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Business

UBS earnings Q4 and FY 2022

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UBS reported fourth quarter and full-year earnings.

Fabrice Coffrini | Afp | Getty Images

UBS beat market expectations with its latest results on the back of lower expenses and higher interest rates. But the lender’s revenues declined because of weaker client activity.

The bank reported $1.7 billion of net income for the fourth quarter of last year, bringing its total annual profit to $7.6 billion in 2022. Analysts had expected UBS would achieve a net income of $1.3 billion in the fourth quarter and of $7.3 billion for the year, according to Refinitiv data.

Looking ahead, the Swiss lender said that revenues for the first quarter of 2023 are set “to be positively influenced” by higher client activity and interest rates, as well as by the easing of Covid-19 restrictions in Asia.

“We delivered good full-year and solid fourth-quarter results in a difficult macroeconomic and geopolitical environment,” CEO Ralph Hamers said in a statement.

Here are a couple of highlights from the latest release:

  • CET 1 capital ratio, a measure of bank solvency, stood at 14.2%, down from 14.4% in the previous quarter;
  • Revenues dropped to $8.029 billion from $8.705 billion a year ago;
  • Return on tangible equity, a measure of bank’s performance, rose to 13.2% at the end of the quarter, up from 10% a year ago.

Among the bank’s units, Global Wealth Management posted a fourth-quarter net interest income increase of 35% on the year, given higher deposit margins off the back of higher interest rates. Personal and Corporate Banking also recorded a 21% year-on-year hike in net interest income over the same period, as a result of higher interest rates and loan revenues.

But market uncertainty hit the investment banking and asset management arms of the business. The former saw a 24% yearly drop in revenues, whereas asset management revenues fell by 31% year-on-year due to the “negative market performance and foreign currency effects.”

“The rate environment is helping the business on one side, and that offsets some of the lower activity that we see on the investment side,” Hamers told CNBC’s Geoff Cutmore on Tuesday.

He added that, following the first half of last year, there was a shift in the markets that put pressure on the investment side of the bank.

“We saw a move from what we would call micro focus, which is equity focused, to macro focus, which is rates focused,” he said, noting that the Swiss bank was not able to benefit from that transition as much as some of its peers, given its smaller presence in the U.S.

‘Uncertain’ Outlook

UBS said it will be purchasing more shares this year.

“We remain committed to a progressive dividend and expect to repurchase more than $5 billion of shares in 2023,” Hamers said in a statement.

However, the Swiss bank is cautious about the economic outlook, citing central bank activity as a potential catalyst for market volatility.

“While inflation may have peaked in the second half of 2022, and an energy crisis in Europe seems likely to be averted, the outlook for economic growth, asset valuations and market volatility remains highly uncertain, and central bank tightening may have an impact on market liquidity,” the bank said in its latest results.

UBS shares are up by about 15% over the last 12 months.

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IMF hikes global growth forecast as inflation cools

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The IMF has revised its global economic outlook upwards.

Norberto Duarte | Afp | Getty Images

The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.

In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.

It also revised its projection for 2024 down to 3.1%.

“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.

The outlook turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.

In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging market countries that hold debt in foreign currency.

However, the picture isn’t totally positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared “but less bad doesn’t quite yet mean good.”

“We have to be cautious,” Georgieva said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.

The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s protracted invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.

IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 and of 4.3% the following year.

As such, the Washington, D.C.-based institution said one of the main policy priorities is that central banks keep addressing the surge in consumer prices.

“Clear central bank communication and appropriate reactions to shifts in the data will help keep inflation expectations anchored and lessen wage and price pressures,” the IMF said in its latest report.

“Central banks’ balance sheets will need to be unwound carefully, amid market liquidity risks,” it added.

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Business

China returns from New Year, CSI 300, New Zealand trade, Fed meeting

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Visitors on Central Street of the Taipa Village in Macau, China, on Wednesday, Jan. 25, 2023. Tourism and spending are reviving in Macau as the Lunar New Year holiday spurred a jump in visitors after pandemic travel restrictions were eased between the territory and mainland China.

Bloomberg | Bloomberg | Getty Images

Stocks in the Asia-Pacific traded mixed on Monday as mainland Chinese markets jumped on resuming trade after a week-long New Year break.

