Aurelia Butler

NEW YORK (Reuters) – U.S. companies will post results in the coming weeks on the final quarter of 2021 as investors worry about inflation’s impact on earnings and pressure on the Federal Reserve to speed up the timeline for kicking off interest rate hikes.The concerns, along with caution tied to the fast-spreading COVID-19 Omicron variant, have driven a recent market sell-off, led by Nasdaq and shares of technology and other big growth companies that have benefited from low interest rates.Year-over-year profit growth for S&P 500 companies is expected to be lower in the fourth quarter than it was in first three quarters of 2021 but still strong at 22.4%, according to IBES data from Refinitiv.Huge profit gains earlier in 2021 were fueled by a rebound from the economic downturn in the early stages of the pandemic.It’s “nearing the end of the very easy comparisons that we had relative to 2020,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “Those easy comparisons will begin to wane as we move into 2022.”Last year’s strong market performance – with the S&P 500 gaining 26.9% for the year – was on the back of massive profit growth, so corporate outlooks for 2022 will be key this earnings period, Northey said. Earnings growth for all of 2021 is estimated at about 50% compared with 8.6% for 2022, while the forward price-to-earnings ratio for the S&P 500 was last at 21.7, compared with its long-term average of 15.5, according to Refinitiv DataStream.JPMorgan Chase (NYSE:JPM) is due to report Friday and will kick off the reporting period along with Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC).Heading into earnings season, bank shares have rallied with U.S. Treasury yields as focus has turned to rate hike expectations.Analysts expect big U.S. banks to show an increase in fourth-quarter core revenues, thanks to new lending and rising Treasury yields.Both the S&P 500 bank index and financial index hit record highs last week. Minutes released last week from the Fed’s December meeting showed some policymakers want to tighten policy even faster. With inflation among their top worries, investors will also watch for signs supply chain bottlenecks may be easing. U.S. economic reports have offered some hope on that front. Last week’s report on U.S. services industry activity included tentative signs the supply logjam in that sector is starting to break up.Transportation snags at ports and other areas have led to bigger expenses for companies and higher costs for consumers.Bottlenecks have hit retailers especially hard, and investors will watch for how they affected holiday sales. S&P 500 companies have been maintaining record profit margins, with many able to pass on higher expenses to customers, but that may not continue.”We expect margins not to be a record this quarter” but still high, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices in New York.The stock market has seen investors rotating out of technology-heavy growth shares and into more value-oriented stocks that tend to do better in a higher interest-rate environment. Still, some investors say technology company results could be much better than Wall Street expects.Results from big tech and other mega-cap companies start next week, with Netflix (NASDAQ:NFLX) due to report on Jan 20.Recent results from some chip companies including Micron Technology (NASDAQ:MU) were upbeat, said Daniel Morgan, portfolio manager at Synovus (NYSE:SNV) Trust in Atlanta, Georgia. “That gives me confidence we should get good reports out of the chips sector,” he said. “I’m optimistic.”Energy, materials and industrials sectors are expected to post the biggest year-over-year earnings gains in the fourth quarter, according to Refinitiv data.Energy has been by far the strongest S&P 500 sector performer in early 2022, with the S&P 500 energy index up about 14% since Dec. 31, supported by tight supply, following a whopping 48% gain in 2021.Results from oil majors ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are due in a couple of weeks.But all 11 of the S&P 500 sectors are slated to show profit growth for the fourth quarter of 2021, while revenue growth for the period is seen at 12.1%. That growth level would also be lower than in recent quarters, based on Refinitiv data. More

