Rough Start to 2022 Continues for All Indexes; Alphabet, GM, Exxon Earnings

Nasdaq stocks are falling, shedding gains from the market's open, as the broader S&P 500 seeks to bounce back from its worst month since March 2020. 

The Dow Jones Industrial Average and the S&P 500 indexes were both little changed after rallying in the last trading session of the month yesterday, driven by technology stocks. The S&P fell 5.3% for the month, the Dow slid 3.3%, and the Nasdaq sank 8.9%.

Key Takeaways

  • Nasdaq stocks are sliding, losing earlier gains, ahead of Alphabet Inc.'s earnings.
  • GM, Google, UPS, Exxon, and AMD will release earnings today.
  • The broader S&P 500 also dropped, after posting its worst month since March of 2020. 
  • India announced plans to issue a central bank digital currency (CBDC) by 2023.
  • Oil prices, which had rallied over the past month, fell and the yield on the 10 year Treasury bond widened.

Among the companies reporting earnings today are Advanced Micro Devices Inc. (AMD), Alphabet Inc. (GOOG), Exxon Mobil Corp. (XOM), General Motors Co. (GM), Starbucks Corp. (SBUX), and United Parcel Service Inc. (UPS).

Later this morning, the Bureau of Labor Statistics (BLS) releases its Job Openings and Labor Turnover Survey, or JOLTS. Economists expect there were 10.1 million job openings in December, half a million fewer than in November, as openings now outnumber the unemployed. 

Also today, the ISM releases its Manufacturing Purchasing Managers’ Index (PMI) for January. Economists forecast a reading of 58, about even with December’s level. New data on construction spending is expected to have increased 0.6% in December, after rising 0.4% in November. 

Oil posted its biggest monthly gain in a year, boosted by supply shortages and political tensions in Eastern Europe and the Middle East. Investors will also be watching this week’s meeting of OPEC and its allies, including Russia. Light sweet crude is now just below $88 a barrel.

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Today's Headlines: Quick Hits

AT&T (T) will slash its dividend in half after the spinoff of its WarnerMedia division. The company said it will spin off WarnerMedia in a $43 billion deal to merge its media business with Discovery.

Sony Group Corp. (SONY) will buy Bungie, the video game maker behind “Halo” and the Destiny franchises, in a $3.6 billion deal. The deal follows Microsoft Corp.’s (MSFT) $69 billion plans to buy game maker Activision Blizzard.

The New York Times Co. (NYT) is buying Wordle, a popular online game. The media company says it paid in the low-seven figures for Wordle, and that it will remain free for now.

Private equity firm Apollo Global Management Inc. is buying a minority stake in Legendary Entertainment for $760 million. Legendary is the company that backed such movies as “Jurassic Park” and “The Dark Knight.”

India's central bank will launch its own digital rupee by 2023, India’s finance minister, Nirmala Sitharaman, said at a parliament meeting on Tuesday. She also said regulators would continue to allow crypto trading in India, and that the Indian government would levy a 30% tax on income from digital assets. 

Google parent Alphabet is expected to show growth in fourth quarter revenue and profit, powered by its digital ad and cloud businesses. Investors will also keep an eye on any commentary on growth in 2022.

UBS Group AG (UBS) raised its stock buyback plans to $5 billion this year and boosted its financial targets, despite profits falling to $1.3 billion down from $1.6 billion a year earlier. The Swiss bank beat analysts’ profit expectations and set ambitious new targets for profitability.

China's Slow Start: The Big Story

China’s economy is off to a slow start this year, with factory activity and services in the world’s second largest economy hurt by COVID-19 lockdowns. 

China’s official manufacturing Purchasing Managers’ Index (PMI) fell to 50.1 in January, down from 50.3 in December, suggesting manager expectations slid, though their overall outlook remains positive. Any reading above 50 indicates an expansion. 

Economists, who had predicted the index would fall to 50, also said the seasonal disruption of the Lunar New Year holiday is curbing activity. A subindex of the PMI for new orders came in at 49.3, down from 49.7 in December, suggesting a slowdown in orders.

Meanwhile, the Caixin/Markit Manufacturing PMI, a private survey, reported a reading of 49.1 in January, down from 50.9 in December. That survey is focused more on smaller private businesses than the official manufacturing index, and hit its lowest level since February 2020, at the height of the initial COVID-19 outbreak.  

A separate survey on China’s services sector also showed renewed weakness for a sector of the economy that has lagged the broader economic recovery for nearly two years. The non-manufacturing PMI, which includes both services and construction activity, fell to 51.1 in January from December’s 52.7.

China recently cut its lending rates twice in December and January to help stimulate the economy.

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