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Business

Asian markets retreat as caution sets in

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TOKYO — Asian shares mostly fell Thursday as caution set in over company earnings reports, recent choppy trading in technology stocks and prospects for more economic stimulus for a world battling a pandemic.

Japan’s Nikkei 225
NIK,
-1.03%
slipped 0.5% in early trading, while South Korea’s Kospi
180721,
-1.90%
dropped 1.6%. Australia’s S&P/ASX 200
XJO,
-0.87%
slipped 0.6%. Hong Kong’s Hang Seng
HSI,
-1.35%
lost 1.2%, while the Shanghai Composite
SHCOMP,
-1.38%
was down 1%. Stocks rose in Indonesia
JAKIDX,
+0.63%
and Malaysia
FBMKLCI,
-0.25%
but fell in Singapore
STI,
-1.29%
and Taiwan
Y9999,
-0.43%.

Also on market players’ minds is the global vaccine rollout, which is becoming more organized in the U.S., but yet to play out in much of Asia, except for China, where the pandemic started.

“As the rally waned for the U.S. market, Asia markets can be seen left to their own devices into the Thursday session, and it appears that investors may be locking in some of the recent gains,” said Jingyi Pan, a senior market strategist for IG in Singapore.

Wall Street ended with modest gains, with the S&P 500
SPX,
+0.10%
inched up 3.86 points, or 0.1%, to 3,830.17, after swinging between a gain of 0.6% and a loss of 0.3%. The tiny gain extended the benchmark index’s winning streak to a third day.

The Dow Jones Industrial Average
DJIA,
+0.12%
gained 36.12 points, or 0.1%, to 30,723.60. The tech-heavy Nasdaq
COMP,
-0.02%
slipped 2.23 points, or less than 0.1%, to 13,610.54. The index had briefly been above its all-time high set last week.

Energy, communications and financial stocks helped lift the market. Those gains were primarily kept in check by declines in companies that rely on consumer spending and technology stocks.

GameStop and other recently high-flying stocks notched modest gains Wednesday. GameStop
GME,
+2.68%
rose 2.7% and AMC
AMC,
+14.71%
climbed 14.7%. The stocks have been caught up in a speculative frenzy by traders in online forums who seek to inflict damage on Wall Street hedge funds that have bet the stocks would fall. GameStop plunged 60% on Tuesday, and AMC Entertainment lost 41.2%.

“There’s a tug of war that’s been brewing for a week or so now, that markets are ripe for a correction and whether the events of last week are a precipitating event,” said Jamie Cox, managing partner at Harris Financial Group.

Stocks have been mostly rallying this week, an encouraging start to February after a late fade in January as volatility spiked amid worries about the timing and scope of another round of stimulus spending by the Biden administration, unease over the effectiveness of the government’s coronavirus vaccine distribution and turbulent swings in GameStop and other stocks hyped on social media.

That volatility has subsided this week, with Wall Street focusing mainly on corporate earnings reports while it keeps an eye on Washington for signs of progress on a new aid package.

Democrats and Republicans remain far apart on support for President Joe Biden’s $1.9 trillion stimulus package, but investors are betting that the administration will opt for a reconciliation process to get the legislation through Congress.

In energy trading, benchmark U.S. crude
CLH21,
+0.63%
gained 15 cents to %55.84 a barrel. Brent crude
BRNJ21,
+0.51%,
the international standard, added 6 cents to $58.52 a barrel.

In currency trading, the U.S. dollar
USDJPY,
+0.13%
inched down to 105.02 Japanese yen from 105.06 yen.

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Technology

The Stick-Shift 668-HP CT5-V Blackwing And 472-HP Cadillac CT4-V Blackwing Are Cadillac’s Last Hurrah For Loud Gasoline Fury

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Photo: David Tracy

This is the end. Cadillac, a brand with a rich history of stuffing gigantic gasoline motors under the hoods of luxury sedans, is about to call it quits on internal combustion, but not before going out with a bang. Well, two bangs, with one of them called the CT5-V Blackwing, a 668-horsepower 6.2-liter supercharged V8 sedan with a standard…standard transmission. The other is the CT4-V Blackwing, a smaller 472-HP twin-turbo 3.6-liter V6 sedan that also comes with a stick shift, in keeping with the car gods’ orders. Let’s take a first look at these last hurrahs for high-performance gasoline Cadillacs.

