Tag Archives: Passenger airlines

Business

Airbus Revives Order From Qatar Airways Following Paint-Dispute Settlement

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LONDON—

Airbus

EADSY 2.36%

SE agreed to revive orders for close to 75 aircraft from Qatar Airways after reaching a settlement with the Middle East airline over a long-running dispute about chipping paint on its A350 wide-body models.

A spokesman for Airbus said it would now go ahead with delivering 50 A321 narrow-bodies and 23 remaining A350 twin-aisles previously ordered by Qatar.

The orders had been scrapped as part of an escalating, multibillion-dollar legal battle over the paint issue, which the airline had claimed could pose a safety concern. Airbus repeatedly denied the claims.

Airbus and Qatar Airways earlier Wednesday said in a joint statement that they had reached an “amicable and mutually agreeable settlement” in relation to the legal dispute. The companies didn’t disclose the details of the settlement other than to say the agreement didn’t amount to an admission of liability from either party. A program to repair the degradation on Qatar’s current fleet is under way, the companies added.

Qatar Airways had previously grounded 29 of its A350 jets and refused new deliveries over the issue, reducing its capacity amid a surge in travel to Doha for the 2022 FIFA World Cup. The airline has said the peeling paint was exposing the meshed copper foil that is designed to protect the aircraft from lightning strikes.

That led Qatar Airways to initiate legal proceedings against Airbus in London, in which the carrier had sought damages partly based on the impact on its operations from not being able to use the aircraft. A possible trial had been scheduled for later this year.

While the paint issue has also affected other A350s in service at other Airbus customers, only Qatar Airways had taken the step to unilaterally ground the aircraft. Airbus and the European Union Aviation Safety Agency, which oversees the Toulouse, France-based plane maker, have insisted that the issue is only cosmetic.

The situation had led to a broad fallout between Airbus and one of its biggest customers. In August, Airbus ended all new business with Qatar Airways, canceling contracts valued at more than $13 billion according to the latest available list prices and before the hefty discounts plane makers typically give to customers.

After Airbus canceled a deal to sell Qatar Airways 50 of its A321 jets, the Gulf carrier ordered up to 50 of rival

Boeing Co.

’s 737 MAX 10 single-aisle jets within two weeks. Qatar Airways had previously canceled most of an existing MAX order in 2020 after receiving five of the planes.

Airbus lawyers alleged that Qatar Airways had exaggerated concerns about the issue in an attempt to claim compensation and refuse delivery of aircraft that it didn’t need as the pandemic hit demand for air travel. The plane maker complained in court that the airline and its regulator, the Qatar Civil Aviation Authority, had failed to provide documentation that showed the technical justifications behind grounding the aircraft.

Qatar Airways has said it provided images of the damage, which it purported showed the scale of the issue and the potential safety risk.

Qatar Airways Chief Executive

Akbar Al Baker

has long had a reputation as a tough customer, publicly lashing out at both Airbus and Boeing when he perceives delivery or quality issues.

Write to Benjamin Katz at ben.katz@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Getting Results—and Money—When Airlines Cancel Flights

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Canceled or delayed flights can cost travelers money. Getting an airline to pay you back for expenses like hotel stays and rental cars isn’t impossible, but it can involve lots of legwork.

Southwest pledged to provide refunds to passengers on canceled or significantly delayed flights between Dec. 24 and Jan. 2, but the airline is also providing reimbursement for additional expenses including the cost of staying at a hotel or renting a car. Passengers were also given 25,000 frequent-flier points in a move by Southwest executives to win them back.

Airline passengers “have very few rights,” said

Paul Hudson,

president of FlyersRights, a consumer advocacy organization. Getting the remuneration that passengers believe they are entitled to can come down to perseverance and communicating extensively with the airline over an extended period.

Here’s what travelers need to know about their rights on domestic flights in the U.S. and how to get reimbursed.

My flight was canceled. Can I get a refund?

Airline customers are entitled to a refund if a flight is canceled for any reason or “significantly delayed” and they opt not to travel, according to rules from the Transportation Department. This policy extends to nonrefundable tickets. The DOT determines on a case-by-case basis whether passengers are entitled to a refund for a delayed flight.

While airlines are required to provide refunds in these circumstances if requested, they aren’t barred from offering other forms of redress first. Carriers will often offer a passenger the opportunity to rebook on another flight or a voucher or credit that could be used for future travel.

In these situations, customers will need to speak with an airline representative and request an “involuntary refund,” Mr. Hudson said. Not all customer-service staff will be familiar with this phrase, he warned, but he described it as “the magic words” to use to get a refund quickly.

I had to stay in a hotel because of a flight delay. Am I entitled to reimbursement?

Additional compensation beyond a refund of airfare and other fees isn’t required by the DOT. Still, most airlines have policies on what they will cover.

If a plane has a technical issue or the flight isn’t properly staffed, an airline’s compensation policy typically will kick in. If the delay or cancellation is due to weather, passengers may be out of luck getting assistance.

The DOT maintains a dashboard spelling out what is covered under the customer-service policies at the 10 largest domestic airlines in the U.S. in cases where cancellations or delays were under the carrier’s control. Each of these major airlines has put these policies in writing, making the commitments enforceable, a DOT spokeswoman said in an email.

My checked luggage went missing. What does the airline owe me?

If a checked bag is delayed, missing or damaged, the airline is liable and must reimburse the traveler. For domestic flights, airlines are only required to cover up to $3,800.

Apart from being required to reimburse passengers for the value of items that were lost or damaged, carriers must also compensate people for incidental expenses such as purchasing replacement clothing or medications. Airlines cannot set an arbitrary daily limit for those expenses, though they can require receipts or other proof for valuable items that were lost, according to the DOT.

I can’t rebook with my airline. Are they required to book me on another airline?

Before the airline industry was deregulated in the U.S. in the 1970s, carriers were required to rebook passengers with other airlines in instances where flights were canceled or delayed. “Now, it’s strictly voluntary,” said Mr. Hudson.

Some carriers have formal relationships with other airlines that allow them to rebook reservations at no additional cost, whereas others may buy tickets from competitors for stranded passengers. Southwest said it bought tickets on other airlines during its meltdown, and

Spirit

did the same during its 2021 meltdown.

