Finance

The current slide in the stock markets is considered unlikely to scare Fed officials enough to deviate from their current policy track.
Both Goldman Sachs and Bank of America have said in recent days that they see the Fed continuing to tighten to address inflation pressures.
Stocks sold off aggressively again Monday, with rate-sensitive shares getting the worst of it.
The Fed meets Tuesday and Wednesday and is expected to tee up rate increases ahead.

The Marriner S. Eccles Federal Reserve building in Washington, D.C., on Friday, Sept. 17, 2021.
Stefani Reynolds | Bloomberg | Getty Images

The current slide in the stock market may be spooking some investors, but it’s seen as unlikely to scare Federal Reserve officials enough to deviate from their current policy track.
In fact, Wall Street is looking at a Fed that might even talk tougher this week as it is seemingly locked in a fight against generational highs in inflation amid market turmoil.

Goldman Sachs and Bank of America both have said in recent days that they see increasing chances of an even more hawkish central bank, meaning a better chance of even more interest rate hikes and other measures that would reverse the easiest monetary policy in U.S. history.
That sentiment is spreading, and is causing investors to reprice a stock market that had been hitting new historic highs on a consistent basis but has taken a steep turn in the other direction in 2022.
“The S&P is down 10%. That’s not enough for the Fed to go with a weak backbone. They have to show some credibility on inflation here,” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “By kowtowing to the market so quickly without doing anything with respect to inflation would be a bad look for them.”

Over the past two months the Fed has taken a sharp pivot on inflation, which is running at a nearly 40-year high.
Central bank officials spent most of 2021 calling the rapid price increases “transitory” and pledging to keep short-term borrowing rates anchored near zero until they saw full employment. But with inflation more durable and intense than Fed forecasts, policymakers have indicated they will start hiking interest rates in March and tightening policy elsewhere.

Where the market had been able to count on the Fed to step in with policy easing during previous corrections, a Fed committed to fighting inflation is considered unlikely to step in and stem the bleeding.
“That gets into the circular nature of monetary policy. It gooses asset prices when they are pedal to the metal, and asset prices fall when they back off,” Boockvar said. “The difference this time is they have rates at zero and inflation is at 7%. So they have no choice but to react. Right now, they are not going to roll over for markets just yet.”
The Federal Open Market Committee, which sets interest rates, meets Tuesday and Wednesday.

Comparisons to 2018

The Fed does have considerable history of reversing course in the face of market turmoil.
Most recently, policymakers turned course after a series of rate hikes that culminated in December 2018. Fears of a global economic slowdown in the face of a tightening Fed led to the market’s worst Christmas Eve rout in history that year, and the following year saw multiple rate cuts to assuage nervous investors.
There are differences aside from inflation between this time and that market washout.
DataTrek Research compared December 2018 with January 2022 and found some key differences:

A 14.8% decline then in the S&P 500 compared with 8.3% now, as of Friday’s close.
A slide in the Dow Jones industrials of 14.7% then to 6.9% now.
The Cboe Volatility Index peaking at 36.1 then to 28.9 now.
Investment-grade bond spreads at 159 basis points (1.59 percentage points) then to 100 now.
High-yield spreads of 533 basis points versus 310 basis points now.

“By any measure as the Fed looks to assess capital markets stress … we are nowhere near the same point as in 2018 where the central bank reconsidered its monetary policy stance,” DataTrek co-founder Nick Colas wrote in his daily note.

“Put another way: until we get a further selloff in risk assets, the Fed will simply not be convinced that raising interest rates and reducing the size of its balance sheet in 2022 will more likely cause a recession rather than a soft landing,” he added.
But Monday’s market action added to the rough waters.
Major averages dipped more than 2% by midday, with rate-sensitive tech stocks on the Nasdaq taking the worst of it, down more than 4%.
Market veteran Art Cashin said he thinks the Fed could take notice of the recent selling and move off its tightening position if the carnage continues.
“The Fed is very nervous about these things. It might give them a reason to slow their step a little bit,” Cashin, director of floor operations for UBS, said Monday on CNBC’s “Squawk on the Street.” “I don’t think they want to be too overt about it. But believe me, I think they will have the market’s back if things turn worse, if we don’t bottom here and turn around and they keep selling into late spring, early summer.”
Still, Bank of America strategists and economists said in a joint note Monday that the Fed is unlikely to budge.