The auto industry is quickly entering the electric era, so it feels a bit strange for Cadillac to be debuting two entirely-conventional flagship sedans. But this is the last stand for performance gasoline Cadillacs, and my god is GM’s premium brand going out swinging.

So Much Power, So Many Pedals

Photo: David Tracy

The CT5-V is a 668-HP, 659 lb-ft supercharged V8 sedan with a six-speed manual transmission sending torque to the rear wheels. On paper, it is epic, fulfilling the entirety of Maslow’s Hierarchy of Automotive Needs (other than perhaps “low curb weight” — the CT5-V Blackwing weighs roughly two tons). I can’t wait to drive this machine.

Photo: David Tracy

G/O Media may get a commission

The other car Cadillac showed was the CT4-V, which also comes standard with a manual transmission, and also has a boosted engine that sends torque to the rear wheels, though that engine is a V6, and the high intake manifold air pressure comes from a pair of turbochargers instead of a supercharger.

Photo: David Tracy

Here’s a little walk-around of these two cars with marketing manager Ken Kornas:

When Cadillac released horsepower figures for the regular CT4-V and CT5-V, the automotive media pretty much spit out its drink and laughed. “We Regret To Inform You That The Cadillac CT4-V Has Just 24 More HP Than A Toyota Camry,” my colleague wrote after Jalopnik’s initial article titled “The 2020 Cadillac CT4-V and CT5-V Arrive Without The Big Power We’re Used To.”

After having been spoiled by the 464 HP ATS-V and 640 HP CTS-V, we just weren’t excited about the paltry 325 HP turbocharged inline-four in the CT4-V or the 360-HP twin-turbo V6 in the CT5-V. “Hey, this isn’t the real V, is it?” my Editor-in-Chief Rory Carroll asked Cadillac at an event in 2019. The brand responded that a “big V” was under development. Now it’s here along with its little sibling.

Photo: David Tracy

The 668-HP CT5-V Blackwing can allegedly pull off a 0-60 mph time of 3.7 seconds, and reach a top speed of over 200 mph. The 472-HP, 445 lb-ft CT4-V Blackwing takes a tenth more to get to 60, and its top speed plateaus at around 189 mph, per Cadillac. Both cars are built on the Alpha II platform, the successor to the Alpha platform that underpinned the Chevy Camaro and Cadillac ATS. Like the ATS and Camaro, the CT4 and CT5 have MacPherson strut front suspensions and five-link setups in the back.

Speaking of the ATS, the CT4-V Blackwing is likely going to be quite similar to that car’s V-model, which was an excellent driver’s car thanks to incredible steering feel and sharp handling. The CT4 has essentially the same engine and transmission, with roughly the same power (it’s up 8 HP). Car And Driver gets into the differences, writing in its story 472-HP 2022 Cadillac CT4-V Blackwing Is like an ATS-V, but Better:

Chassis upgrades include larger front and rear brake rotors, a newer version of the standard magnetorheological dampers, and Michelin Pilot Sport 4S tires instead of the old Pilot Super Sport rubber. These tires wrap around 18-inch wheels with a staggered-width setup; the magnesium wheels that Cadillac teased earlier won’t be available until later in the production run. The housing for the electronic limited-slip differential is now aluminum, which Cadillac says saves 22 pounds. Overall curb weight is up by a claimed 77 pounds.

Photo: David Tracy

I’m conflicted here, because as much as I love the idea of an improved ATS-V that handles well, the bigger, couple-of-hundred-pounds-heavier CT5-V Blackwing has the V8 with a 1.7-liter Eaton supercharger on it, and you know that’s going to sound much, much better. So the question is: Do you choose nimble(ish) handling or do you choose the glorious sound of a boosted V8?

Perhaps I’m a bit basic, but my initial primal instinct is to go with option B.

The Hardware

Photo: Cadillac

Cadillac didn’t have engineers at my preview session in a warehouse in Warren, Michigan, so the brand wasn’t able to get deep into the CT4-V Blackwing and CT5-V Blackwing’s tech. But right away, it was obvious how epic the cooling systems are — unsurprising, given the ATS-V was a masterpiece in this area.