Chinese onshore equities are headed for a bull market — the CSI 300, which tracks the largest mainland-listed stocks, have gained more than 20% from its recent lows seen at the end of October last year.

The Shenzhen Component rose more than 2%, leading gains in the wider region. The Shanghai Composite rose 1.36% in its first hour of trade. Hong Kong’s Hang Seng index traded 0.6% lower.

In Japan, the Nikkei 225 rose 0.12% while the Topix also gained 0.03%. South Korea’s Kospi fell 0.24% while the Kosdaq rose 0.28%.

The S&P/ASX 200 in Australia shed 0.12%. Investors also digested trade data from New Zealand.

Stocks on Wall Street ended the week last Friday higher, fueled by gains in Tesla shares and a better-than-expected GDP report on Thursday. All major averages posted a positive week and are on pace for a month of gains.

— CNBC’s Samantha Subin, Carmen Reinicke contributed to this report

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Dow gains 150 points, heads for winning week as 2023 comeback rally marches on

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A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, January 26, 2023.

Andrew Kelly | Reuters

Stocks rose Friday, and all the major averages headed for a winning week fueled by better-than-expected economic growth and a pop in market-darling Tesla.

The S&P 500 gained 0.4%, while the Nasdaq Composite added 0.56%. The Dow Jones Industrial Average was last up 135 points, or 0.4%.

Earnings season continued, with Intel slumping more than 8% following a dismal earnings report that missed on the top and bottom lines. Strong guidance boosted American Express 9% despite a top-and bottom-line miss.

All the major averages are positive for the week and month. The Dow and the S&P 500 have gained 1.7% and 2% this week, respectively. The Nasdaq is up 3.2% on the week and is set to notch its best monthly performance since July. The Nasdaq has gained the last four weeks. Tesla rose 3% Friday, building on a 24% weekly gain on the back of an earnings beat.

So far this year, markets have bucked 2022’s selloff trend. The Dow is up 2.8%, while the S&P has gained 6.1%. The Nasdaq has surged more 10.6%

“This year’s stock market rally is impressive and shouldn’t be ignored,” Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance said in a Thursday note. “Unfortunately, the Fed is likely to start talking down the market again, as early as next week, so prepare for volatility again this year; we may be in the eye of the hurricane and not completely out of the woods yet.”

Investors digested more economic data ahead on next week’s Federal Reserve policy meeting. The personal consumption expenditures price index, a preferred inflation measurement for the Fed, showed prices rise 4.4% from a year ago, the Commerce Department said. That was in line with the Dow Jones estimate.

It’s some of the last data ahead of the central bank’s next interest-rate decision. Investors are currently expecting a 25 basis point hike.

Stocks are coming off a positive session. Investors cheered a better-than-expected fourth quarter gross domestic product report that stoked hopes that the U.S. economy can experience a soft landing as the central bank hikes rates to tame inflation.

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Asia-Pacific stocks rise as Tokyo’s inflation nears 42-year high

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Adani shares plunge further for second straight day of losses

Shares of Adani Group companies continued to see sharp losses for a second consecutive trading session in India after short seller firm Hindenburg announced its short position in the conglomerate’s firms earlier this week.

Adani refuted the claims in two separate statements, adding that the group is “evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hidenburg Research,” Adani Group’s head of legal Jatin Jalundhwala said in a statement.

Mumbai-listed shares of Adani Enterprises fell more than 5% in India’s trading session on Friday. Adani Transmission fell 16.8%, Adani Green Energy shed 14.9% and Adani Power lost 8.4%. Adani Port’s share price also dropped 8.4%.

Hindenberg doubled down on its initial stance, emphasizing that Adani has not answered any of the questions raised in their claims.

“We fully stand by our report and believe any legal action taken against us would be meritless,” it said,” it said.

— Jihye Lee

Tokyo’s inflation stays above Bank of Japan’s target

Consumer prices in Japan’s capital Tokyo rose by 4.3% in January, higher than expected by economists polled by Reuters.

The reading also maintained levels higher than the Bank of Japan’s target of 2% inflation for an eighth consecutive month after rising 2.1% in June 2022.