‘Every meeting is live’

The bank said it expects Fed Chairman Jerome Powell on Wednesday to signal that “every meeting is live” regarding either rate hikes or additional tightening measures. Markets already are pricing in at least four increases this year, and Goldman Sachs said the Fed could hike at every meeting starting in March if inflation doesn’t subside.
While the Fed isn’t likely to set concrete plans, both Bank of America and Goldman Sachs see the central bank nodding toward the end of its asset purchases in the next month or two and an outright rundown of the balance sheet to start around midyear.
Though markets have expected the asset purchase taper to come to a complete conclusion in March, BofA said there’s a chance that the quantitative easing program might be halted in January or February. That in turn could send an important signal on rates.
“We believe this would surprise the market and likely signal an even more hawkish turn than already expected,” the bank’s research team said in a note. “Announced taper conclusion at this meeting would increase the odds we assign to a 50bp hike in March and another potentially 50bp hike in May.”
Markets already have priced in four quarter-percentage point increases this year and had been leaning toward a fifth before reducing those odds Monday.
The note further went on to say that a market worried about inflation “will likely continue bullying the Fed into more rate hikes this year, and we expect limited pushback from Powell.”
Boockvar said the situation is the result of a failed “flexible average inflation targeting” Fed policy adopted in 2020 that prioritized jobs over inflation, the pace of which has garnered comparisons with the late 1970s and early 1980s at a time of easy central bank policy.
“They can’t print jobs, so they’re not going to get restaurants to hire people,” he said. “So this whole idea that the Fed can somehow influence jobs is specious in the short term for sure. There’s a lot of lost lessons here from the 1970s.”

WATCH LIVEWATCH IN THE APP More

James Chanos and Leon Cooperman at the 2019 Delivering Alpa conference in New York on Sept. 19. 2019.
Adam Jeffery | CNBC

Short-seller Jim Chanos said the belief that the Federal Reserve will always rescue the stock market from steep losses is reckless for investors.
“The idea of a Fed put and that the Fed is always going to be there to bail out my bad investment decisions is really not cogent investment policy to hold onto for a long time,” Chanos said on CNBC’s “Halftime Report” on Monday.

“The fact that it will bail out the stock market at some pre-determined level of losses… I think it’s a very dangerous idea to uphold,” he added.
The market sell-off accelerated Monday, with the Dow dropping as much as 1,100 points, as investors braced for a potential hawkish tilt from the Federal Reserve this week. The S&P 500 also dipped into correction territory, falling more than 10% from its record high.
The Fed will wrap up its policy meeting on Wednesday. Central bankers have indicated that they expect not only to raise rates and taper asset purchases soon — but also could be teeing up a balance sheet reduction. The potential move from the Fed would mark an aggressive policy change after nearly two years of the most accommodative monetary policy in U.S. history.
The central bank last raised rates in late 2018, part of a “normalization” process that happened in the waning period of the record-long economic expansion.
Chanos called the 2018 rate hike “a big error” from the Fed, which caused a significant sell-off in the stock market.

The longtime investor said despite the sharp decline in stocks recently, his hedge fund is still slightly net long on the market. He added that investors should avoid names with high-flying multiples.
Chanos, the founder of Kynikos Associates, is a famed short seller on Wall Street with a long history of identifying fraud.

WATCH LIVEWATCH IN THE APP More

Take a look at some of the biggest movers in the premarket:
Kohl’s (KSS) – Kohl’s soared 27.3% in premarket trading as takeover interest in the retailer ramps up. Starboard-backed Acacia Research is offering $64 per share for Kohl’s, compared to Friday’s close of $46.84 a share. People familiar with the matter say private-equity firm Sycamore Partners has reached out with a potential offer of at least $65 per share.

