorgan Chase, Citigroup, Wells Fargo; Federal Reserve Bank of Philadelphia President Patrick Harker speaks at The Chamber of Commerce for Greater Philadelphia Economic virtual event; Federal Reserve Bank of New York President John Williams speaks at Council on Foreign Relations event (virtual).

Opening Call:

Treasury yields rose, while stock futures were little changed, as earnings season ramped up and investors awaited fresh data on retail spending.

Earnings are due from BlackRock, Citigroup, JPMorgan Chase and Wells Fargo ahead of the opening bell.

Money managers will be looking for guidance on how companies are being impacted by the Omicron variant and elevated inflation. Some investors are betting that anticipated interest-rate hikes will fuel profits in financials and make the sector more attractive than tech.

Expectations for a rate rise as soon as March have caused some investors to sell government bonds, pushing up yields and down prices.

"Equity markets will continue to take their cues from the bond market," said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "What's becoming clear is the Fed is realizing that inflationary pressures are larger and more broad-based than they previously expected."

Investors are trying to assess how heightened inflation, a tight labor market and rising wages will impact the Federal Reserve's timeline for raising rates. Lael Brainard, the White House nominee to serve as the central bank's No. 2 official, told Congress on Thursday that efforts to reduce inflation were the Fed's "most important task."

Fresh data on sales at retail stores, online sellers and restaurants in December are due at 8:30 a.m. ET.

Economic Insight: The U.S. economy is expected to grow 4% this year, less than the 4.4% previously estimated due to the hit to activity from the Omicron coronavirus variant, economists from Wells Fargo said.

Consumer-price inflation is expected to average 5.2% over the course of the year, and the Federal Reserve is seen rising interest rates four times, by 100 basis points in total, to tame price growth, the bank said.

More specifically, the Fed is seen rising interest rates at the March meeting by 25 basis points, followed by three more 25-basis-points increases over the remainder of 2022. "These forecasts are higher than current market pricing and what most Fed policymakers currently envision, " Wells Fargo said.

Forex:

The dollar extended its falls that began after U.S. inflation data earlier this week were high but in line with expectations, prompting investors to take profits on the currency's strong gains since late November.

If Friday's retail sales figures are soft this "may provide an excuse for the dollar to correct a little further," ING said.

The DXY dollar index earlier fell to a two-month low of 94.6290 and could fall further toward 94.10, it said, adding that "extended positioning has probably made the dollar vulnerable early this year."

However, ING expects the falls to be temporary and says the dollar should start to rise again ahead of the Jan. 26 Fed policy meeting.

The euro's recovery versus the dollar may have slightly further to run but the gains won't last, ING said. The EUR/USD 1.1500 resistance level looks vulnerable and the pair could rise to 1.16, ING analysts said.

However, any increase to the 1.15-1.16 region would be a correction and ING retains its 1.08-1.10 target for this spring/summer as the Fed starts raising interest rates. EUR/USD's adjustment seems dollar-driven rather than any "bullish" reassessment of the euro with international fund managers investing in non-dollar assets such as emerging market equity and debt, they said.

Cryptocurrency dogecoin jumped 14% from its 5 p.m. ET level Thursday after Elon Musk said Tesla was accepting payment for some merchandise with the currency, which was originally started as a joke.

Bonds:

The yield on the benchmark 10-year Treasury note ticked up to 1.729% Friday from 1.708% Thursday.

Rates markets have entered consolidation mode after a strong selloff, said Societe Generale's rates strategists, who expect breaking above crucial levels by global rates being further off.

"Breaking key levels of 0% and 1.80% for 10-year Bunds and USTs (our 1Q targets) may require some time," they say. That said, they see the medium-term trend being firmly in place, targeting 0.25% on 10-year Bund yields and 2.25% on 10-year U.S. Treasury yields in late 2022.

Citi sees resistance to higher eurozone government bond yields to be defined by markets' pricing of global terminal interest rates, said strategist Jamie Searle.

"Resistance to higher euro yields is likely to come from the stickiness of global terminal rate pricing and growing policy error fears that may be hard to shake off," he said.