The cars each have roughly a dozen heat exchangers, with tiny outboards ones tilted, and angled a bit inboard:

Photo: David Tracy

My favorite heat exchanger (everyone should have a favorite heat exchanger, right?) on the CT4-V is the flat one up front, which I’m fairly sure cools the transmission and rear differential.

A heat exchanger whose face is actually parallel to airflow?! It seems counterintuitive, but it makes sense if you consider that it’s located just ahead of the main cooling module, which — due to its restriction — creates an area of high pressure ahead of itself. That high pressure, along with the low pressure under the vehicle as air rushes at a high velocity, forces air through the heat exchanger mounted parallel to the car’s floor:

Photo: David Tracy

While we’re on the topic of aerodynamics, Cadillac says the new grille design is a key enabler for improving airflow over the ATS-V, and the brand mentions a new Carbon Fiber Aero Package, which allegedly reduces lift by 214 percent on the CT4-V Blackwing and 75 percent on the CT5-V Blackwing. It goes without saying that there’s a drag penalty.

Also exciting are the underbody “airflow-channeling strakes” that make up what Cadillac calls the “Underwing” — basically, an underbody airflow strategy that Cadillac says reduces drag and improves track performance:

Photo: David Tracy

Speaking of the underbody, here’s an “Easter Egg” V-Series logo at the bottom of the liquid-cooled electronic limited-slip differential:

Photo: David Tracy

The brakes are huge. The CT4-V Blackwing’s rotors are 15 inches up front and 13.4 out back, while the bigger sibling has 15.7-inch rotors ahead of the driver and 14.7s behind. Both cars have six-piston calipers at the nose and four-piston grabbers at the tail.

Photo: David Tracy

The standard manual transmission is a six-speed Tremec, with a dual-disk LuK clutch. In case you’re not familiar with how a twin-disc clutch works, it essentially involves bolting a housing to the flywheel, using axial space to create an additional surface for an additional clutch to grab onto. Here, watch this Aussie show you how it works:

Both cars get rev matching capability and “No-Lift Shift,” which is what it sounds like: You can stay hard on the accelerator pedal while shifting — something that, per Cadillac, helps keep the CT4-V Blacking’s turbos in boost.

There’s also a 10-speed automatic available if you’re into that sort of thing.

Pricing

Photo: David Tracy

Photo: David Tracy

The CT4-V Blackwing starts at $59,990, while the CT5-V Blackwing costs $84,990. These are higher base prices than those of the Audi RS3 and BMW M3 with which GM says the two cars compete, respectively. How the Caddies will hold up on the track against their German counterparts is something I can’t wait to find out. Will Cadillac’s final internal combustion engine V-Series cars go out on top?

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Business

Tesla is in decline, SUVs are king, and more insights from the world’s largest electric-vehicle market

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Europe overtook China in 2020 to become the world’s largest market for electric vehicles, amid a pedal-to-the-metal push to increase EV adoption from governments and supercharged demand from consumers.

The registrations of new electric vehicles topped 1.33 million in the key European markets last year, compared with 1.25 million in China, according to a report based on public data by automotive analyst Matthias Schmidt.

The 18 markets include the European Union states — minus 13 countries in Central and Eastern Europe — as well as the U.K., Norway, Iceland, and Switzerland.

And growth will only continue, according to Schmidt, who publishes the European Electric Car Report. He projects that electric vehicles’ share of the European car market will rise from 12.4% in 2020 to 15.5% in 2021 — that is 1.91 million vehicles out of a total of 12.3 million, and an increase of 572,000 from 2020.

Key trends have emerged as Europe races to become the most important region for EVs, highlighted in the report that Schmidt shared with MarketWatch.

Among them are that the Renault Zoe is now the most popular electric vehicle in Europe, overtaking Tesla’s Model 3, which took the top spot in 2019. In fact, Tesla’s success in Europe has declined across the board over the last year, with the U.S. company delivering 97,791 cars across the continent in 2020, down from 109,467 in 2019.

Here’s what you should know:

SUVs are leading the growth

When you think of environmentally-friendly vehicles, sport-utility vehicles and crossovers probably don’t spring to mind. But this class is by far the most popular type of battery-electric vehicle in Europe, representing 27% of all registrations in 2020 and 29% in December alone.