Snap (SNAP) – Snap shares slid 5.3% in the premarket after it was downgraded to “neutral” from “outperform” at Wedbush, which sees various headwinds impacting the social media network operator’s revenue growth.
Philips (PHG) – Philips slid 4.2% in premarket action after the Dutch health technology company reported falling profit due in part to supply chain issues that are expected to persist in coming months. Philips did predict a strong recovery in sales for the second half of the year.
Peloton (PTON) – Activist investor Blackwells Capital is calling on Peloton to fire its CEO and seek a sale of the company. The fitness equipment maker’s stock is down more than 80% from its all-time high, as it struggles to deal with rapidly changing supply-and-demand dynamics. Peloton fell 2% in premarket trading.
Halliburton (HAL) – Halliburton rose 1.5% in the premarket after the oilfield services company beat top and bottom line estimates for the fourth quarter. Halliburton earned 36 cents per share, 2 cents a share above estimates. Demand for the company’s services jumped as oil prices rose. Halliburton also raised its quarterly dividend to 12 cents per share from 4.5 cents a share.
Unilever (UL) – Unilever surged 6.6% in the premarket following reports that Nelson Peltz’s Trian Partners has built up a stake in the consumer products giant. The size of the stake could not be determined, and Trian said it did not comment on market rumors when contacted by CNBC.

Fox Corp. (FOXA) – Fox added 1.6% in premarket trading after UBS upgraded the stock to “buy” from “neutral.” UBS said among traditional media companies, Fox is among the best poised to benefit from an acceleration in sports betting, and also pointed to Fox’s strong position among pay-TV providers.
Discover Financial (DFS) – Discover Financial was upgraded to “overweight” from “neutral” at Piper Sandler, which cites several factors including the financial services company’s valuation. Discover gained 1.1% in premarket trading.
Coinbase (COIN) – The cryptocurrency exchange operator’s shares tumbled 7.8% in the premarket, reflecting the downward move in crypto over the weekend and this morning, with Bitcoin touching its lowest level since July. Microstrategy (MSTR) – the business analytics company that holds several billion dollars in bitcoin – plunged 12.2%.
Comcast (CMCSA) – The NBCUniversal and CNBC parent was upgraded to “outperform” from “sector perform” at RBC Capital, which thinks that subscriber growth concerns have been overblown. Comcast added 1.1% in the premarket.

WATCH LIVEWATCH IN THE APP More

Mainland China’s share of the global luxury market rose in 2021 as consumers spent more at home, keeping the country on track to become the world’s largest luxury goods market by 2025, according to consultancy Bain & Company.
However, luxury goods sales were not immune to a slump in Chinese consumer spending in the second half of last year, and Chinese consumer spending on luxury goods worldwide last year remained below pre-pandemic levels, the report said.
The Bain analysts expect the growth of mainland China’s luxury market to moderate in 2022.

Consumers linger outside a Haikou duty free shop at Riyue Square, Haikou City, Hainan Province, China, on September 2, 2021.
Wang Jianfeng | Future Publishing | Getty Images

BEIJING — Chinese consumers are spending more on luxury goods at home, even if they can’t easily travel abroad due to pandemic-related restrictions, consultancy Bain & Company said in its annual report on the luxury sector.
Sales of personal luxury goods in mainland China rose by 36% to 471 billion yuan ($73.59 billion) in 2021 from the prior year, according to Bain estimates released Thursday. That’s more than double the 234 billion yuan in luxury goods spending on the mainland in 2019, before the pandemic.

The growth in luxury goods sales comes despite a slump in Chinese retail sales overall since the pandemic began in 2020. The data also reflects the growth of China’s domestic market as a destination for international brands.
Mainland China’s share of the global luxury market rose to about 21% in 2021, up from roughly 20% in 2020, according to Bain.
“We anticipate this growth to continue, putting the country on track to become the world’s largest luxury goods market by 2025 — regardless of future international travel patterns,” the report said.
“China remains the best consumer story in the world,” the Bain analysts said, pointing to the country’s growing middle class. “The average increase of disposable income remains higher than inflation.”
Leather goods sales grew by about 60% and was the fastest-growing category, followed by roughly 40% growth in fashion and lifestyle, the report said.