The Japanese yen strengthened 0.3% after the data release and last traded at 129.82 against the US dollar.

CNBC Pro: These 6 global ETFs are the only ones to have posted gains every year for the past five years

Only six global stock ETFs have consistently posted yearly gains over the past five years, according to new analysis by CNBC Pro.

They are the only funds among 7,000 equities ETFs trading worldwide to:

  • Not have a single year of negative returns between Jan. 1, 2018, and Dec. 31, 2022;
  • And be in positive territory this year so far.

CNBC Pro subscribers can find out which ETFs they are here.

— Ganesh Rao

Singapore home prices rose less in final quarter of 2022

Private residential property prices in Singapore rose by 0.4% in the final quarter of 2022, a release by the Urban Redevelopment Authority showed.

The reading showed home prices rose less than the previous period’s increase of 3.8% and the slowest growth since the second quarter of 2020.

Home prices rose 8.6% in the full year of 2022, the release said, also less than then 10.6% increase seen in the full year of 2021.

— Jihye Lee

Australia producer price index rises 5.8% from year ago

The producer price index in Australia rose 5.8% for the final quarter of 2022 on an annualized basis, data from the Australian Bureau of Statistics showed.

The reading was slightly lower than the previous quarter’s print of 6.4%, a signal inflation may be easing in the nation.

On a quarterly basis, the index rose 0.7%, also slower than the previous period’s reading of 1.9%.

The Australian dollar strengthened slightly during Asia’s morning session and last traded at 0.7123 against the U.S. dollar.

— Jihye Lee

GDP, other fourth-quarter data shows economic challenges are ‘beginning to clear,’ economist says

Thursday’s GDP data adds to a broadening picture of economic growth in the fourth quarter, according to Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. And that signals to him the economic outlook is improving.

“The big picture view of economic growth in the fourth quarter is a positive one. Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023,” Long said. “Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”

— Alex Harring

CNBC Pro: Buy the dip? Top Morningstar strategist names 3 stocks trading at a steep discount

U.S. stocks are around 15% undervalued, according to Dave Sekera, chief U.S. market strategist for Morningstar, who says the extent of this undervalued territory is rare.

Since the end of 2010, the market has traded at or below the current discount only 5% of the time, he said.

He picks three stocks that he says are trading at steep discounts.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Tesla’s strong orders and weak margins have Wall Street analysts conflicted

Wall Street analysts are divided on Tesla after the electric car company’s latest quarterly results.

Tesla reported a beat on both earnings and revenue for the fourth quarter, and assuaged investor fears of weaker growth at the company after recently issuing a round of price cuts. While the move triggered a drop in used Tesla prices, they also supported demand for the vehicles.

“Thus far in January we’ve seen the strongest orders year to date than ever in our history. We’re currently seeing orders of almost twice the rate of production,” Musk said during a call with analysts.

For Goldman Sachs’ Mark Delaney, that was the “most important takeaway from the call.”

“Importantly, Tesla commented that since it lowered prices it has seen the strongest orders year-to-date in its history, with orders running about 2X production. While we believe this rate of orders may not be sustained in light of the weak macroeconomic environment, it would suggest the company is tracking well to our 1.8 mn delivery estimate,” Delaney wrote.

Other analysts were more negative on the stock outlook, however, saying that Tesla’s automotive gross margins, which was the lowest figure in the last five quarters, spelled trouble ahead.

AllianceBernstein’s Toni Sacconaghi reiterated an underperform rating on Tesla, saying the automaker’s latest results and earnings call had “something for bulls and bears,” adding he remains “torn” on the company. While the strong orders are promising, the analyst said the auto gross margins were too weak to overlook.

“Despite raising our energy storage forecast materially, our FY EPS declines from $3.80 to $3.54 amid lower margins. Moreover, while no one (including Tesla) knows what demand elasticity is, we believe it is uncertain whether surging demand will be sustained, particularly in China, where we believe more price cuts will likely be needed before year end,” Sacconaghi wrote.

CNBC Pro subscribers can read the full story here.

— Sarah Min

CNBC Pro: Morgan Stanley has a ‘simple’ tech playbook, names TSMC and others as stocks to buy right now

A recession may be coming, and the semiconductor sector — widely seen as cyclical and volatile — could be an unlikely safe refuge for investors.