Hyundai
005380,
+0.42%
and Kia
000270,
-1.22%
led the pack, making up 39% of battery-electric SUV and crossover volumes in 2020.

SUVs and crossovers are even more popular with hybrid buyers — accounting for 53% of plug-in hybrid electric-vehicle volumes last year.

Luxury buyers prefer hybrids

When it comes to hybrids, better is best. Premium brands made up 58% of all plug-in hybrid electric-vehicles in 2020.

Many of those cars were supplied by the German automotive giants: Volkswagen Group
VOW,
-0.40%,
which owns Audi and Porsche, Mercedes-Benz owner Daimler
DAI,
+0.46%,
and BMW
BMW,
-0.19%.

There is a coming wave from China

As Chinese car makers increase efforts to meet market demand at home and abroad, they are looking at Europe.

The volume of electric vehicles in Europe that were made by Chinese companies grew 1290% from 2019 to 2020, to 23,800 units. Much of that momentum came only recently — half of those cars arrived in the final three months of the year.

As Europeans scrambled to buy electric vehicles, the flow of cars from China also included Teslas. In December, 20% of all Tesla
TSLA,
+5.83%
models registered in Austria were manufactured in China.

Also read: Audi is betting on the luxury market in a new electric-vehicle venture with China’s oldest car maker

Government action is speeding up EV adoption

European car makers are being pushed to manufacture more electric vehicles by the threat of hundreds of millions of euros in fines from the European Union over binding emissions targets. 

Phased in through 2020, and continuing into 2021, the fleetwide average emission target for new cars must be 95 grams carbon dioxide per kilometer, which is around 4.1 liters of gasoline per 100 kilometers.

In the wake of the post-Brexit trading agreement, the U.K. government said that the country’s car makers face emissions targets “at least as ambitious” as in the EU.

EV adoption is being pushed on both sides of the market, with governments stimulating demand by providing generous incentives for buyers to trade in their gas guzzlers.

In Germany, buyers can save up to €9,000 ($10,940) on purchases of new electric vehicles. France offered incentives of up to €7,000 in 2020, but will trim that down to €6,000 in 2021. 

Regulation could hurt some bottom lines in the short-term

Volkswagen Group confirmed last week that it had not met the EU’s emissions targets for 2020, meaning that the company is on the hook for more than €100 million in fines.

Others could face the same fate, though rivals Daimler, BMW, Renault
RNO,
-0.58%,
and Peugeot (now part of Stellantis
STLA,
+1.05%
) all say they met their targets.

“Despite very ambitious efforts in electrification, it has not been possible to meet the set fleet target in full. But Volkswagen is clearly well on its way,” said Rebecca Harms, a member of the independent Volkswagen Sustainability Council.

“The key to success will be to give a greater role to smaller, efficient and affordable models in the electrification rollout.”

It is unclear how easy that will be in 2021. The COVID-19 pandemic contributed to the fewest passenger-car registrations in Europe since 1985 and, according to Schmidt, this allowed a number of car makers to meet emissions targets.

Also read: Car makers put the pedal to the metal on electric vehicles in 2020, with sales surging in one key region where Tesla lost market share

Tesla is losing dominance

Tesla comfortably topped the European EV charts in 2019. It delivered more than 109,000 vehicles that year, making up 31% of the region’s battery electric-vehicle market. 

But the tide turned in 2020, with Tesla dropping behind both the brands of Volkswagen Group, which had 24% market share, and the Renault–Nissan–Mitsubishi Alliance, with 19% market share. Last year, Tesla delivered nearly 98,000 vehicles and made up just 13% of the European market.

According to Schmidt, it was the introduction of emissions targets, and the specter of massive fines, that has accelerated European car makers’ battle against Tesla for dominance.

See also: Electric-car sales jump to record 54% market share in Norway in 2020 but Tesla loses top spot

“With 2021 getting even tougher — thanks to the phase-in year ending — Tesla will come under even more intense competition,” Schmidt said. “Come 2025 when the targets increase again, Tesla will certainly be playing against fully-fit opponents and will potentially struggle.”