More duty-free stores in China

A major driver for the local luxury market is the growth of duty-free stores in Hainan, an island province in southern China. In the last two years, new government policies have cut taxes and introduced other business-friendly measures aimed at turning the region into a free-trade port and international consumption center.
Even before pandemic-induced travel restrictions kept shoppers from traveling overseas, luxury brands were already moving to Hainan and other parts of mainland China from Hong Kong due to violent protests in the semi-autonomous region.
Sales of luxury goods at Hainan’s duty-free stores posted annual growth of 85% in 2021 — reaching 60 billion yuan — following a 122% year-on-year increase in 2020, according to Bain. The stores accounted for 13% of mainland China’s personal luxury goods market last year, up from 9% in 2020 and 6% in prior years.
However, the Bain analysts said the biggest driver of Hainan’s duty-free success was sharp discounts that went beyond tax savings. The “significant price gap” between the official listed price and that in Hainan contributed to slow growth in other sales channels, at least for some products, the report said.

Analysts at The Economist Intelligence Unit expect new government policies to help China’s domestic duty-free market to nearly quadruple to 258 billion yuan between 2021 and 2025, with the opening of new duty-free stores in major Chinese cities like Beijing, Tianjin and Shanghai.
But that’s contingent on Chinese authorities relaxing restrictions on international travel and duty-free purchase quotas, the analysts said in a report late last month.
“The duty-free market in Hainan is still lagging behind on product ranges and price competitiveness, especially for mid-to-high-end products,” they said. “Meanwhile, Chinese consumers may prefer to combine their shopping with an overseas holiday, to experience foreign cultures and environments.”

How China’s luxury spend in 2021 stacked up globally

Global spending on luxury goods reached 283 billion euros ($320.6 billion) in 2021, recovering from a slump in 2020 to exceed 2019 levels of 281 billion euros in luxury sales, according to Bain estimates.
However, Chinese consumers still spent about 30 billion euros less on luxury goods last year than they did in 2019, the report showed.
Robust luxury goods sales growth slowed sharply in the second half of last year, the analysts said, pointing to factors such as a high comparable base in 2020, sporadic Covid outbreaks and new regulations on online influencers.

Read more about China from CNBC Pro

The drop-off in growth showed luxury wasn’t immune to an overall slump in Chinese consumer spending in the last six months. Retail sales grew by a disappointing 1.7% year-on-year in December.
Looking ahead, the Bain analysts expect the domestic luxury market to grow at a more moderate pace in 2022.
“Sporadic localized Covid-19 outbreaks will likely continue throughout the year,” the analysts said. “We expect a corresponding negative impact on shopping-mall traffic in affected cities.”
Local authorities have swiftly locked down neighborhoods or restricted travel to prevent coronavirus outbreaks from spreading. The policy can discourage people from going to places where they might come into contact with a confirmed case, or face quarantine because of an overlapping travel history.
One such case in Beijing city this month visited luxury shopping mall SKP, according to an extensive travel history disclosed by municipal authorities.

WATCH LIVEWATCH IN THE APP More

Trader on the floor of the NYSE, Jan. 21, 2022.

Stock futures rose slightly in overnight trading Sunday, following the S&P 500’s worst week since March 2020, as investors awaited more corporate earnings results and a key policy decision from the Federal Reserve.
Futures on the Dow Jones Industrial Average edged up 120 points. S&P 500 futures climbed 0.5% and Nasdaq 100 futures rose 0.9%.

The overnight action followed a brutal week on Wall Street in the face of mixed company earnings and worries about rising interest rates. The S&P 500 lost 5.7% last week and closed below its 200-day moving average, a key technical level, for the first time since June 2020. The blue-chip Dow fell 4.6% for its worst week since October 2020.
The sell-off in the tech-heavy Nasdaq Composite was even more severe with the benchmark dropping 7.6% last week, notching its fourth straight weekly loss. The index now sits more than 14% below its November record close, falling deeper into correction territory.
The fourth-quarter earnings season has been a mixed bag. While more than 70% of S&P 500 companies that have reported results have topped Wall Street estimates, a couple of key firms let down investors last week, including Goldman Sachs and Netflix.
“What had initially been a stimulus withdrawal-driven decline morphed last week to include earnings jitters,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “So investors are now worried not just about the multiple placed on earnings, but the EPS forecasts themselves.”
IBM is set to report numbers after the bell Monday. Investors will also digest a slew of high-stakes Big Tech earnings, including Microsoft, Tesla and Apple.