(Reuters) – Controlling inflation that has spiked to nearly a 40-year high is the “most important task” facing the Federal Reserve right now, Fed Governor Lael Brainard said in prepared remarks for a Senate hearing on Thursday on her nomination to become vice chair of the U.S. central bank.”We are seeing the strongest rebound in growth and decline in unemployment of any recovery in the past five decades,” Brainard said in comments to be delivered to the Senate Banking Committee. “But inflation is too high, and working people around the country are concerned about how far their paychecks will go. Our monetary policy is focused on getting inflation back down to 2 percent while sustaining a recovery that includes everyone. This is our most important task. Brainard is scheduled to begin her testimony at 10 a.m. EST (1500 GMT) in a session that could mark the start of a broader and potentially bitter partisan contest over the make-up of the Fed’s seven-member governing board.Only four of those seats are filled right now, and pending Biden appointments, including for a second vice chair’s slot overseeing financial regulation, could advance what he and his Democratic supporters feel should be a bigger Fed role on climate issues and a tougher hand with Wall Street.Brainard, a Democrat first appointed to the Fed in 2014 by then-President Barack Obama and confirmed at the time by a 61-31 vote, would be a prominent player in that effort. She is a veteran of U.S. economic policymaking, and in her remarks noted that she had “worked on the U.S. policy response to every major financial crisis over three decades” as a member of past Democratic administrations and more recently at the Fed.In her prepared remarks, which were released by the Fed on Wednesday, Brainard said she was “committed to the independent and nonpartisan status” of the central bank, and promised an “independent voice.” As a Fed governor she was a frequent dissenting vote against steps taken during former President Donald Trump’s administration and under Fed Chair Jerome Powell to loosen oversight of the largest banks; called for the Fed to require financial firms to set aside more capital; and worried that Fed officials were behind European central bankers in understanding how climate change may effect the macroeconomy and financial system.Conservative groups like the Club for Growth, as a result, have tried to build the case against her confirmation as vice chair, and Republican senators have flagged a fight to come: at Powell’s own confirmation hearing this week one Republican senator asked whether he risked being outnumbered if Brainard is confirmed along with the other expected Biden appointments to the Fed’s board. Brainard’s confirmation hearing will be held jointly alongside that for Sandra Thompson, who has been nominated by Biden to be director of the Federal Housing Finance Agency. Thompson is currently FHFA’s acting director.MORE SWAYThe Fed’s vice chair has a central role in shaping monetary policy, which is now being shifted away from the accommodative programs put in place at the start of the pandemic and towards higher interest rates and other efforts to tame inflation.Brainard’s prepared remarks stuck close to the monetary policy script used by Powell at his hearing on Tuesday, when he said the Fed will act as needed with higher interest rates and other measures to be sure inflation returns from its current high level to the 2% target.U.S. consumer prices are rising at their fastest pace in almost four decades as high consumer demand for goods like used cars overwhelms supply limited by snarled supply chains and a pandemic-hit workforce. The Fed decided last month to end its monthly bond purchases in March to clear the way for what most policymakers expected would be at least three quarter-percentage-point interest rate hikes this year.But Brainard, as vice chair, would also gain more sway over cutting-edge issues like climate change and cryptocurrency regulation where the central bank’s approach is in flux. Fed vice chairs are often called on to lead the development of new policies, and Brainard as a governor has staked out a broad agenda on those and other topics. More

By Yasin Ebrahim
Investing.com – Federal Reserve Governor Lael Brainard is expected to stress the central bank’s priority to get inflation back down to 2%, while protecting economic gains already made to support a full recovery.
“[I]nflation is too high … Our monetary policy is focused on getting inflation back down to 2 percent while sustaining a recovery that includes everyone,” Brainard said in prepared remarks for a confirmation hearing before the Senate Banking Committee slated for Thursday.
The remarks arrived just as data showed U.S. inflation rose 7% for the year through December, the fastest pace since 1982.
“Today the economy is making welcome progress, but the pandemic continues to pose challenges. Our priority is to protect the gains we have made and support a full recovery,” Brainard said.
The Fed governor will also point to the progress made on the Fed’s labor market objective, which forms part of the central bank’s dual mandate.
“We are seeing the strongest rebound in growth and decline in unemployment of any recovery in the past five decades,” according to remarks from Brainard.
“Over the past year, unemployment has fallen by 2.8 percentage points, and growth is estimated to be around 5 1/2 percent, according to a variety of private forecasts.” More