I was bumped from my flight by my airline. Is that allowed?

Airlines have come under fire in recent years for the practice of overselling flights and then bumping passengers. The practice is allowed, as long as you haven’t boarded the plane. If you’ve already boarded, the airline can remove you from the flight for safety, security or health reasons.

If a passenger is involuntarily bumped, the carrier must provide a written statement of the flier’s rights and how the company decides who is bumped. They may be provided a refund, but they aren’t guaranteed additional compensation.

To be eligible for compensation, the traveler must have a confirmed reservation, have checked in on time and have arrived at the departure gate on time, the DOT states on its website.  

If all those conditions apply—and the airline cannot rebook the passenger on a flight that gets them to their destination within one hour of their original scheduled arrival—compensation is calculated based on the price of the original ticket, the length of the delay and whether the flight is domestic or international. Compensation ranges from up to $775 for short delays to no more than $1,550 for longer delays.

Write to Jacob Passy at jacob.passy@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Southwest Airlines Shows Progress in Push to Restore Flights

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Southwest Airlines Co.

LUV 0.87%

showed progress Saturday in its push to regain credibility with regulators and travelers, especially those whose holidays were disrupted by the company’s meltdown over the past week, but cancellations increased late in the day.

The Dallas-based carrier had 30 Saturday flight cancellations as of Saturday evening, according to FlightAware. Overall, more than 250 flights among all airlines flying to, from or within the U.S. had been canceled. Southwest’s total compared with 15 for United Airlines and 11 for

Delta Air Lines.

A Southwest spokeswoman said earlier in the day that the airline was operating a normal Saturday schedule of about 3,400 flights. Meanwhile, the carrier was seeking volunteers among its employees to help the customer-service staff catch up with requests for refunds and reunite customers with missing bags.

In a video distributed to staff members Friday, Southwest executives were upbeat about the near-term outlook. “I’m just very pleased to share that things are going very, very well,” said

Bob Jordan,

the airline’s chief executive. 

Andrew Watterson,

chief operating officer, said that lines had grown shorter and that the airline expected to provide normal service during the New Year holiday period and beyond. In another update Saturday, he said Southwest had deployed “an army” of people to ship bags back to customers, in some cases using

UPS

and

FedEx

to transport lost luggage. 

Southwest has ramped up its service after a meltdown that resulted in nearly 16,000 canceled flights between Dec. 22 and Dec. 29. Those cancellations, stemming from the recent winter storm, left thousands of holiday travelers stranded, furious and in many cases separated by hundreds of miles from their luggage.

Though the storm created problems for all airlines, Southwest canceled far more flights and was much slower than others to recover. Executives of the airline have said the scheduling system used to revise crew schedules after storms was overwhelmed by the volume of changes required. Airline staff members fumbled with makeshift manual methods to match up available crew and planes.

Southwest Airlines travelers waited for luggage in Minneapolis on Friday.



Photo:

Abbie Parr/Associated Press

To get back on track, the airline shrank itself for much of this week, operating roughly a third of its typical schedule on Tuesday, Wednesday and Thursday as it worked to get crews and planes back in place. The airline resumed operating its full schedule Friday. 

Southwest’s problems are far from over. Regulators, lawmakers and union leaders have said they are monitoring the airline’s response to the crisis. Southwest has apologized repeatedly and promised to reimburse affected travelers.

“As SWA turns the corner operationally, focus must remain on promptly compensating passengers caught in last week’s breakdown,” Transportation Secretary Pete Buttigieg said in a tweet Saturday.

One regular Southwest customer who still needs more reassurance is Allison Whitney, a professor of film and media studies at Texas Tech University. She was due to fly home to Lubbock, Texas, from Minnesota on Wednesday, but her Southwest flight was canceled. Facing the risk of being stranded until early in the new year, she booked an American Airlines flight Friday and made it home. 

Ms. Whitney likes Southwest’s luggage and easy-rebooking policies and finds that it can be the only good choice for some of her trips. But she said that after this week, she might hesitate to rely on Southwest for longer trips until she is convinced that the airline’s computer systems are up-to-date.

Write to James R. Hagerty at bob.hagerty@wsj.com and Alison Sider at alison.sider@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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Business

Southwest Airlines Gears Up for a Normal Flight Schedule on Friday After Mass Cancellations

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Southwest Airlines Co.

LUV 3.70%

executives said the airline is gearing up to resume its full flying schedule on Friday, removing limits on ticket sales and rebuilding crew schedules after an operational meltdown led it to cancel thousands of flights over the past week. 

Executives also pledged to continue work to update technology systems that company and labor officials have blamed for exacerbating Southwest’s troubles, leaving scheduling systems jammed and crews dispersed as the airline struggled to rebound from a winter storm.

“I can’t imagine that it doesn’t boost the focus in certain areas, maybe shift priorities based on what we learned,” Chief Executive

Bob Jordan

told reporters Thursday. “This has been an incredible disruption, and we can’t have this again.”

Southwest canceled nearly two-thirds of its flights Tuesday, Wednesday and Thursday, as part of an effort to dig out from a cascading meltdown after last week’s severe winter storm threw operations into disarray. While other airlines were able to recover from the brutal weather within a few days, Southwest continued to spiral.

Southwest has canceled nearly 16,000 flights in the past week, according to FlightAware. The airline scrubbed 39 flights scheduled for Friday that Chief Operating Officer

Andrew Watterson

said it was unable to staff, but executives said they believe they are ready for a smooth operation Friday.

Mr. Jordan told employees Thursday morning in a video message that shrinking Southwest’s operations had helped, with 95% of its flights on time on Wednesday. “Together we did what we needed to do to set ourselves up to operate our regular schedule tomorrow,” he said.

As it works to resume normal operations, Southwest faces heightened scrutiny from regulators and lawmakers, who have said they are closely monitoring the airline’s response to the crisis.

Transportation Secretary Pete Buttigieg on Thursday wrote to Mr. Jordan, describing the disruption as “unacceptable.” He reiterated his expectation that the airline will assist stranded passengers, honor commitments to cover passengers’ expenses, issue prompt refunds and ensure passengers are reunited with their bags. The airline has said it is providing those accommodations now.