Citi is of the view that the selloff in German Bunds may already be fizzling out.

Commodities:

Oil rose to its highest level since October. A weaker dollar supports dollar-denominated oil by making it cheaper for holders of other currencies. Brent is on course for a more than 4% weekly gain and is within striking distance of hitting its highest level since 2014.

"The combination of Omicron making a limited negative impact on global oil demand, continued supply issues, and OPEC+ struggling to increase production in line with production quota increases have pushed Brent above" $85 a barrel, Helge Andre Martinsen, senior oil analyst at DNB Markets, said.

Investors can look to commodities for more stability in a period of concern that interest-rate rises could hurt equity valuations, Goldman Sachs said. In contrast to equities, which are driven by expectations of demand growth, commodities are primarily driven by current demand levels.

"This distinction is critical as early rate hikes impact growth rates, and hence financial market valuations, but not today's demand levels," which are the bigger driver of commodities

Electric vehicle companies are facing much higher costs for the lithium metal used in the batteries that give the cars power, Rystad Energy said.

"Battery-grade lithium are poised to skyrocket. Prices for the metal are already trading at a record high of $35 per kilogram in Asia, and are likely to keep climbing to $50 per kilogram in the second half of 2022."

Rystad said interest in lithium iron phosphate batteries has taken off since early 2021, and it expects the supply of lithium salts "to remain tight through the first half of 2022 at least, due to lagging production in China and South America."


TODAY'S TOP HEADLINES


Citigroup Exits More Asian Consumer-Banking Operations With $3.7 Billion Deal

Citigroup Inc. agreed to sell its consumer-banking franchises in Indonesia, Malaysia, Thailand and Vietnam to United Overseas Bank Ltd., advancing its strategy to exit most of its retail operations in Asia and free up resources to deploy in wealth management and in serving corporate customers.

The New York-based bank on Thursday said the deal includes retail-banking and credit-card businesses. Singapore-headquartered UOB will pay Citigroup for the net assets of the businesses to be acquired, plus a premium of $690 million, Citigroup said.


Elon Musk Says Tesla Is Accepting Dogecoin for Some Merchandise

Elon Musk said Tesla Inc. is accepting payment for some merchandise with dogecoin, a return for the electric-vehicle maker to acceptance of digital currencies for some payments.

The Tesla chief executive said in an early Friday tweet, "Tesla merch buyable with Dogecoin." The company's website showed some items, including one labeled a "Giga Texas Belt Buckle," priced in the cryptocurrency.


Walgreens, CVS Shut Some Pharmacies on Weekends as Omicron Strains Staffing

The biggest U.S. drugstore chains are shutting some pharmacies on weekends as the spread of Covid-19 and the Omicron variant exacerbates already severe staffing shortages.

CVS Health Corp. and Walgreens Boots Alliance Inc. said weekend shutdowns are unusual but become a reality when locations lack enough pharmacists and technicians to remain open.


Google Doubles Down on the Office, Buying London Site for $1 Billion

LONDON-Google plans to spend $1 billion buying office space it already uses in central London, saying it believes office work will remain vital for the tech giant.

The purchase of the site, called Central Saint Giles, near the British Museum, comes as the Alphabet Inc. unit is building a separate, massive new U.K. headquarters about a mile and a half away, next to London's King's Cross train station.


Eye-Care Company Bausch & Lomb Files for IPO

Bausch & Lomb Corp. has filed paperwork for its initial public offering, nearly a year and half after its parent company, Bausch Health Cos., said it would spin off the eye-care company.

The company said it plans to raise $100 million in its IPO, a placeholder figure companies often use to calculate filing fees and is often changed. It didn't disclose how many shares it intends to offer to the public, according to registration documents filed with the Securities and Exchange Commission on Thursday.


Tiger Woods-Backed SPAC Files for IPO

Professional golfer Tiger Woods is a lead investor in Sports & Health Tech Acquisition Corp., a so-called blank-check company looking to raise $150 million, targeting sports and health technology investments.

(MORE TO FOLLOW) Dow Jones Newswires

01-14-22 0613ET