Another crucial market driver will be the Fed’s policy meeting, which wraps up on Wednesday. Investors are anxious to find out any signals on how much the central bank will raise interest rates this year and when it will start.
Goldman Sachs said Sunday that its baseline forecast calls for four rate hikes this year, but the bank sees a risk for more rate increases due to the surge in inflation.
Investors are dumping riskier assets this year as they brace for the Fed to tighten monetary policy. Bitcoin dropped more than 8% over the weekend to trade around $35,511 apiece, wiping out nearly half of its value at its record high reached in November.
Meanwhile, bond yields have surged in the new year in anticipation of Fed rate hikes, which partly triggered the drastic sell-off in growth-oriented tech shares. While the 10-year Treasury yield finished last week lower around 1.76%, the benchmark rate has jumped about a quarter of a percentage point in 2022.
“The big story so far in 2022 has been the rapid move higher in interest rates, which is prompting investors to re-assess valuations for some of the most expensive segments of the market and rotate into value stocks,” said David Lefkowitz, head of equities Americas at UBS Global Wealth Management. 

WATCH LIVEWATCH IN THE APP More

Goldman Sachs expects the Federal Reserve to enact four interest rate hikes this year but thinks more are possible due to the surge in inflation.
“We see a risk that the [Federal Open Market Committee] will want to take some tightening action at every meeting until the inflation picture changes,” Goldman economist David Mericle told clients.
The Fed also is likely to start cutting its balance sheet by $100 billion a month starting in July, the firm said.

U.S. Federal Reserve Board Chairman Jerome Powell attends his re-nominations hearing of the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill, in Washington, U.S., January 11, 2022.
Graeme Jennings | Reuters

Accelerating inflation could cause the Federal Reserve to get even more aggressive than economists expect in the way it raises interest rates this year, according to a Goldman Sachs analysis.
With the market already expecting four quarter-percentage-point hikes this year, Goldman economist David Mericle said the omicron spread is aggravating price increases and could push the Fed into a faster pace of rate increases.

“Our baseline forecast calls for four hikes in March, June, September, and December,” Mericle said in a Saturday note to clients. “But we see a risk that the [Federal Open Market Committee] will want to take some tightening action at every meeting until the inflation picture changes.”
The report comes just a few days ahead of the policymaking group’s two-day meeting starting on Tuesday.
Markets expect no action regarding interest rates following the gathering but do figure the committee will tee up a hike coming in March. If that happens, it will be the first increase in the central bank’s benchmark rate since December 2018.
Raising interest rates would be a way to head off spiking inflation, which is running at its highest 12-month pace in nearly 40 years.

Mericle said that economic complications from the Covid spread have aggravated imbalances between booming demand and constrained supplies. Secondly, wage growth is continuing to run at high levels, particularly at lower-paying jobs, even though enhanced unemployment benefits have expired and the labor market should have loosened up.

“We see a risk that the FOMC will want to take some tightening action at every meeting until that picture changes,” Mericle wrote. “This raises the possibility of a hike or an earlier balance sheet announcement in May, and of more than four hikes this year.”
Traders are pricing in nearly a 95% chance of a rate increase at the March meeting, and a more than 85% chance of four moves in all of 2022, according to CME data.
However, the market also is now starting to tilt to a fifth hike this year, which would be the most aggressive Fed that investors have seen going back to the turn of the century and the efforts to tamp down the dot-com bubble. Chances of a fifth rate increase have moved to nearly 60%, according to the CME’s FedWatch gauge.
In addition to hiking rates, the Fed also is winding down its monthly bond-buying program, with March as the current date to end an effort that has more than doubled the central bank balance sheet to just shy of $9 trillion. While some market participants have speculated that the Fed could shut down the program at next week’s meeting, Goldman does not expect that to happen.
The Fed could, though, provide more indication about when it will start unwinding its bond holdings.
Goldman forecasts that process will begin in July and be done in $100 billion monthly increments. The process is expected to run for 2 or 2½ years and shrink the balance sheet to a still-elevated $6.1 trillion to $6.6 trillion. The Fed likely will allow some proceeds from maturing bonds to roll off each month rather than selling the securities outright, Mericle said.
However, the unexpectedly strong and durable inflation run has posed upside risks to forecasts.
“We also increasingly see a good chance that the FOMC will want to deliver some tightening action at its May meeting, when the inflation dashboard is likely to remain quite hot,” Mericle wrote. “If so, that could ultimately lead to more than four rate hikes this year.”
There are a few key economic data points out this week, though they will come after the Fed meets.
Fourth-quarter GDP is out Thursday, with economists expecting growth around 5.8%, while the personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, is due out Friday and forecast to show a monthly gain of 0.5% and a year-over-year increase of 4.8%.