However, Schmidt does note in his market outlook for 2021 that the opening of Tesla’s factory in Germany, expected to start production in the second half, is likely to double regional volumes next year.



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Business

Amid the GameStop-led frenzy, Jefferies says ‘plenty of air’ to come out of riskier assets. Another strategist says wait to buy the dip

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Markets are buckled into the fighting chair as another day of the retail-led feeding frenzy on shorted stocks is about to come online.

In case you thought the trading mania was a limited battle between internet day traders and Wall Street hedge funds: videogame retailer GameStop was one of the most traded stocks by value in the U.S. on Wednesday. 

Amateur investors, many based on the Reddit group WallStreetBets, are jumping into heavily-shorted stocks, driving prices to astronomical levels and forcing hedge funds to sell bigger, safer bets to cover losses.

Selloff is creeping to other investments and spooking sentiment. Major indexes took a 2% to 3% ride down on Wednesday and are set to continue surfing.

A must-read: Tendies? Diamond hands? Your guide to the lingo on WallStreetBets, the Reddit forum fueling Gamestop’s wild rise

Our call of the day comes from the U.S. equity researchers at Jefferies, led by global equity strategist Sean Darby, with a bonus call from Sébastien Galy, a strategist at Nordea Asset Management.

The team at Jefferies is clear that the correction in share prices has little to do with fundamentals. Rather, what’s happening is a reflection of a “sentiment shift within some of the more overbought and speculative parts of the market.”

The group’s retail speculative index, measuring the deviation from trend of assets where value is hard to determine, is high at 4 standard deviations. “Hence, there is plenty of air to come out of the riskier financial assets,” the team said.

Darby’s team noted that the short-term worry is whether the “popping” of riskier parts of the market will create a domino effect, as mainstream equities are liquidated to stem losses.

Galy, of the Nordic asset manager Nordea, echoes Jefferies’ caution about a wider selloff. He also says it’s too early to buy the dip, because there’s more to come.

The big moves to cover shorts at a time of high leverage typically forces more deleveraging, Galy said. This is because the constraint on capital from the risk of losses on investments is ratcheting up.

“As a consequence, the cost of hedging downside risk has sharply increased,” Galy said. “This risk reduction could last a few days followed by a sharp liquidity driven rebound in U.S. and to a lesser extent European stocks.”

Galy said that even a dovish Federal Reserve meeting on Wednesday couldn’t turn around this market, which is another signal that it may last.

The buzz

Shares in GameStop
GME,
+134.84%
touched the $500 level in the premarket before pulling back. The stock was just $19 heading into 2021. Fashion brand Nakd
NAKD,
+252.31%
is another stock making a big leap in the premarket, up 130%.

In a Securities and Exchange Commission filing this morning, cinema-theater chain AMC
AMC,
+301.21%
revealed that holders of the company’s convertible bonds have chosen to convert the notes into stock, as shares in the company have rallied around 330% since Tuesday. 

Apple
AAPL,
-0.77%,
Facebook
FB,
-3.51%,
and Tesla
TSLA,
-2.14%
posted earnings after the close yesterday. Technology giant Apple topped $100 billion in quarterly revenue for the first time, crushing expectations, as social-media company Facebook also beat estimates, with sales soaring 156% from “other revenue” — like virtual-reality headsets and video-chat devices. Electric-car maker Tesla reported its sixth straight quarter of profit, but it was a miss on expectations.

But if you can peel your eyes away from the stock market, it is a big day on the economic front. Initial and continuing jobless claims are due at 8:30 a.m. EST, with around 875,000 people expected to have filed for unemployment last week. Gross domestic product figures for the fourth quarter of 2020 will come at the same time, before new home-sales figures for December are reported at 10 a.m.

After the Federal Open Market Committee decided to hold monetary policy steady yesterday, Fed Chair Jerome Powell gave dovish signals that the central bank wasn’t done restoring the COVID-19 pandemic-ravaged economy to health. “We have not won this yet,” he said.

The markets

It looks like another wild day on Wall Street. Yesterday’s tumult saw the Dow Jones Industrial Average
DJIA,
-2.05%
tumble more than 630 points, and stock market futures
YM00,
-0.07%

ES00,
-0.31%

NQ00,
-0.90%
are pointing down, set to continue the selloff. Asian markets
NIK,
-1.53%

HSI,
-2.55%

HSI,
-2.55%
fell across the board and European indexes
SXXP,
-0.76%

UKX,
-1.13%

DAX,
-0.86%

PX1,
-0.17%
are firmly in the red.