Morgan Stanley says chip stocks have historically done well in past recessions. The bank named its top Asia chip stocks — giving one 40% upside.

Pro subscribers can read more here.

— Zavier Ong

U.S. GDP rose slightly more than expected in the fourth quarter

The U.S. economy expanded at an annualized pace of 2.9% in the fourth quarter, slightly outperforming a Dow Jones estimate of 2.8%. The Commerce Department’s report comes even as inflation persists and the Federal Reserve continues to raise rates.

Consumer spending rose 2.1% for the period, down slightly from 2.3% in the previous period but still positive.

— Jeff Cox

Bitcoin heading toward best month since 2020

Bitcoin’s remains in rally mode despite pulling back the past two days and the cryptocurrency is on pace for its best month since 2020. Some investors see crypto prices as a leading indicator of investors’ risk appetite.

So far this month and year, bitcoin has risen almost 40% and is poised to post its best monthly performance since December 2020, when it gained 49.47% for the month.

Meanwhile, the S&P 500 has risen about 5% this month.

— Tanaya Macheel

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Business

Stock futures trade lower after the Dow posts a five-day win streak

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A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, January 26, 2023.

Andrew Kelly | Reuters

Stock futures fell Friday morning as investors look ahead to earnings and economic reports due later in the day.

Futures tied to the Dow Industrial Average fell 42 points, or 0.12%. S&P 500 futures and Nasdaq 100 futures were down 0.36% and 0.7%, respectively. Shares of Intel slumped more than 9% in after-hours trading following a dismal earnings report that missed on the top and bottom lines.

Stocks rose during regular trading Thursday, cheering a better-than-expected fourth quarter gross domestic product report that stoked hopes that the U.S. economy can experience a soft landing as the Federal Reserve hikes rates to tame inflation.

The Dow Jones Industrial Average gained more than 205 points, or 0.61%, notching its fifth consecutive winning session, the first streak of that length since October. The S&P 500 rose 1.10% and the tech-heavy Nasdaq Composite jumped 1.76%.

All three indexes are positive for the week and month. The Dow and the S&P 500 have gained 1.7% and 2.2% this week, respectively. The Nasdaq is up 3.3% on the week and is set to notch its best monthly performance since July.

“This year’s stock market rally is impressive and shouldn’t be ignored,” Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance said in a Thursday note. “Unfortunately, the Fed is likely to start talking down the market again, as early as next week, so prepare for volatility again this year; we may be in the eye of the hurricane and not completely out of the woods yet.”

On Friday, investors will be watching for economic reports that will give more information about the state of inflation. Personal income and spending and pending home sales for December are due in the morning. The personal consumption expenditures price index, a preferred inflation measurement for the Federal Reserve, is also due. Consumer sentiment for January will also be released.

It’s some of the last data that will be released ahead of the Fed’s next meeting, which starts at the end of January. Investors are currently expecting a 0.25 percentage point interest rate hike from the central bank.

Earnings season continues as well. American Express, Colgate-Palmolive and Chevron are among companies scheduled to report quarterly results Friday. Investors may be watching Chevron’s report closely after the company announced a $75 billion stock buyback and dividend boost on Wednesday.

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S&P 500 rises after strong GDP report, Nasdaq jumps nearly 1% on Tesla results

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The Nasdaq Composite rose Thursday as fourth-quarter gross domestic product came in above expectations, and investors parsed through the latest batch of corporate earnings.

The tech-heavy index jumped 1.2%, while the Dow Jones Industrial Average traded 104 points, or 0.3%, higher. The S&P 500 rose 0.6%.

GDP data released Thursday showed the economy expand at an annualized rate of 2.9% during the fourth quarter, the Commerce Department said. That’s above the 2.8% Dow Jones estimate, but represents a slight cooldown from the third-quarter reading.

“With today’s better-than-expected GDP number, I think investors are thinking, maybe we can get away with a pretty soft, mild recession that is not likely to throw us into an even deeper bear market when all is said and done,” said Sam Stovall, CFRA Research’s chief investment strategist.