WATCH LIVEWATCH IN THE APP More

LATE NOVEMBER almost began to feel like the early days of the pandemic all over again. Global stockmarkets fell by 5% as news of what would come to be known as the Omicron variant filtered out and investors feared either another round of restrictions, or that people would voluntarily shut themselves away. Haven currencies, such as the dollar and the yen, strengthened. The price of oil slumped by about $10 a barrel, the kind of drop often associated with a looming recession.Two months on, the impact of Omicron is slowly coming into focus. So far it is, largely, better than feared. On January 18th the price of a barrel of Brent crude oil approached $88, its highest level in seven years. Although global stockmarkets have sold off in recent days and are at the same level as in late November, that seems to reflect worries over higher interest rates rather than covid-19. Goldman Sachs, a bank, has constructed a share-price index of European companies, such as airlines and hotels, that thrive when people are able and willing to be in public spaces. The index, a good proxy for anxiety about covid-19’s economic impact, has surged relative to wider stockmarkets in recent weeks.High-frequency economic data back up the cautious optimism. Nicolas Woloszko of the OECD, a rich-country think-tank, produces a weekly GDP index for 46 middle- and high-income economies, using data from Google-search activity on everything from housing and jobs to economic uncertainty. Adapting his index, which has proved to be a good predictor of the official numbers, we estimate that GDP across these countries is currently about 2.5% below its pre-pandemic trend (see chart 1). That is a little worse than in November, when GDP was 1.6% below trend, but is still much better than the situation a year ago, when output was nearly 5% below it.A few factors explain why the worst fears about the global economy have so far not come to pass. The great uncertainty with Omicron relates to whether the bad (greater transmissibility) outweighs the good (lower virulence), and thus whether there is a damaging surge in hospitalisations and deaths from covid-19. So far, though, few governments apart from China’s, which is wedded to its zero-covid strategy, seem to believe that drastic restrictions on people’s movements are required.A quantitative measure produced by UBS, a bank, ranks global restrictions from zero to ten and finds that the average global score has risen from 3 to 3.5 in recent weeks. Only one rich country, the Netherlands, moved into a proper lockdown (though this was partly lifted on January 14th). At the start of the Omicron wave economists feared that renewed lockdowns in key manufacturing nodes such as Vietnam and Malaysia would aggravate supply glitches. So far governments in both countries have kept restrictions laxer than they were a few months ago, though case numbers in both places remain relatively low. UBS also finds that the share of international travel routes with covid-related entry restrictions, at 31% globally, has barely budged since October.More people also seem happy to take risks. Goldman Sachs produces an “effective” lockdown index, which takes into account not only governments’ diktats but also people’s choices. So far its global index has tightened to about the same level as during the global Delta wave of last summer, despite four to five times as many daily infections. Even in places where the rapid spread of covid-19 is a novelty, people are largely carrying on as normal. Cases in San Francisco were in the low double digits for most of the autumn. Although the city now averages about 2,000 a day, gyms and restaurants remain busy.Today’s case numbers suggest that about 5-10% of Americans currently have covid-19. Such high prevalence has created a new difficulty that did not exist with previous variants: a widespread absence of workers. According to a survey of households conducted at the turn of the year by the Census Bureau, 8.8m Americans were out of work because they were caring for someone with covid-19, or because they had the disease themselves. At the end of 2021, 138 National Basketball Association players were unable to work for covid-related reasons, though this number has since dropped. In San Francisco a small but growing number of shops, already struggling with a labour shortage lasting months, are closing early for lack of staff.Measuring the effect of such absences on output is hard, but it looks likely to be limited—and short-lived. For a start, several factors might offset their impact. Some of those isolating will work from home. If a restaurant is closed prospective diners may still have other places to go. And for a time at least, co-workers who are uninfected can take up some of the slack. The overall drag could therefore be modest. Research published on January 10th by JPMorgan Chase, another bank, for instance, speculated that absences could reduce British GDP in January by 0.4%.Moreover, with case numbers falling in both Britain and some cities in America, Omicron’s economic effects look likely to fade rapidly. Forward-looking surveys also suggest that firms are not too worried. There is little sign, for instance, of a decline in business confidence (see chart 2). Despite a better overall performance than expected, the global economic recovery from the lockdowns of 2020 is still uneven. The gap between the best and worst performers is as wide as it has ever been. As South Africa’s Omicron wave has collapsed, GDP has risen and is now in line with its pre-crisis trend. Britain’s economy seems to be recovering strongly too. Other places are still struggling, whether that be because of a slow booster roll-out, low population immunity or just bad luck. According to the OECD’s measure, the Spanish and Greek economies are still an astonishing 10% smaller relative to pre-covid trends. Omicron has not done too much to knock the recovery off course. But some places still feel a long way from normal. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Netflix logo
Mario Tama | Getty Images News | Getty Images