Union leaders who represent Southwest pilots, flight attendants and other workers have faulted what they said was the airline’s lack of investment in technology over the years for many of its problems. Executives have acknowledged the need to upgrade inadequate platforms, such as the SkySolver system that it uses to redo crew schedules during disruptions and that was overwhelmed by the magnitude of the problems over the weekend.

Baggage Stuck in Southwest Airlines Cancellation Fiasco

Mr. Watterson said Thursday in a call with reporters that the upgrading process had already been under way. Southwest has made crew-scheduling its own department, hired more staff and made what he described as incremental improvements to current systems as it began to look for replacements. He said the “modest work” that had been done had started to pay off this fall, but that the winter storm created unique challenges.

While the airline has started to contemplate the broader questions of what it could have done differently, executives said their more immediate task this week has been to piece the airline back together—making sure that pilots and flight attendants are where they need to be, reuniting bags with their owners and ensuring that planes are tuned up and ready to go.

In an effort to make sure the airline is ready for Friday, Southwest added some flights for passengers on Thursday and ferried planes and crew to position them, Mr. Watterson said.

Ticket sales resumed, executives said, after the airline had limited bookings on remaining flights for much of this week, hoping to avoid a scenario where customers bought seats on flights that would ultimately be canceled. The airline also wanted to make sure seats would be available to take pilots and flight attendants where they had to be on Friday, Mr. Watterson said.

Southwest Airlines was ferrying planes and crew to make sure the company was ready for a full flying schedule.



Photo:

Matt York/Associated Press

To get to this point, Southwest sought volunteers to help work through a deluge of tasks to repair schedules for pilots and flight attendants.

At the height of the disruption, the airline’s crew schedulers had to revert to manually assigning pilots and flight attendants to flights when automated software couldn’t keep pace with the volume of changes. Even with the smaller schedule, the group was overwhelmed by the remaining workload, Mr. Watterson told employees this week.

Former crew schedulers working in other areas of the business stepped in to triage inbound phone calls, according to an internal memo Wednesday from

Lee Kinnebrew,

Southwest’s vice president of flight operations, and

Brendan Conlon,

vice president of crew scheduling. Other employee groups were being trained to support overwhelmed schedulers.

Mr. Watterson said the “volunteer army” has been trained on systems and could be called on to pitch in again if the airline begins to see signs that current technology is becoming overwhelmed, as it works on broader fixes. Airline executives said they are confident that existing technology systems can handle the airline’s normal operations while it works on a plan to update them.

Southwest’s ground-operations staff worked to scan thousands of missing bags to figure out where they had ended up. The airline set up new call centers to investigate lost items and update customers, Mr. Kinnebrew and Mr. Conlon wrote. The final step was to coordinate with FedEx Corp. and other delivery companies to truck bags between airports and reduce the strain on Southwest’s remaining flights this week, they wrote.

Running a smaller schedule introduced some new technical challenges, executives said. Planes can’t stay parked for long before they need to be put into short- or long-term storage, so the airline had to rotate through its fleet to ensure that aircraft weren’t sitting idle too long. Maintenance workers had to fan out to different locations to perform checks and regular work on planes that weren’t in their usual locations,

Kurt Kinder,

vice president of maintenance operations, wrote to employees Wednesday.

Southwest Airlines has canceled nearly 16,000 flights since Dec. 22, as customers have struggled to reach their destinations and find lost luggage. The airline said its reduced schedule would extend at least until Thursday. Photo: Albuquerque Journal/Zuma Press

Write to Alison Sider at alison.sider@wsj.com

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Business

Apple, Amazon, McDonald’s Headline Busy Earnings Week

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Amazon.

com Inc.,

Apple Inc.

and

Meta Platforms Inc.

are among the tech heavyweights featured in a packed week of earnings that investors will probe for indicators about the broader economy.

Other tech companies scheduled to report their latest quarterly reports include Google parent company

Alphabet Inc.

and

Microsoft Corp.

Investors also will hear from airlines such as

Southwest Airlines Co.

and

JetBlue Airways Corp.

, automotive companies

General Motors Co.

and

Ford Motor Co.

, and energy giants

Chevron Corp.

and

Exxon

Mobil Corp.

Nearly a third of the S&P 500, or 161 companies, are slated to report earnings in the coming week, according to FactSet. Twelve bellwethers from the Dow Jones Industrial Average, including

Boeing Co.

and

McDonald’s

Corp., are expected to report as well.

The flurry of results from a broad set of companies will give a sense of how businesses are faring as they deal with inflation denting consumer spending, ongoing supply-chain challenges and a stronger dollar.

People awaited the release of Apple’s latest iPhones in New York last month. The company will report quarterly results on Thursday afternoon.



Photo:

ANDREW KELLY/REUTERS

One area holding up to the challenges has been travel. Several airline companies have reported that consumers still have an appetite to spend on trips and vacations. On Friday,

American Express Co.

raised its outlook for the year in part because of a surge in travel spending.

“We expected the recovery in travel spending to be a tailwind for us, but the strength of the rebound has exceeded our expectations throughout the year,” American Express Chief Executive

Stephen Squeri

said.

In addition to airlines reporting, companies such as car-rental company

Hertz Global Holdings Inc.

and lodging companies

Hilton Worldwide Holdings Inc.

and

Wyndham Hotels & Resorts Inc.

will offer reads into leisure spending.

Overall, earnings for the S&P 500 companies are on track to rise 1.5% this period compared with a year ago, while revenue is projected to grow 8.5%, FactSet said.

Other companies will serve as a gauge for how consumers have responded to higher prices and whether they have altered their spending as a result.

Coca-Cola Co.

and

Kimberly-Clark Corp.

on Tuesday and

Kraft Heinz Co.

on Wednesday will show how consumers are digesting higher prices.

Mattel Inc.,

set to report on Tuesday, will highlight whether demand for toys remains resilient. Rival

Hasbro Inc.

issued a warning ahead of the holiday season.

United Parcel Service Inc.

will release its results on Tuesday and provide an opportunity to show how it is faring ahead of the busy shipping season. The Atlanta-based carrier’s earnings come weeks after rival

FedEx Corp.

warned of a looming global recession and outlined plans to raise shipping rates across most of its services in January to contend with a global slowdown in business.