Meanwhile, earnings season trudged on, with strong results from Tesla giving the Nasdaq and electric vehicle stocks a boost. Tesla jumped 9% after posting record revenue and solid earnings. Beaten-up technology giants Microsoft, Apple, Amazon and Alphabet added more than 1% each.

Airline earnings also rolled out, with Southwest falling on a larger-than-expected loss fueled by its holiday meltdown. American Airlines rose on a fourth-quarter beat.

Elsewhere, Chevron added 3% after announcing a $75 billion share repurchasing program.

Wall Street is coming off a mixed session, but all the major averages are headed for weekly, and monthly, gains. The Dow and S&P are up 1.5% and 1.9% so far this week, respectively. The Nasdaq has gained 3.1% this week and is on pace for its best month since July.

Focus now shifts to next week’s Federal Reserve policy, where the central bank is widely expected to announce a 25 basis point hike as it battles high inflation. Investors will be on the lookout for clue into how much further the Fed intends to hike before it cuts rates.

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Business

Australia PMI, Japan Jibun Flash PMI, Lunar New Year holidays

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New Zealand’s Auckland airport passenger volumes hit 74% of pre-pandemic levels in November

New Zealand’s Auckland Airport saw its total passenger volumes for November reach 74% of levels seen in the financial year to June 2019, or the last full-year not impacted by the pandemic, according to the airport’s monthly traffic update.

International passengers were at 67% of pre-pandemic levels, the release said, adding that a majority of the recovered overseas travel was short-haul flights from Australia and the Pacific Islands.

The demand for routes between New Zealand and North American regions has recovered to 86% of pre-pandemic levels, including two added destinations in Texas (Dallas/Fort Worth) and New York.

— Jihye Lee

CNBC Pro: These 6 low-debt global stocks are set to outperform, Bernstein says

Rising interest rates have major implications for companies with large amounts of debt, as they will likely experience higher costs from increased borrowing.

As interest rates continue to rise, analysts at Bernstein think that stocks with low debt exposure and a higher quality of debt should outperform.

The investment bank named a handful of global low-debt stocks with an investment-grade credit rating there likely to outperform.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Shares of Zip reverses after initial rally

Australian “buy now, pay later” company Zip fell by more than 10% after a short-lived rally following its quarterly results.

Zip traded 15% lower, a sharp turnaround from its earlier gains of more than 10% after posting 12% revenue growth.

The company said underlying “monthly cash burn has continued to decrease and expected to further improve.” It said currently available cash and liquidity position is “sufficient to see the company through to generating positive cash flow” and expects to deliver positive cash EBITDA by the first half of fiscal 2024.

Week ahead: PMIs, Australia and Singapore inflation reports, South Korea GDP

Here are some of the major economic events in the Asia-Pacific that investors will be closely watching this week.

Stock markets in mainland China and Taiwan will remain closed until they resume trade on Jan. 30.

On Tuesday, regional purchasing managers’ index readings for Japan and Australia will be in focus while most markets remain closed to observe the Lunar New Year — with the exception of Australia, Japan and Indonesia.

Inflation reports will be in focus on Wednesday as Australia and New Zealand release their consumer price index readings for the final quarter of 2022. Singapore will publish its inflation print for December.

Hong Kong’s market is scheduled to resume trade on Thursday.

Fourth-quarter gross domestic product for South Korea and Philippines will be published Thursday, while the Bank of Japan will release its summary of opinions from its latest monetary policy meeting in January. Japan also reports its services producer price index on Thursday.

Japan’s core CPI readings for capital Tokyo will be a barometer for where monetary policy is headed.

Australia’s producer price index and trade data will also be closely monitored indicators ahead of the Reserve Bank of Australia’s meeting in the first week of February.

— Jihye Lee

Australia’s business conditions worsened last month: NAB survey

National Australia Bank’s monthly business survey showed worsened business conditions for December with a reading of 12 points, a decline from November’s print of 20 points.

The survey reflects deteriorated trading conditions, profitability, and employment, NAB said.

“The main message from the December monthly survey is that the growth momentum has slowed significantly in late 2022 while price and purchase cost pressures have probably peaked,” NAB chief economist Alan Oster said.