The chart

Our chart of the day, from Marshall Gittler at BDSwiss, shows how the S&P 500
SPX,
-2.57%
dropped by the most since October 2020, and the VIX index of expected volatility saw its biggest one-day rise since the COVID-19 pandemic hit in March 2020. 

The tweet

When the sharks root for the fish. Billionaire entrepreneur and investor Mark Cuban — of “Shark Tank” fame — is rooting for Reddit’s WallStreetBets traders.

Random reads

An Oklahoma lawmaker has proposed a ‘Bigfoot’ hunting season with a new bill.

Key West wants to ban people from feeding fat, feral, free-roaming chickens.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.

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Business

GameStop, Microsoft, AMC: What to Watch When the Stock Market Opens Today

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Here’s what we’re watching ahead of Wednesday’s opening bell.

—U.S. stock futures slipped, as investors awaited a bumper day of major earnings reports and a meeting of the Federal Reserve.

S&P 500 futures were down 1.1%, while futures tied to the technology-heavy Nasdaq-100 edged down 0.7%. Dow Jones Industrial Average futures fell 1.1%.

What’s Coming Up

—Earnings updates expected:

Tesla,

TSLA -0.71%

Apple

AAPL -0.22%

and

Facebook

FB -2.39%

are due after the close. The electric-car maker is expected to record its first full-year profit.

The Federal Reserve releases a policy statement at 2 p.m. and Chairman Jerome Powell holds a press conference at 2:30 p.m.

Market Movers to Watch

—And then there’s GameStop. Its stock popped again ahead of the bell, soaring 73% in wildly volatile trading. CNBC reported that Melvin Capital, a hedge fund that has posted big losses so far this year in part because of a wager against the videogame retailer’s stock, had closed out its short position on Tuesday afternoon. The report caused a stir on the online platform Reddit—popular among day traders waging a battle against hedge-fund short-sellers—where some members wrote that it was an attempt to pull

GameStop

GME 109.79%

‘s share price back down. And

Elon Musk

weighed in on the stock again last night with a tweet, “Gamestonk!!“

—The show must go on: Another heavily shorted stock, movie-theater operator

AMC Entertainment Holdings,

AMC 133.87%

saw its shares vault more than 350% higher premarket.

—Headphone maker

Koss

KOSS 72.20%

has also joined the party, and its shares jumped 109% premarket.

—

Bed Bath & Beyond

BBBY 28.21%

resumed its upward trajectory, up 20% ahead of the bell. Online traders point to an early 2020 change in management and the fact that the company is buying back shares as signs that the share price will continue to increase.

—

Microsoft

MSFT 1.44%

shares are up 2.1% premarket. The software giant’s profit and sales jumped, propelled by pandemic-fueled demand for videogaming and accelerated adoption of its cloud-computing services.

—

Boeing

BA -4.46%

shares fell 3.3% premarket after the plane maker reported its biggest-ever annual loss and took a huge financial hit on its new 777X jetliner, reflecting the pandemic’s worsening toll.

—

Abbott Laboratories

ABT 1.12%

shares added 1.5% premarket after it logged hearty profit growth in the latest quarter as a surge in demand for its Covid-19 diagnostics services contributed to higher revenue.

—

Starbucks

SBUX -5.30%

slipped 3% premarket after the coffee chain reported that sales fell during the holiday quarter but showed signs of recovery, particularly in China. Its operating chief

Roz Brewer

is leaving to become CEO of

Walgreens

WBA 6.21%

Boots Alliance, where she’ll be the only Black woman leading a Fortune 500 company. Walgreens shares climbed 5%.

A Walgreens store in Tomball, Texas, Jan. 16, 2021.



Photo:

Jeff Lautenberger for The Wall Street Journal

—

AT&T

T -1.11%

shares slipped 1.3% premarket after it reported a fourth-quarter loss as it booked a $15.5 billion charge on its pay-TV business.

—Chip maker

Texas Instruments

TXN -2.81%

‘s shares slipped 1.7% premarket even though quarterly results and outlook both topped Wall Street estimates after Tuesday’s close.