Results from credit-card companies

Visa Inc.

and

Mastercard Inc.

will offer insights into whether inflation has finally put a dent in consumer spending after both companies reported resilient numbers last quarter.

Wireless carrier

T-Mobile US Inc.’s

numbers on Thursday will give more context to mixed results from competitors

Verizon Communications Inc.

and

AT&T Inc.

AT&T

issued an upbeat outlook on Thursday after its core wireless business exceeded the company’s expectations, whereas Verizon on Friday said earnings tumbled as retail customers balked at recent price increases.

Other notable companies lined up to report include

Chipotle Mexican Grill Inc.

on Tuesday, chicken giant

Pilgrim’s Pride Corp.

on Wednesday and chip maker

Intel Corp.

on Thursday.

Write to Denny Jacob at denny.jacob@wsj.com

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Business

Stock-market investors brace for busiest week of earnings season. Here’s how it stacks up so far.

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So far, so good?

Stocks ended the first full week of the earnings season on a strong note Friday, pushing the Dow Jones Industrial Average
DJIA,
+2.47%,
S&P 500
SPX,
+2.37%
and Nasdaq Composite
COMP,
-0.81%
to their strongest weekly gains since June. It gets more hectic in the week ahead, with 165 S&P 500 companies, including 12 Dow components, due to report results, according to FactSet, making it the busiest week of the season.

The bar for earnings was set high last year as the global economy reopened from its pandemic-induced state. “Fast forward to this year, and earnings are facing tougher comparisons on a year-over-year basis. Add in the elevated risk of a recession, still hot inflation, and an aggressive Fed tightening cycle, and it is of little surprise that the sentiment surrounding the current 3Q22 earnings season is cautious,” said Larry Adam, chief investment officer for the private client group at Raymond James, in a Friday note.

“We have reason to believe the 3Q22 earnings season will be better than feared and could become a positive catalyst for equities just as the 2Q22 results were,” he wrote.

Read: Stocks are attempting a bounce as earnings season begins. Here’s what it will take for the gains to stick.

Better-than-feared earnings were credited with helping to fuel a stock-market rally from late June to early August, with equities bouncing back sharply from what were then 2020 lows before succumbing to fresh rounds of selling that, by the end of September, took the S&P 500 to its lowest close since November 2020.

While earnings weren’t the only factor in the past week’s gains, they probably didn’t hurt.

The number of S&P 500 companies reporting positive earnings surprises and the magnitude of these earnings surprises increased over the past week, noted John Butters, senior earnings analyst at FactSet, in a Friday note.

Even with that improvement, however, earnings beats are still running below long-term averages.

Through Friday, 20% of the companies in the S&P 500 had reported third-quarter results. Of these companies, 72% reported actual earnings per share, or EPS, above estimates, which is below the 5-year average of 77% and below the 10-year average of 73%, Butters said. In aggregate, companies are reporting earnings that are 2.3% above estimates, which is below the 5-year average of 8.7% and below the 10-year average of 6.5%.

Meanwhile, the blended-earnings growth rate, which combines actual results for companies that have reported with estimated results for companies that have yet to report, rose to 1.5% compared with 1.3% at the end of last week, but it was still below the estimated earnings growth rate at the end of the quarter at 2.8%, he said. And both the number and magnitude of positive earnings surprises are below their 5-year and 10-year averages. On a year-over-year basis, the S&P 500 is reporting its lowest earnings growth since the third quarter of 2020, according to Butters.

The blended-revenue growth rate for the third quarter was 8.5%, compared with a revenue growth rate of 8.4% last week and a revenue growth rate of 8.7% at the end of the third quarter.

Next week’s lineup accounts for over 30% of the S&P 500’s market capitalization, Adam said. And with the tech sector accounting for around 20% of the index’s earnings, reports from Visa Inc.
V,
+1.68%,
Google parent Alphabet Inc.
GOOG,
+0.94%

GOOGL,
+1.16%,
Microsoft Corp.
MSFT,
+2.53%,
Amazon.com Inc.
AMZN,
+3.53%
and Apple Inc.
AAPL,
+2.71%
will be closely watched.

Away from the backward-looking numbers, guidance from executives on the path ahead will be crucial against a backdrop of recession fears, Adam wrote, noting that so far guidance has remained resilient, with the net percentage of companies raising rather than lowering their outlook remaining positive.

“For example, the ‘Summer of Revenge Travel’ was known to benefit the airlines, but commentary from United
UAL,
+3.56%,
American
AAL,
+1.86%
and Delta Airlines
DAL,
+1.34%
suggests demand remains strong for the months ahead and into 2023. Ultimately, the broader based and better the forward guidance, the higher the confidence in our $215 S&P 500 earnings target for 2023,” Adam said.

The soaring U.S. dollar
DXY,
-0.89%,
which remains not far off a two-decade high set at the end of last month, also remains a concern.

See: How the strong dollar can affect your financial health

“While the degree of the impact depends on the blend of costs versus sales overseas and how much of the currency risk is hedged, a stronger dollar typically impairs earnings,” Adam wrote.

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Business

Dow drops nearly 600 points, Nasdaq slumps ahead of megacap tech earnings

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U.S. stocks were trading sharply lower Tuesday afternoon, failing to build on the previous session’s bounce, as investors sift through a raft of company results and await earnings reports due after the bell from tech giants including Microsoft Corp. and Google parent Alphabet Inc.

How are stock indexes performing?
  • The Dow Jones Industrial Average
    DJIA,
    -2.14%
    dropped 589 points, or 1.7%, to 33, 460.
  • The S&P 500
    SPX,
    -2.47%
    fell 83 points, or about 2%, to 4,212.
  • The Nasdaq Composite
    COMP,
    -3.51%
    lost 375 points, or 2.9%, to trade at about 12,630.

Monday saw the biggest intraday reversal since February for the Dow, which rose 238 points, or 0.7%, erasing a loss of nearly 500 points. The S&P 500 rose 0.6%, and the Nasdaq Composite gained 1.3%.

Also read: U.S. stocks ended a Manic Monday in the green — but intraday bounces like this aren’t bullish

What’s driving markets?

