The stock market rally rebounded from Monday’s lows, with the Nasdaq recovering from below its 200-day line. But the market bounce hit resistance midweek, with the major indexes all lower for the week. Growth stocks, especially software and highly valued growth names, continued to struggle. Taiwan Semiconductor () broke out on bullish earnings and guidance. JPMorgan Chase ( ), Citigroup ( ) and Wells Fargo ( ) kicked off bank earnings, with the stocks diverging. Energy stocks jumped as crude oil prices hit a two-year high.
Stock Market Rally Struggling
The stock market rally got a rebound from Monday’s lows, but then fizzled on Wednesday and reversed late in the week. The major indexes all retreated solidly for the week, with the Nasdaq testing its 200-day line while the Dow Jones and S&P 500 hovered around their 50-day lines. Growth stocks were hammered once again, though Taiwan Semiconductor () broke out. Energy, fertilizer and commodity plays led. Financials did well as Treasury yields traded around two-year highs, though JPMorgan and Citigroup tumbled on earnings.
Fed Hawkish, Inflation Hot
Hawkish Fed news dominated the week, with the CPI inflation rate hitting 7% for the first time since 1982 and even relatively dovish members signing onto a March rate hike. However, a rise in jobless claims and unexpected drop in December retail sales reported on Thursday and Friday somewhat muddied the picture of economic strength. Fed chief Jerome Powell, appearing before a Senate hearing on his nomination to a second term, preached the same message revealed by minutes from the December Fed meeting. After wrapping up its asset-purchase program in March, the Fed may act “sooner and faster” to unwind its balance sheet than it did after the previous crisis.
Crude Oil Rallies On Strong Demand, Tight Supplies
Crude oil prices and energy stocks continued to rally as investors bet the omicron Covid variant won’t derail a solid global recovery, while natural gas prices jumped. The U.S. Energy Information Administration reported a 4.6 million barrel drop in domestic crude supplies for the week ended Jan. 7. Gasoline supplies surged higher by 8 million barrels. Analysts polled by S&P Global Platts expected a 1.6 million barrel drop in crude supplies and a 3 million barrel increase of gasoline stockpiles. The EIA also gave a bullish global oil demand forecast on Tuesday, but it also sees U.S. oil production averaging a record-high 12.4 million barrels per day in 2023.
Taiwan Semi Tops Q4 Targets
Taiwan Semiconductor Manufacturing () reported Q4 EPS grew 19% while sales rose 24% to $15.74 billion, both beating views. The world’s largest chip foundry guided to Q1 sales of $16.9 billion, also above forecasts. It also targeted 2022 capital spending of $40 billion to $44 billion vs. last year’s $30 billion. Taiwan Semi makes chips for fabless semiconductor firms and consumer device makers such as Apple ( ), AMD ( ), Nvidia ( ) and Qualcomm ( ). Smartphone chips accounted for 44% of Taiwan Semi’s revenue in the fourth quarter while high-performance computing chips made up 37% of sales. TSM stock jumped to a new high on Thursday.
Banks Top Earnings Views
JPMorgan Chase (), Citigroup ( ) and Wells Fargo ( ) all reported better-than-expected Q4 earnings. JPMorgan EPS dipped 7% while revenue tilted higher. Earnings were flattered by JPMorgan releasing $1.3 billion from loan loss reserves. Citigroup EPS edged higher as revenue climbed 1%, but expenses rose solidly. Citi also sold operations in four SE Asian countries. Wells Fargo GAAP earnings and revenue rose solidly. JPM and Citi fell solidly Friday, while Wells rose.
Big Pharma Moves Into CRISPR
Pfizer () announced a $1.35 billion collaboration deal with Beam Therapeutics ( ), which is using CRISPR technology to perform what are known as base edits. Like fellow gene-editing companies — Crispr Therapeutics ( ), Intellia Therapeutics ( ) and Editas Medicine ( ) — Beam aims to create one-time treatments for genetic conditions. Meanwhile, Germany’s Bayer formed a gene-editing deal with Mammoth Biosciences.
Tesla Posts Record China Sales
Tesla China sales hit 70,847 in December, with only 245 vehicles exported. In November, Tesla Shanghai sold 52,859 made-in-China Model 3 sedans and Model Y crossover SUVs, including 21,127 exported. Most of those exports go to Europe. U.S.-based EV Tesla () maker got the OK to build 2,000 Model Y bodies at Gigafactory Berlin, as it awaits final approval to open the plant. Tesla and many other EV makers likely got a boost in December, with China cutting EV subsidies by 30% in 2022. After 2022, Beijing plans to end subsidies. Separately, Tesla reportedly is pushing back Cybertruck production to early 2023.
Delta Sees ‘Meaningful Profit’
Delta Air Lines () reported fourth-quarter results that beat expectations, and said it expects “meaningful profit” this year overall as it recovers from two years of the pandemic and a string of losses in 2020 and last year. However, the Atlanta-based airline said it expects a loss for the first quarter, as the omicron variant tears through its workforce and customer base. However, the company said it was positioned to bring in a profit for the quarters to follow.
Vaccines Lift Albertsons
Albertsons () beat fiscal Q3 views, as rising prices and Covid vaccine revenue lifted comparable sales. The grocery-store and pharmacy chain raised its full-year comp-sales and profit outlook. However, BMO analysts characterized its Q4 outlook as cautious, due to “consumer uncertainty” and “changing government stimulus.”
News In Brief
KB Home () reported EPS jumped 71%, beating Q4 views. Revenue rose 40% to $1.68 billion, slightly missing. But the homebuilder gave bullish guidance on revenue, selling prices and margins. Shares soared.
Commercial Metals () reported fiscal Q1 EPS jumped 179%, comfortably above views. Sales rose 42% but missed views. The Texas steelmaker said Q2 margins should match or top recent levels. Shares rose.
Biogen () tumbled after Medicare said it would only cover the cost of the biotech’s Alzheimer’s treatment, Aduhelm, for patients in clinical trials.
Infosys () jumped after the Indian IT services firm raised full-year revenue targets. Fiscal Q3 EPS of 18 cents, up from 17 cents a year earlier, met views. Revenue rose 21% to $4.25 billion. But rival Wipro ( ) tumbled after missing views.
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