“It’s time to move forward with this file,” von der Leyen, who is the first woman to lead the Brussels-based EU executive, told the Financial Times on Wednesday. “It’s been sitting on the shelf for 10 years now, but in these 10 years there has been a lot of movement and learning.”Von der Leyen said there was “overwhelming” evidence that companies with boardroom diversity were more successful and introducing legal requirements accelerated the pace of progress towards more gender-balanced representation.Nevertheless, gender equality initiatives in the EU have stalled previously, including a 2012 legal proposal calling for listed companies in the bloc to fill at least 40% of their non-executive board seats with women.Some EU countries refused to adopt that target as law, including Germany and some Nordic and Baltic states.Von der Leyen told the FT she is ready to work with France to push for the proposed directive during the six-months Paris is holding the EU’s rotating presidency, and that she is hopeful Berlin will drop its opposition now that a new government has been formed.EU lawmakers should aim to settle the directive in the first half of the year if possible, and a deal could “definitely” be done at some point in 2022, von der Leyen said.The directive does not set out sanctions, leaving these to member states, and it will not apply to small and medium-sized, or unlisted, companies, the Financial Times said.France currently has the strongest female representation in the boardrooms of the biggest listed companies’ at 45%, according to the report, against a 30% average for the EU as a whole. More

Lael Brainard, Joe Biden’s nominee for vice-chair of the Federal Reserve, will tell Congress that the fight against high inflation is the US central bank’s “most important task” in an embrace of the Fed’s pivot towards tighter monetary policy. “Inflation is too high, and working people around the country are concerned about how far their pay cheques will go,” said Brainard, a Fed governor, in prepared remarks released ahead of her confirmation hearing before the Senate banking committee on Thursday. “Our monetary policy is focused on getting inflation back down to 2 per cent while sustaining a recovery that includes everyone. This is our most important task,” she added. If confirmed by the Senate, Brainard, 60, would become second-in-command at the Fed after a steady rise up the ranks of US economic policymaking, including serving as a senior Treasury official for international affairs under former president Barack Obama and nearly eight years on the board of the Fed.The central bank is moving quickly towards tighter monetary policy following a pivot late last year in its thinking about inflation and the risk it poses to the economic recovery. During his confirmation hearing on Tuesday, Jay Powell, Fed chair, warned high inflation is a “severe threat” to the labour market and the prospects of a long economic expansion. Brainard is generally regarded as dovish on monetary policy, but her testimony suggests she is on board with a more aggressive approach to fighting inflation. During her opening statement, she will also cite her international experience to highlight her determination to quash excessive price rises. “In some foreign countries, I saw up close how high inflation hurts workers and families, especially the most vulnerable,” she will say. The consumer price index increased at a 7 per cent year-on-year pace last month, a step up from the 6.8 per cent rate registered in November and the largest jump since June 1982.Fed officials have already indicated their support for three interest rate increases next year, having accelerated the pace at which they are winding down a huge bond-buying stimulus programme. “Lift-off” of the Fed’s main policy rate is now broadly expected in March, with a reduction in the $9tn balance sheet kicking off later in the year.Brainard is expected to face tough questions, particularly from Republican lawmakers concerned that she will lead what Bill Hagerty, a senator from Tennessee, described as an “activist bloc” of Biden appointees who would sideline Powell and impose a Democratic policy agenda on the Fed. Brainard sought to dismiss such concerns in her remarks. “I am committed to the independent and non-partisan status of the Federal Reserve. If confirmed, I look forward to supporting chair Powell in carrying out the responsibilities assigned to the Federal Reserve and in fostering transparent communication and accountability to you and the American people,” she said.

While Brainard is generally aligned with Powell and other members of the Federal Open Market Committee on issues related to monetary policy, she has carved out a distinct voice at the central bank on supervisory matters.During her tenure at the Fed, she assumed a tougher stance than her colleagues on how Wall Street should be policed, dissenting more than 20 times on board votes pertaining to rule changes that would ease regulations on the largest financial institutions. That earned her plaudits from progressive Democrats, who had for months lobbied the Biden administration to replace Powell with Brainard.Her efforts to strengthen the guidelines on how banks should service disadvantaged communities also burnished her reputation among members of Biden’s party, as did her push for the Fed to more proactively incorporate climate-related financial risks into its oversight. More