Stocks were sinking Tuesday afternoon, with all three major benchmarks down after Monday’s rally.

“Investors are not necessarily secure” in the strength of the market, with “fragility” on display since the beginning of the year, said Aoifinn Devitt, chief investment officer at Moneta, in a phone interview Tuesday. “There is this fear of slowing growth.” 

The CBOE Volatility Index
VIX,
+14.62%
jumped about 15% to around 31 Tuesday afternoon, according to FactSet data. That compares with a 200-day moving average of around 21.

Consumer discretionary
SP500.25,
-4.08%,
information technology
SP500.45,
-2.79%
and communication services
SP500.50,
-2.00%
were the hardest hit sectors of the S&P 500 in early afternoon trading Tuesday, according to FactSet data. Tech and communications services had posted the strongest performance for the S&P 500 in Monday’s stock market rally.

“Now we have this giveback today,” said Devitt. “Markets are trying to figure out a level.”

The S&P 500 is trading not far off its closing low this year of 4,170.70 on March 8, according to Dow Jones Market Data. The Nasdaq was trading near its 2022 low of 12,581.22, hit March 14.

U.S. stocks were falling as investors wade further into the busiest week of the U.S. company-earnings reporting season, digesting results from a number of corporate heavyweights released before the opening bell. They’re also looking ahead to results from megacap tech companies Microsoft Corp.
MSFT,
-3.23%
and Google parent Alphabet Inc.
GOOG,
-2.58%
after the closing bell.

Tech giants are “big movers in the market,” said Paul Nolte, a portfolio manager at Kingsview Investment Management, by phone Tuesday. Both the S&P 500 and Nasdaq are “dramatically impacted by tech.” 

Formerly high-flying Netflix
NFLX,
-4.49%
shares have dropped more than 40% since announcing last week that it had lost 200,000 subscribers in the first quarter.

While around 80% of companies so far reporting earnings for the quarter have beaten profit expectations, including General Electric Co., United Parcel Service Inc. and Pepsico Inc., disappointing earnings forecasts are weighing on shares.

Read: First major Wall Street bank to call for a recession now sees clear outside risk it could be `more severe’

In U.S. economic data, orders at U.S. factories for durable goods rose 0.8% in March and business investment rebounded after the first decline in a year, signaling the economy is still growing at a steady pace. The rise in durable-goods orders matched the consensus expectation produced by a survey of economists by The Wall Street Journal.

 A survey of consumer confidence dipped in April to 107.3 from 107.6, but Americans signaled they are optimistic enough about the economy to keep buying big-ticket items such as news cars and appliances.

The S&P CoreLogic Case-Shiller 20-city house price index posted a 20.2% year-over-year gain in February, up markedly from 18.9% the previous month, but U.S. new-home sales decreased 8.6% to an annual rate of 763,000 in March, the government said Tuesday. 

The Federal Reserve’s policy meeting next week is meanwhile weighing on investors, who are anticipating the central bank may announce a large rate hike, potentially of 50 basis points, in an effort to tame hot inflation, according to Nolte.

“The Fed will raise rates until something breaks, and that will be the economy,” he said. “Concerns may be rising for the potential for a recession.”

Which companies are in focus?
  • Twitter Inc.
    TWTR,
    -3.28%
    shares fell about 2.7% Tuesday to around $50 after its board agreed Monday to accept Tesla chief Elon Musk’s $54.20 a share bid for the social-media platform.
  • 3M Co.
    MMM,
    -3.00%
    shares dropped 2.8% after the maker of post-it notes and industrial equipment posted better-than-expected first-quarter earnings.
  • Shares of PepsiCo Inc.
    PEP,
    -0.06%
    rose 0.3% after delivering earnings and revenue that exceeded Wall Street forecasts.
  • United Parcel Service Inc.
    UPS,
    -3.02%
    shares fell 2.6% after the package-delivery giant reported first-quarter profit and revenue that beat expectations.
  • General Electric Co.
    GE,
    -10.91%
    shares plunged 10.6% after the industrial conglomerate reported first-quarter adjusted profit and revenue that beat expectations, but missed on free cash flow and provided a somewhat downbeat outlook.
  • Shares of JetBlue Airways Corp.
    JBLU,
    -10.60%
    plummeted 10.1% after the air carrier reported a narrower-than-expected loss and revenue that more than doubled to match forecasts, but said it planned to reduce capacity growth further to help restore operational reliability. United Airlines Holdings Inc.
    UAL,
    -4.22%
    said Tuesday it is launching the biggest transatlantic expansion in its history with 30 new or resumed flights coming from mid-April through early June. United Airline shares fell 3.5%.
How are other assets are faring?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    2.774%
    fell about 5 basis points to around 2.77%. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index
    DXY,
    +0.56%,
    a measure of the currency against a basket of six major rivals, rose 0.5%.
  • Bitcoin
    BTCUSD,
    -4.79%
    fell 4.6% to trade around $38,314.
  • Oil futures
    CL.1,
    +3.01%
    climbed, with West Texas Intermediate crude for June
    CLM22,
    +3.01%
    delivery rising 2.8% to trade around $101.37 a barrel.
  • In gold futures
    GC00,
    +0.11%,
    gold for June delivery
    GCM22,
    +0.11%
    rose 0.1% to trade at $1,898.10 an ounce.
  • In European equities, the Stoxx Europe 600
    SXXP,
    -0.90%
    closed 0.9% lower, while London’s FTSE 100
    UKX,
    +0.08%
    gained 0.1%.
  • In Asia, the Shanghai Composite
    SHCOMP,
    -1.44%
    fell 1.4%, while the Hang Seng Index
    HSI,
    +0.33%
    rose 0.3% in Hong Kong and Japan’s Nikkei 225
    NIK,
    +0.41%
    gained 0.4%.

—Steve Goldstein contributed to this report.

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Business

Stock Futures Rise After Nasdaq Enters Correction

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U.S. stock futures gained, putting indexes on course to pare some of the sharp losses that have come as investors reposition their portfolios, spooked by the prospect of tightening monetary policy and slowing growth.