Market Fact

Retail order flows have reached 20% of the U.S. stock market’s total, according to

UBS

research, twice what they were in 2010.

Chart of the Day

GameStop shares have become a favorite of online traders who are seeking to make money from buying options.

Must Reads Since You Went to Bed

Online Traders Helped Some Unlikely Stocks Soar

Jack Ma’s Ant Plans Major Revamp in Response to Chinese Pressure

Renewed Demand for Treasurys Quells Fears of Rising Rates—for Now

Goldman CEO David Solomon Takes $10 Million Pay Cut for 1MDB Scandal

Biden’s Candidate for SEC Chairman Is Expected to Be Tough

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Business

Apple, Tesla and Facebook ready to report record sales in busiest week of earnings

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U.S. companies have barely managed to eke out positive earnings growth so far in this quarterly results season, but the big test arrives in the week ahead.

Nearly a quarter of the S&P 500
SPX,
-0.30%
is set to report results, with those companies representing 39% of the index by market value, according to calculations based on FactSet data. Given that the S&P 500 is weighted by market capitalization, this roster of companies will have an outsize impact on the profit trajectory for the index.

Earnings are expected to decline for the fourth consecutive quarter once all results are in for the latest period, but those companies that have reported thus far have been beating expectations in aggregate.

The FactSet consensus now models a 5% earnings decline for the index, compared with the 6.3% drop projected a week ago. If profit growth for the S&P 500 ultimately ends up positive, it would mark an end to the current earnings recession, which takes place when corporate profits drop for two or more consecutive quarters.

Apple Inc.
AAPL,
+1.61%
and Facebook Inc.
FB,
+0.60%
are among the highlights of next week’s slate, along with Tesla Inc.
TSLA,
+0.20%,
which will deliver results for the first time since it became a member of the S&P 500. All three high-profile companies are scheduled to report Wednesday afternoon and expected to have produced record revenue in the holiday quarter.

The holiday quarter is always crucial for Apple, which releases new iPhones in the fall. With a slightly later launch than usual this year due to the pandemic pushing sales into the period, Apple is widely expected to post its largest quarterly revenue total ever and its first ever total above $100 billion. The technology giant likely also continued to see benefits from remote-work and remote-schooling trends, which have driven strong iPad and Mac sales throughout the COVID-19 crisis.

Full preview: Get ready for Apple’s first $100 billion quarter in history

Facebook is also expected to post what should easily be a record quarter given strong digital advertising trends during the holiday period. Still, the company will face questions about user engagement and a decision to ban Donald Trump from the platform indefinitely over his role in inciting the violent riot at the U.S. Capitol. Bernstein analyst Mark Shmulik points to “continued usage fatigue” across social media as well as a “conversation skewed towards unmonetizable political events.”

Full preview: Facebook earnings still flourishing amid pandemic, economic slowdown and antitrust scrutiny

Tesla already disclosed delivery numbers for the full year that came in ahead of analyst expectations, and all eyes will be on the company’s outlook for 2021. RBC Capital Markets analyst Joseph Spak anticipates a delivery forecast of 825,000 to 875,000 million units for the full year, even though Chief Executive Elon Musk said on Tesla’s last earnings call that an analyst was “not far off” for expecting 840,000 to a million deliveries during 2021.

Full preview: Can Tesla’s sales growth match stock’s rise?

Here’s what else to watch for in the week ahead, which brings reports from 117 members of the S&P 500 and 13 Dow Jones Industrial Average
DJIA,
-0.57%
components.

Up in the air

Boeing Co.’s
BA,
-0.76%
journey remains turbulent even as the company’s 737-MAX jets were recertified after being grounded for almost two years. Though the company began deliveries of these aircraft, “the pace of delivering all 450 parked 737-MAX will be dictated by airline customers ability to absorb aircraft as well as air traffic demand,” according to Benchmark Company analyst Josh Sullivan.

Boeing’s Wednesday morning report will offer perspective on the company’s recovery expectations amid the pandemic, though Sullivan sees volatility ahead stemming from a recent equity offering and the impact of the COVID-19 crisis on airlines.