Meanwhile, business confidence in December rose by 3 points to -1, an improved reading from -4 points seen in November.

— Jihye Lee

Japan’s headline factory data shows second month of contraction

The au Jibun Bank Flash Japan manufacturing purchasing managers’ index in January was unchanged for a second-straight month at 48.9, below the 50-mark that separates contraction and growth from the previous month.

The reading “signaled the joint-strongest deterioration in the health [of] the Japanese manufacturing sector since October 2020,” S&P Global said.

The au Jibun Bank flash composite output index rose to 50.8 in January, slightly higher than the reading of 49.7 seen in December.

Flash services business activity rose further with a print of 52.4, higher than December’s reading of 51.1.

— Jihye Lee

CNBC Pro: Wall Street is excited about Chinese tech — and loves one mega-cap stock

After more than 2 years of regulatory crackdowns and a pandemic-induced slump, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many.

Pro subscribers can read more here.

— Zavier Ong

Fed likely to discuss next week when to halt hikes, Journal report says

Federal Reserve officials next week are almost certain to approve another deceleration in interest rate hikes while also discussing when to stop the increases altogether, according to a Wall Street Journal report.

The rate-setting Federal Open Market Committee is set to convene Jan. 31-Feb. 1, with markets pricing in almost a 100% chance of a quarter-point increase in the central bank’s benchmark rate. Most prominently, Fed Governor Christopher Waller said Friday he sees a 0.25 percentage point increase as the preferred move for the upcoming meeting.

However, Waller said he doesn’t think the Fed is done tightening yet, and several other central bankers in recent days have backed up that notion.

The Journal report, citing public statements from policymakers, said slowing the pace of hikes could provide the chance to assess what impact the increases so far are having on the economy. A series of rate hikes begun in March 2022 has resulted in increases of 4.25 percentage points.

Market pricing is currently indicating quarter-point hikes at the next two meetings, a period of no action, and then up to a half-point reduction by the end of 2023, according to CME Group data.

However, several officials, including Governor Lael Brainard and New York Fed President John Williams, have used the expression “stay the course” to describe the future policy path.

— Jeff Cox

Nasdaq on pace for back-to-back gains as tech shares rise

The Nasdaq Composite rallied more than 2.2% during midday trading Monday, lifted by shares of beaten-up technology stocks.

The move put the tech-heavy index on pace for a consecutive day of gains exceeding 2%. The index finished 2.66% higher on Friday.

Rising semiconductor stocks helped pushed the index higher. Tesla and Apple, meanwhile, surged 7.7% and 3.2%, respectively, as China reopening lifted hopes of a boost to their businesses. Western Digital and Advanced Micro Devices rose about 8% each, while Qualcomm and Nvidia jumped about 7%.

Information technology was the best-performing S&P 500 sector, gaining 2.7%. That was in part due to gains within chip sector. Communication services added 1.9%, boosted by the likes of Netflix, Meta Platforms, Alphabet and Match Group.

— Samantha Subin

El-Erian says Fed should hike by 50 basis points, calls smaller increase a ‘mistake’

Surging inflation may appear largely in the past, but a shift to a 25 basis point hike at the next Federal Reserve policy meeting is a “mistake,” according to Allianz Chief Economic Adviser Mohamed El-Erian.

“‘I’m in a very, very small camp who thinks that they should not downshift to 25 basis points, they should do 50,” he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this growth window we’re in, they should take advantage of where the market is, and they should try to tighten financial conditions because I do think that we still have an inflation issue.”

Inflation, he said, has shifted from the goods to the services sector, but could very well resurge if energy prices rise as China reopens.

El-Erian expects inflation to plateau around 4%. This, he said, will put the Fed in a difficult position as to whether they should continue crushing the economy to reach 2%, or promise that level in the future and hope investors can tolerate a steady 3% to 4% nearer term.

“That’s probably the best outcome,” he said of the latter.

— Samantha Subin

An earnings recession is imminent, according to Morgan Stanley

An earnings recession is imminent this year, according to Morgan Stanley equity strategist Michael Wilson. 

“Our view has not changed as we expect the path of earnings in the US to disappoint both consensus expectations and current valuations,” he said in a note to clients Sunday.