Nasdaq-100 futures rose 0.9% Thursday, a day after a late tech selloff dragged down indexes. Futures tied to the S&P 500 rose 0.5% and blue-chip Dow Jones Industrial Average futures added 0.4%. 

In premarket trading, Travelers Companies rose over 4% after reporting record net income in the fourth quarter.

American Airlines

Group gained 1.6% after saying it had trimmed its losses.

Netflix

will be one of the first tech giants to post its fourth-quarter results, after markets close, when

PPG Industries

will also report.

The technology-heavy Nasdaq Composite shed 1.1% on Wednesday.



Photo:

BRENDAN MCDERMID/REUTERS

Hong Kong-listed Chinese stocks jumped after an interest-rate cut by China’s central bank lifted shares of property developers and tech giants. The Hang Seng Index rose 3.4%, while mainland China’s Shanghai Composite Index edged down 0.1%. Elsewhere in Asia, the Nikkei 225 rose 1.1%. The pan-continental Stoxx Europe 600 edged up 0.1%. 

Faced with the prospect of multiple interest-rate rises, cooling growth and inflation at multidecade highs, investors have been reassessing the pandemic-era playbook that focused on outsize gains for growth stocks, such as tech. In recent sessions, investors have rotated into sectors expected to perform better in the coming year, such as financials and energy. 

“I don’t see a whole lot in the market that is really alarming me. There is no one out there saying ‘run for the hills,’ but there are those saying they are going to take off risk and reposition to other areas of the market,” said

Kara Murphy,

chief investment officer of Kestra Holdings.

That has prompted tumultuous trading. On Wednesday, the Nasdaq Composite closed more than 10% below its all-time closing high, putting it in correction territory.

Investors are selling government bonds in anticipation of higher interest rates, pushing up yields, and in the process, pressuring tech companies, whose future earnings become less attractive when compared with bonds with rising yields.

The yield on the 10-year U.S. Treasury note crept down to 1.823% Thursday from 1.826% Wednesday, after rising steadily in recent weeks. Benchmark German bund yields fell further into negative territory, a day after they briefly turned positive. The yield on the 10-year German government bond fell to minus 0.037% Thursday from minus 0.014% Wednesday.

U.S. home prices hit an all-time high in 2021, but those increases are expected to slow in 2022 thanks to a number of economic factors. Here’s what’s driving the housing market and what that could mean for prospective buyers and sellers. Photo: George Frey/Bloomberg News

Investors are awaiting data on the U.S. housing market, a bright spot for the economy. The data, due at 10 a.m. ET, is expected to show that existing home sales slowed in December, but were still on track for the best year since 2006. 

Brent crude, the international oil benchmark, fell 0.5% to $88.01 a barrel. This follows a rally partly driven by the potential for supply disruptions in Russia and the Middle East. On Wednesday, Brent crude futures hit their highest level since October 2014.

Write to Will Horner at william.horner@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Get ready for the climb. Here’s what history says about stock-market returns during Fed rate-hike cycles.

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Bond yields are rising again so far in 2022. The U.S. stock market seems vulnerable to a bona fide correction. But what can you really tell from a mere two weeks into a new year? Not much and quite a lot.

One thing feels assured: the days of making easy money are over in the pandemic era. Benchmark interest rates are headed higher and bond yields, which have been anchored at historically low levels, are destined to rise in tandem.

Read: Weekend reads: How to invest amid higher inflation and as interest rates rise

It seemed as if Federal Reserve members couldn’t make that point any clearer this past week, ahead of the traditional media blackout that precedes the central bank’s first policy meeting of the year on Jan. 25-26.

The U.S. consumer-price and producer-price index releases this week have only cemented the market’s expectations of a more aggressive or hawkish monetary policy from the Fed.

The only real question is how many interest-rate increases will the Federal Open Market Committee dole out in 2022. JPMorgan Chase & Co.
JPM,
-6.15%
CEO Jamie Dimon intimated that seven might be the number to beat, with market-based projections pointing to the potential for three increases to the federal funds rate in the coming months.

Check out: Here’s how the Federal Reserve may shrink its $8.77 trillion balance sheet to combat high inflation

Meanwhile, yields for the 10-year Treasury note yielded 1.771% Friday afternoon, which means that yields have climbed by about 26 basis points in the first 10 trading days to start a calendar year, which would be the briskest such rise since 1992, according to Dow Jones Market Data. Back 30 years ago, the 10-year rose 32 basis points to around 7% to start that year.

The 2-year note
TMUBMUSD02Y,
0.960%,
which tends to be more sensitive to the Fed’s interest rate moves, is knocking on the door of 1%, up 24 basis points so far this year, FactSet data show.

But do interest rate increases translate into a weaker stock market?

As it turns out, during so-called rate-hike cycles, which we seem set to enter into as early as March, the market tends to perform strongly, not poorly.

In fact, during a Fed rate-hike cycle the average return for the Dow Jones Industrial Average
DJIA,
-0.56%
is nearly 55%, that of the S&P 500
SPX,
+0.08%
is a gain of 62.9% and the Nasdaq Composite
COMP,
+0.59%
has averaged a positive return of 102.7%, according to Dow Jones, using data going back to 1989 (see attached table). Fed interest rate cuts, perhaps unsurprisingly, also yield strong gains, with the Dow up 23%, the S&P 500 gaining 21% and the Nasdaq rising 32%, on average during a Fed rate hike cycle.

Dow Jones Market Data

Interest rate cuts tend to occur during periods when the economy is weak and rate hikes when the economy is viewed as too hot by some measure, which may account for the disparity in stock market performance during periods when interest-rate reductions occur.

To be sure, it is harder to see the market producing outperformance during a period in which the economy experiences 1970s-style inflation. Right now, it feels unlikely that bullish investors will get a whiff of double-digit returns based on the way stocks are shaping up so far in 2022. The Dow is down 1.2%, the S&P 500 is off 2.2%, while the Nasdaq Composite is down a whopping 4.8% thus far in January.

Read: Worried about a bubble? Why you should overweight U.S. equities this year, according to Goldman

What’s working?

So far this year, winning stock market trades have been in energy, with the S&P 500’s energy sector
SP500.10,
+2.44%

XLE,
+2.35%
looking at a 16.4% advance so far in 2022, while financials
SP500.40,
-1.01%

XLF,
-1.04%
are running a distant second, up 4.4%. The other nine sectors of the S&P 500 are either flat or lower.