Check out the companies making headlines in midday trading.
Netflix – Shares of the streaming giant tanked 21.7%, on pace for their worst day since July 2012. The steep sell-off came after Netflix admitted that streaming competition was eating into its own growth in its fourth-quarter earnings release Thursday. Other media companies with streaming services also saw shares fall after Netflix issued lower-than-expected subscriber guidance. Disney shares fell 5.6%, while ViacomCBS dropped about 6%, and Discovery lost roughly 4%.

Peloton – Shares of the at-home fitness company saw an 11.7% bounce on Friday after a major wipeout Thursday, when investors sold shares following a CNBC report that the company is halting production of its bikes and treadmills. Peloton then said Friday that it’s reviewing production levels and considering layoffs.
Schlumberger – The oilfield services stock fell 1.8% on Friday despite a better-than-expected fourth-quarter report for Schlumberger. The company reported adjusted earnings per share of 41 cents per share, while analysts surveyed by Refinitiv were looking for 39 cents. Revenue also topped estimates. Schlumberger reported shrinking margins in its production systems unit.
CSX – CSX shares dipped 3.2% even after the railroad operator beat earnings expectations for the fourth quarter. The company posted a profit of 42 cents per share, beating the StreetAccount consensus estimate by 1 cent. However, CSX reported volume fell from the previous year.
Intuitive Surgical – Intuitive Surgical shares sunk 7.9% despite the company’s quarterly earnings report beating expectations. Management said procedures using its DaVinci surgical system will be down significantly in the current quarter due to Covid surges.
PPG Industries – PPG’s shares slipped 3% even after beating analysts’ earnings expectations in its quarterly report. The paint and coatings maker said heightened supply and Covid-related disruptions from the fourth quarter are expected to continue in the current quarter.

Intel – Intel’s stock rose nearly 1% midday but closed flat, after the company announced plans to invest at least $20 billion in new manufacturing facilities outside Columbus, Ohio. The plants come as chipmakers work to accelerate supply to meet demand.
Rio Tinto – Rio Tinto shares retreated about 2.2% after Serbia revoked the mining company’s lithium exploration licenses. Government leaders said the decision came after opposition from environmental groups. Rio had aimed to become one of the top producers of lithium, a key component in batteries.
Under Armour – The apparel stock rose 1.4% after Citi upgraded Under Armour to buy from neutral. The firm said in a note to clients that the industry shift to online and direct-to-consumer shopping would Under Armour improve its profit margins.
— CNBC’s Tanaya Macheel, Jesse Pound and Yun Li contributed reporting

WATCH LIVEWATCH IN THE APP More