Some positive developments have unfolded recent weeks — such as China’s ongoing reopening and falling natural gas prices in Europe — and contributed to some investors viewing market prospects more optimistically. 

However, Wilson advises investors to remain bearish on equities, citing price action as the main influence for this year’s rally. 

“The rally this year has been led by low-quality and heavily shorted stocks,” he said. “It’s also witnessed a strong move in cyclical stocks relative to defensives.”

Wilson has based his forecasts on margin disappointment, and he believes the case for this is growing. Many industries are already facing revenue slowdowns, as well as inventory bloating, less productive headcount. 

“It’s simply a matter of timing and magnitude,” said Wilson. “We advise investors to stay focused on fundamentals and ignore the false signals and misleading reflections in this bear market hall of mirrors.”

— Hakyung Kim

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Stock futures rise after Dow goes negative for the year

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Stock futures ticked higher early Friday morning as investors tried to hang onto the January rally amid worries about monetary policy and slowing earnings.

Futures tied to the Dow Jones Industrial Average rose 45 points, or 0.14%. S&P 500 and Nasdaq 100 futures gained 0.24% and 0.43%, respectively. Nordstrom slipped more than 5% in after hours trading after reporting weak holiday sales and cutting its year-end forecast. Netflix jumped 7% after reporting more subscribers than expected even though its quarterly earnings missed analysts’ estimates.

During Thursday’s session, the Dow and the S&P 500 both closed lower to hit their third negative days in a row as corporate earnings and economic data signal a slowing economy. The Dow slipped more than 252 points, or 0.76% and is now down 0.31% year to date. The S&P 500 shed 0.76% and the Nasdaq Composite lost 0.96%, but both indexes are positive for the year.

For the week, however, all three indexes are on track to close lower. The Dow is down 3.67%, on track for its worst week since September. The S&P 500 is down more than 2.5% and could notch its worst weekly performance since December. The Nasdaq is down more than 2% and on pace to break a two-week win streak.

“The market is focused and is not sure how to react between the backward looking Fed analysis of the market versus the forward and leading indicators of the market,” said Tim Seymour, founder and chief investment officer of Seymour Asset Management, on CNBC’s “Fast Money.”

Those forward indicators include economic data such as retail sales and industrial production. “This is where the market is starting to break down,” he said.

Going forward, investors will continue to watch corporate earnings with oilfield services name SLB and Ally Financial set to report Friday. They will also listen closely to speeches from Fed officials ahead of the central bank’s February meeting, seeking clues on the size of the rate hike that’s likely forthcoming.

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Business

Stock futures dip as investors look to economic data, Fed speeches

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Stock futures traded lower Thursday, building on the losses from the previous session, as rate and recession fears dented market sentiment.

Futures tied to the Dow Jones Industrial Average fell 224 points, or 0.7%. S&P 500 futures and Nasdaq 100 futures shed 0.7% and 0.9%, respectively.

Wall Street is coming off a losing session. The S&P 500 tumbled 1.56% on Wednesday for its worst day since Dec. 15. The Dow shed more than 613 points, or 1.81%. The tech-heavy Nasdaq Composite fell 1.24%, snapping seven-straight days of gains. Bank stocks such as JPMorgan, Bank of America and Wells Fargo slid, weighing on the broader market.

Disappointing retail sales and a weaker-than-expected producer price index reading ignited recession fears, sending stocks lower.

On Thursday, investors will weigh more economic data that could give further clues as how much the Fed may raise interest rates in its upcoming meeting. Initial jobless claims, housing starts and the Philadelphia Federal Reserve’s manufacturing survey will be released in the morning. Several central bank leaders including Fed Vice Chair Lael Brainard will also speak throughout the day on the path forward.

Investors have been parsing through the latest data and Fed remarks for clues on how high rates will go. But, while recent numbers point to easing inflation, JPMorgan Chase CEO Jamie Dimon thinks rates will top 5%.

“I think there’s a lot of underlying inflation, which won’t go away so quick,” Dimon told CNBC’s “Squawk Box” from the World Economic Forum in Davos, Switzerland.

Investors will also be watching key quarterly reports to see if there is an earnings recession brewing. Netflix and Truist Financial are among companies reporting earnings on Thursday.

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