Meanwhile, value themes are making a more pronounced comeback, eking out a 0.1% weekly gain last week, as measured by the iShares S&P 500 Value ETF
IVE,
-0.14%,
but month to date the return is 1.2%.

See: These 3 ETFs let you play the hot semiconductor sector, where Nvidia, Micron, AMD and others are growing sales rapidly

What’s not working?

Growth factors are getting hammered thus far as bond yields rise because a rapid rise in yields makes their future cash flows less valuable. Higher interest rates also hinder technology companies’ ability to fund stock buy backs. The popular iShares S&P 500 Growth ETF
IVW,
+0.28%
is down 0.6% on the week and down 5.1% in January so far.

What’s really not working?

Biotech stocks are getting shellacked, with the iShares Biotechnology ETF
IBB,
+0.65%
down 1.1% on the week and 9% on the month so far.

And a popular retail-oriented ETF, the SPDR S&P Retail ETF
XRT,
-2.10%
tumbled 4.1% last week, contributing to a 7.4% decline in the month to date.

And Cathie Wood’s flagship ARK Innovation ETF
ARKK,
+0.33%
finished the week down nearly 5% for a 15.2% decline in the first two weeks of January. Other funds in the complex, including ARK Genomic Revolution ETF
ARKG,
+1.04%
and ARK Fintech Innovation ETF
ARKF,
-0.99%
are similarly woebegone.

And popular meme names also are getting hammered, with GameStop Corp.
GME,
-4.76%
down 17% last week and off over 21% in January, while AMC Entertainment Holdings
AMC,
-0.44%
sank nearly 11% on the week and more than 24% in the month to date.

Gray swan?

MarketWatch’s Bill Watts writes that fears of a Russian invasion of Ukraine are on the rise, and prompting analysts and traders to weigh the potential financial-market shock waves. Here’s what his reporting says about geopolitical risk factors and their longer-term impact on markets.

Week ahead

U.S. markets are closed in observance of the Martin Luther King Jr. holiday on Monday.

Read: Is the stock market open on Monday? Here are the trading hours on Martin Luther King Jr. Day

Notable U.S. corporate earnings

(Dow components in bold)
TUESDAY:

Goldman Sachs Group
GS,
-2.52%,
Truist Financial Corp.
TFC,
+0.96%,
Signature Bank
SBNY,
+0.07%,
PNC Financial
PNC,
-1.33%,
J.B. Hunt Transport Services
JBHT,
-1.04%,
Interactive Brokers Group Inc.
IBKR,
-1.22%

WEDNESDAY:

Morgan Stanley
MS,
-3.58%,
Bank of America
BAC,
-1.74%,
U.S. Bancorp.
USB,
+0.09%,
State Street Corp.
STT,
+0.32%,
UnitedHealth Group Inc.
UNH,
+0.27%,
Procter & Gamble
PG,
+0.96%,
Kinder Morgan
KMI,
+1.82%,
Fastenal Co.
FAST,
-2.55%

THURSDAY:

Netflix
NFLX,
+1.25%,
United Airlines Holdings
UAL,
-2.97%,
American Airlines
AAL,
-4.40%,
Baker Hughes
BKR,
+4.53%,
Discover Financial Services
DFS,
-1.44%,
CSX Corp.
CSX,
-0.82%,
Union Pacific Corp.
UNP,
-0.55%,
The Travelers Cos. Inc. TRV, Intuitive Surgical Inc. ISRG, KeyCorp.
KEY,
+1.16%

FRIDAY:

Schlumberger
SLB,
+4.53%,
Huntington Bancshares Inc.
HBAN,
+1.73%

U.S. economic reports

Tuesday

  • Empire State manufacturing index for January due at 8:30 a.m. ET
  • NAHB home builders index for January at 10 a.m.

Wednesday

  • Building permits and starts for December at 8:30 a.m.
  • Philly Fed Index for January at 8:30 a.m.

Thursday

  • Initial jobless claims for the week ended Jan. 15 (and continuing claims for Jan. 8) at 8:30 a.m.
  • Existing home sales for December at 10 a.m.

Friday

Leading economic indicators for December at 10 a.m.

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Business

After Two Weeks of Flight Cancellations, Airlines Assess What Went Wrong

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At JetBlue Airways Corp., executives felt confident coming into the Christmas season. The airline had flown through Thanksgiving week with hardly any hiccups.

Then Covid-19’s Omicron variant arrived. With its headquarters in New York, which leads the country in new case counts, JetBlue was quickly overwhelmed. Daily sick calls more than quadrupled. On Dec. 21, JetBlue canceled no flights. Four days later, on Christmas Day, it scrapped 12% of its schedule.

“Because of the exponential increase, you get to a point where you exhaust all your available reserves,” Chief Executive Robin Hayes said.

Airlines are struggling through one of the most severe and persistent mass-cancellation events of the past decade, according to data compiled by FlightAware. U.S. Covid-19 infections surged too quickly for carriers to manage without upending holiday travel, wreaking havoc on already-stretched airline workforces. Now carriers are assessing how to better manage what could continue to be a difficult period, at least for the next few weeks.

Airlines scrapped more than 3,000 U.S. flights and delayed more than 5,000 on Monday. The new wave of cancellations and delays comes as the surge in Covid-19 infections in the U.S. has left the airline industry stretched thin. Photo: Chandan Khanna/AFP/Getty Images

Airlines have canceled more than 1,000 daily U.S. flights for 13 straight days, including over 2,500 on Friday as another winter storm brought snow to Boston and New York.

Flights scrubbed from Christmas Eve through Jan. 6 exceeded 24,000, roughly 7% of the number airlines had planned to fly, according to flight-tracking service FlightAware.

For airlines, the upheaval of the pandemic is heading into a new phase. Unlike in early 2020, when terrified passengers canceled trips in droves, new variants dent but don’t decimate appetite for travel. But airlines are still rebuilding their operations. The twin challenges of rising numbers of employees calling out sick after being infected or exposed to Covid-19, and a series of severe winter storms that hit major hubs from Seattle to Chicago to Washington, D.C., created the perfect conditions for travel chaos.

