Stock futures edge higher but inflation pressures linger; Ford books $8.2 billion Q4 gain from Rivian investment; 5G rollout pause fails to stop flight cancellations; AMSL boosts chip stocks with bullish 2022 outlook and New York Attorney General Letitia James ups her attack on former President Donald Trump.
Here are five things you must know for Wednesday, January 19:
1. — Stock Futures Edge Higher But Inflation, Rate Pressures Linger
U.S. equity futures edged higher Wednesday, while Treasury yields extended their recent surge amid bets that the Federal Reserve will quicken the pace of near-term rate hikes as inflationary pressures continue to build in the world’s largest economy.
Stocks were hit hard by the prospects of faster rate hikes yesterday, while weaker-than-expected quarterly earnings from Goldman Sachs GS kept the Dow Jones Industrial Average deeply in the red, closing out its worst day since November, and pushed the S&P 500 into a year-to-date decline of around 4%.
A 0.25% March rate hike is all but assured from the Fed, but bets on a 50 basis point move are starting to creep in, lifting 2-year Treasury note yields to a February 2020 high of 1.075%.
Further upside pressures on oil prices, which have lifted WTI crude to the highest levels in seven years, were evident overnight amid disruption in a pipeline between Iraq and Turkey, while benchmark 10-year German bund yields traded in positive territory for the first time since 2019.
Bond market moves are likely to loom large over the markets again Wednesday, although a series of blue-chip earnings reports — including updates from Dow components UnitedHealth (UNH) – Get UnitedHealth Group Incorporated Report and Procter & Gamble (PG) – Get Procter & Gamble Company Report — will also provide direction prior to the start of trading.
Futures tied to the Dow are indicating a modest 35 point opening bell gain while those linked to the S&P 500 are priced for an 8 point bump to the upside.
Nasdaq Composite futures are indicating a 40 point opening bell gain as benchmark 10-year Treasury note yields climb to a post-pandemic high of 1.895% in overnight trading.
2. — Ford Books $8.2 Billion Q4 Gain From Rivian Investment
Ford F shares edged lower in pre-market trading after the carmaker said late Tuesday that its early investment in Rivian Automotive (RIVN) – Get Rivian Automotive, Inc. Class A Report would add around $8.2 billion to its fourth quarter bottom line.
In an investor update ahead of its formal earnings release on February 3, Ford said gains from Rivian’s November IPO would be booked as a special item over the three months ending in December. Ford invested $500 million in Rivian in 2019 and has a total stake of around 12% in the Irvine, California-based EV group.
Rivian shares, once valued at more than $100 billion, closed at $73.16 last night, pegging their market cap at just under $66 billion.
Ford shares were marked 0.12% lower in pre-market trading Wednesday to indicate an opening bell price of $24.35 each.
3. — 5G Rollout Pause Fails to Stop Flight Cancellations
U.S. air travelers could face another day of delay and disruption Wednesday as carriers around the world cancel flights in and out of the country following the initial rollout of 5G networks by AT&T (T) – Get AT&T Inc. Report and Verizon (VZ) – Get Verizon Communications Inc. Report.
Although the wireless groups said they would pause rollouts near major U.S. airports, following warnings from both airline bosses and the Federal Aviation Administration linked to concerns that the 5G frequencies could affect some flight navigation instruments — particularly in planes made by Boeing (BA) – Get Boeing Company Report — several international carriers have cancelled flights or substituted aircraft to U.S. destinations.
President Joe Biden said the agreement to pause 5G rollouts at key airport towers would “avoid potentially devastating disruptions to passenger travel, cargo operations, and our economic recovery, while allowing more than 90% of wireless tower deployment to occur as scheduled.”
United Airlines (UAL) – Get United Airlines Holdings, Inc. Report was marked 0.1% lower in pre-market trading at $45.60 each, while American Airlines (AAL) – Get American Airlines Group, Inc. Report edged 0.2% higher to $17.94. Delta Air Lines (DAL) – Get Delta Air Lines, Inc. Report was marked 0.15% higher at $39.60 each while Boeing was little-changed at $225.05 each.
4. — ASML Boosts Chip Stocks With Bullish 2022 Outlook
U.S. chip stocks jumped higher in pre-market trading after semiconductor equipment maker ASML NV (AMSL) posted stronger-than-expected fourth quarter earnings and issued a robust near-term outlook for the sector.
ASML said demand for its extreme ultraviolet lithography systems, or EUV, machines, which design complex chips used by, sector titans such as Samsung Electronics, Intel and Taiwan Semiconductor and cost as much as $120 million, would help overall sales grow more than 20% this year, easing concerns that a fire in one of its German-based factories would impact supplies.
ASML’s bullish outlook follows a similar assessment from Taiwan Semi (TSM) – Get Taiwan Semiconductor Manufacturing Co. Ltd. Report the world’s biggest contract chipmaker and a lead supplier for Apple Inc. (AAPL) – Get Apple Inc. Report iPhones, which posted record fourth quarter profits last week and boosted its compound annual growth rate targets and capital spending plans.
Nvidia (NVDA) – Get NVIDIA Corporation Report shares were marked 0.5% higher in pre-market trading Wednesday while Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report gained 0.1% to $132.00 each. Intel (INTC) – Get Intel Corporation Report was marked 0.2% higher at $54.86 while Micron (MU) – Get Micron Technology, Inc. Report gained 0.85% to $93.65 each.
5. — New York AG James Renews Attack on President Trump
Former President Donald Trump was accused by the state of New York of using “fraudulent or misleading” asset valuations to obtain loans and tax deductions for his family organization.
New York Attorney General Letitia James said Trump, as well as his son Donald Jr. and daughter Ivanka, must provide sworn testimony as part of her investigation into the Trump Organization’s financial affairs.
“Thus far in our investigation, we have uncovered significant evidence that suggests Donald J. Trump and the Trump Organization falsely and fraudulently valued multiple assets and misrepresented those values to financial institutions for economic benefit,” James said in a statement.