The fourth-quarter reports from U.S. airlines have been bleak so far, and American Airlines Group Inc.
AAL,
-0.06%
and Southwest Airlines Co.
LUV,
-0.80%
offer more on Thursday morning.

Can you hear me now?

Verizon Communications Inc.
VZ,
+0.35%
leads off a busy week of telecommunications earnings Tuesday morning, followed by AT&T Inc.
T,
+0.35%
Wednesday morning and Comcast Corp.
CMCSA,
-0.92%
Thursday morning.

For the wireless carriers, a key issue will be the impact of iPhone 12 promotions on recent results. Investors will also be looking for information about a recent wireless auction offering spectrum that will be crucial for 5G network deployments. Though the bids haven’t been made public yet, the auction drove record spending and AT&T and Verizon are both expected to have paid up handsomely to assert their standing. The question for investors is what impact these bids will have on the companies’ financial positioning.

Full preview: AT&T earnings to kick off a defining year for telecom giant

AT&T and Comcast have more media exposure than Verizon, and those two companies have been trying to contend with the new realities brought on by the pandemic. Both companies have made moves to emphasize streaming more with their film slates given theater closures, and the financial implications of these moves will be worth watching.

Paying up

The evolving situation with the pandemic is reflected perhaps no more clearly than in the results of Visa Inc.
V,
-1.52%,
Mastercard Inc.
MA,
-1.63%,
and American Express Co.
AXP,
-1.01%,
which have a pulse on the global consumer spending landscape. The companies should provide insight on a travel recovery toward the end of the year, as well as the impact of recent lockdowns.

Susquehanna analyst James Friedman wrote recently that his Mastercard revenue projection of $3.97 billion is slightly below the consensus view, though he also asked: “does anyone really care about Q4 2020?” Friedman is upbeat about mobile-payments and online-shopping dynamics that suggest “positive trends ahead” for Mastercard, which reports Thursday morning. Visa follows that afternoon, while American Express kicks of the week with its Tuesday morning report.

The chip saga continues

Advanced Micro Devices Inc.
AMD,
+1.38%
is poised to keep benefiting from Intel Corp.’s
INTC,
-9.29%
stumbles, which analysts expect to last for some time even as Intel prepares for a new, technology-oriented chief executive to take the helm.

“We have low confidence that Intel will be able to close that transistor gap quickly, and therefore expect it to continue to lose share for the foreseeable future,” Jefferies analyst Mark Lipacis wrote after Intel’s latest earnings report. AMD will show how that dynamic has played out on its side of the equation when it posts numbers Tuesday afternoon.

Full preview: If Intel gets its act together, can AMD maintain swollen valuation?

Other chip makers reporting in the week ahead include Texas Instruments Inc.
TXN,
-1.31%
on Tuesday afternoon; Xilinx Inc.
XLNX,
+1.26%,
which is in line to be acquired by AMD, on Wednesday afternoon report, when it will be joined by chip-equipment maker Lam Research Corp.
LRCX,
-0.06%
; and Western Digital Corp.
WDC,
-5.23%
on Thursday afternoon.

Busy week for the Dow

Among the 13 members of the Dow Jones Industrial Average
DJIA,
-0.57%
set to report this week are 3M Co
MMM,
-0.96%.
, Johnson & Johnson
JNJ,
+1.13%,
American Express, Verizon, and Microsoft Corp.
MSFT,
+0.44%,
all of which report Tuesday.

“Near term, we see the company’s COVID-19 vaccine readout as a key upcoming catalyst and believe efficacy in the 80%+ range would suggest a clear role for the product in the market,” J.P. Morgan analyst Chris Schott wrote of Johnson & Johnson.

Cowen & Co. analyst J. Derrick Wood sees tough comparisons for Microsoft especially in its Azure and server businesses, though he expects a more favorable situation going forward.

Full preview: SolarWinds hack may actually be a good thing for Microsoft

Wednesday brings results from Boeing and Apple, while Thursday features McDonald’s Corp.
MCD,
-0.07%,
Dow Inc.
DOW,
-0.10%,
and Visa. Honeywell International Inc.
HON,
-1.45%,
Chevron Corp.
CVX,
-0.30%,
and Caterpillar Inc.
CAT,
-0.13%
round out the week Friday morning.

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