It became clear that a problem was brewing early in the week of Christmas, said

Sara Nelson,

president of the Association of Flight Attendants-CWA.

“Thanksgiving went off without a hitch. We had two things going for us: We didn’t have Omicron, and we didn’t have any winter storms,” she said. “No one saw Omicron coming.”

The trouble spiraled as more workers became infected. “I was getting notices that entire crews were testing positive and they’re out of the country, in a location where they don’t have other crews. There’s no way to get that aircraft back,” Ms. Nelson said.

A check-in line at Seattle-Tacoma International Airport on Dec. 27.



Photo:

LINDSEY WASSON/REUTERS

Delta Air Lines Inc.

DAL 3.63%

was the first to flag the potential for disruption. Chief Executive

Ed Bastian,

along with the airline’s chief health officer and a medical adviser, asked the director of the Centers for Disease Control and Prevention on Dec. 21 to consider halving its recommended isolation period for fully vaccinated people who come down with breakthrough Covid-19 infections. They cited potential workforce shortages and new information about the Omicron variant. JetBlue followed with its own letter a day later.

Airlines had been under pressure from both travelers and lawmakers to deliver a smooth holiday season after meltdowns last summer and fall. Carriers including

Southwest Airlines Co.

LUV 3.25%

and

American Airlines Group Inc.

AAL 4.23%

at times struggled to maintain the buffer needed to quickly recover from storms or other disruptions, resulting in thousands of canceled flights.

Delta and

United Airlines Holdings Inc.

UAL 3.53%

were among the airlines facing the toughest problems in recent weeks. But almost no airline emerged completely unscathed.

“It has been one of the most difficult operational environments we’ve ever faced, and it forced us to cancel hundreds of flights as a result,” Delta’s chief customer experience officer,

Allison Ausband,

wrote to its frequent fliers on Jan. 5. Delta said Thursday that another round of storms headed for the Northeast would likely result in hundreds more cancellations.

Airlines aren’t alone in facing shortfalls as the Omicron variant rips through workforces. Public-transit services in New York and other cities have been disrupted. Retailers, bars and restaurants have had to temporarily close or curtail hours. School closures are at their highest point of the academic year as teachers call in sick.

Airlines operate under strict safety rules that can leave them little recourse but to cancel flights when they are short of staff in the right places. Pilots aren’t always trained to fly multiple aircraft types, for example. Regulations dictate how much rest crews must get between shifts. And employees such as flight dispatchers and mechanics can take on only so much extra work safely.

William Humphrey, 35 years old, had hoped to return on New Year’s Day from a family visit to Omaha, Neb. Citing weather, United canceled his flight and rebooked him for Jan. 2. He instead took a refund and switched to a quicker route with Delta, but that flight was canceled, too, as were two more of his Delta flights on Monday.

Dr. Humphrey, a resident physician working in Burlington, Vt., worried about finding coverage at his already short-handed office. On Tuesday, when a delay in his flight from Omaha to Detroit caused him to miss his connecting flight home to Burlington, he instead booked a flight to Albany, N.Y., rented a car, and drove the rest of the way, a three-hour trip.

“It seems like it’s getting more and more chaotic,” he said.

Waiting at Newark Liberty International Airport in Newark, N.J., on Monday.



Photo:

Christopher Occhicone/Bloomberg News

Airlines are preparing for the difficulties to last at least a few more weeks.

Alaska Air Group Inc.

ALK 2.94%

said Thursday that it will reduce Alaska Airlines departures by 10% through the end of January, citing an unprecedented rate of employee sick calls due to Omicron and the need to find a way to navigate Covid-19 as a “continued reality in our business and our world.”

“This will give us the flexibility and capacity needed to reset,” the airline said in a statement.

Southwest said that through Jan. 25 it will offer pay incentives, including up to double pay for working extra shifts, to employees such as flight attendants, customer-service representatives and mechanics. Southwest canceled over 2,500 flights this week, including more than 500 on Friday—17% of the flights it planned that day, according to FlightAware, as Omicron-related sick calls made it harder to recover from severe weather such as a major snowstorm that hit Washington, D.C., early this week.

An airline spokesman said Southwest is focusing on stabilizing its operation in the wake of winter storms while maintaining sufficient staffing as Covid-19 cases jump.

Carriers typically maintain higher staffing levels as a buffer against bad weather and other unexpected events over the busy holiday season—when demand runs high and staff callouts tend to be elevated even in the best of circumstances—said

Geoff Murray,

a partner at consulting firm Oliver Wyman. Airlines are still clamoring to hire more staff, he said, with regional carriers suffering a dearth of pilots and major carriers contending with training logjams.

SHARE YOUR THOUGHTS

What has been your recent experience traveling by air? Join the conversation below.

“There was not a lot of slack in the system,” Mr. Murray said. “The only alternatives the airlines had were to further cut back schedules going into the holiday. With the booking levels they were looking at, that would have been very difficult to do.”

At United, the number of pilots out sick, including those with Covid-19, those awaiting test results and those with other illnesses, climbed to about 900 this week from about 500 shortly before Christmas. And the number of pilots with active Covid-19 infections more than doubled to nearly 500 during that period, according to a spokesman for the union that represents United’s pilots.

The airline rushed to bump pay for pilots willing to take on extra trips, with negotiators working past midnight on Dec. 31 to craft an incentive agreement that offers up to triple pay for certain trips. United hasn’t shortened the 10-day quarantine period for pilots and flight attendants who become ill with Covid.

While airlines are still canceling flights, they will likely get a measure of relief from the typical travel slowdown following the winter holidays. Airlines tend to operate fewer flights in January than at the end of December. Airports screened 1.5 million passengers Thursday, pulling back from daily highs of more than 2 million at the height of the holiday rush, according to the Transportation Security Administration.

“I think we’ll start seeing more people coming back to work than calling out,” said JetBlue’s Mr. Hayes. “And I think that will allow us to recover very quickly from the middle of January onwards.”

A packed Miami International Airport on Jan. 3.



Photo:

chandan khanna/Agence France-Presse/Getty Images

—Stephen Council contributed to this article.

Write to Alison Sider at alison.sider@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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