Finance

THERE IS SOMETHING slightly tedious about the dollar’s rude health. It seems as inevitable as lying politicians and stormy winters. The DXY, a gauge of the dollar against half a dozen other rich-world currencies, is up by almost 7% since the start of the year. The broad dollar index, which measures the dollar against 26 of America’s trading partners, has also risen markedly since June. It is difficult to imagine what might check its rise. But it is still worth trying. You may find that the case for a reversal of the dollar in 2022 is more plausible than you had thought.The dollar’s current strength is tied to American exceptionalism of a sort. The S&P 500 index of leading shares consistently outperforms the stockmarkets of other countries. America’s economy has proved to be a reliable source of growth. It has emerged from the pandemic more strongly than just about anywhere else. After a brief loss of energy in the summer it is now showing renewed vigour.As a consequence, inflation is stubbornly high. The chairman of the Federal Reserve, Jay Powell, has already said that the Fed will move faster towards ending its bond purchases, thus paving the way for interest-rate increases. Elsewhere things are running less hot. China’s GDP growth is sluggish. In Europe a wave of covid-19 infections has led to some restrictions on business activities. And while the full implications of the Omicron variant are not certain, there is a general feeling it will prove to be more of an economic headwind outside America.One currency that has kept up with the dollar is the yuan. This is because more money is flowing into China than out of it. Bumper exports to America have contributed to a huge trade surplus. Portfolio capital is washing in. Foreign investors are loading up on bonds and stocks, which are now a bigger part of their benchmarks. Meanwhile less money is leaking out. Spending abroad by Chinese tourists has all but vanished, as a consequence of travel bans. Still, the risks seem tilted towards a fall in the yuan against the dollar. China is leaning towards a looser monetary setting, as policymakers grapple with distress in the property sector. This week’s reduction in reserve requirements might even be a hint that Beijing would prefer a weaker yuan.Put this all together, and the argument for a strong dollar looks watertight. But the situation is fluid. There is a decent case that the dollar will peak in the coming months and then weaken. For that to happen, three conditions need to be fulfilled. First, the global growth gap must narrow. America’s economy has more than recovered. Other countries still have ground to make up. They will eventually do so. Too much of the sluggishness of Asia is put down to China’s slowdown and not enough to the lingering effects of the pandemic across the region. Europe has never quite reopened fully. And there is fiscal stimulus from the EU recovery fund in the pipeline. America may still lead the pack. But the race will be closer.A second condition is lower inflation. Oil prices have fallen already. There are tentative signs that bottlenecks are easing. Business surveys in goods-producing hubs, such as Taiwan and Vietnam, show a pickup in delivery times. If these developments translate into lower headline inflation, says Mansoor Mohi-uddin of the Bank of Singapore, it will allow the Fed to pivot towards a less hawkish stance—a third condition for a weaker dollar. It is hard to be an interest-rate dove when inflation is so high. But if it falls back during 2022, and the economy slows, the Fed’s focus could easily tip back to the “jobs” part of its mandate. By the spring or early summer, markets may find themselves pricing in more interest-rate rises than the Fed is minded to deliver.It is easy to forget, but other central banks get to do monetary policy, too. A recovering euro-zone economy might easily stir the hawks at the European Central Bank, says Kit Juckes of Société Générale, a bank. Even the hint of an interest-rate rise in the euro zone could be a game-changer for currency markets.For dollar bulls, this might all sound a bit far-fetched. A lot of their enthusiasm is tied to high inflation and its implications for interest rates. But this carries dangers. Inflation is not a high-quality reason for backing a currency, says Steven Englander of Standard Chartered, another bank. Quite so. If inflation in America proves stubborn in the medium term, that is not obviously good for the dollar either. For now, the greenback is a winning currency. But there are still a few ways it could lose.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Top dollar” More

Check out the companies making headlines before the bell:
CVS Health (CVS) – The drug store operator issued new guidance ahead of its investor day, saying it expects a 2022 adjusted profit of $8.10 to $8.30 per share compared with an $8.24 consensus estimate and better-than-expected revenue. CVS also raised its 2021 outlook, and the shares rallied 2.2% in the premarket.

Hormel (HRL) – The food producer beat estimates by a penny with quarterly earnings of 51 cents per share, and revenue that also topped Wall Street forecasts. Hormel saw double-digit growth across all of its business segments, and shares rose 1% in premarket trading.
RH (RH) – The company formerly known as Restoration Hardware reported adjusted quarterly earnings of $7.03 per share, 40 cents above estimates, while the luxury home furnishings retailer’s revenue beat forecasts. RH also lifted the low end of its revenue outlook. RH surged 10.1% in premarket action.
Rent The Runway (RENT) – Rent The Runway tumbled 11.3% in the premarket after the fashion rental company posted a loss that was wider than a year ago and reported subscriber numbers that have not yet returned to pre-pandemic levels. Sales did surge 66% over the same quarter a year ago.
GameStop (GME) – GameStop shares slid 4% in premarket trading after the videogame retailer posted a wider loss compared with a year earlier and also disclosed an August subpoena from the SEC involving the trading of its shares.
Apple (AAPL) – Apple won an appeals court decision that delays changes to its App Store. An earlier ruling had ordered Apple to allow developers to offer payment alternatives outside of the App Store, stemming from its legal dispute with “Fortnite” developer Epic Games. Separately, Apple is closing in on a $3 trillion valuation, which will be achieved when the share price hits $182.86.

AstraZeneca (AZN) – The drug maker’s Covid-19 antibody treatment won FDA approval for patients who cannot achieve adequate protection from vaccination.
Lucid Group (LCID) – Lucid shares tumbled 5.9% in the premarket after the electric vehicle maker announced a $1.75 billion offering of convertible senior notes.
LabCorp (LH) – The medical lab operator announced a number of steps to enhance shareholder value, including the initiation of a dividend in the second quarter of 2022 and the authorization of a $2.5 billion share repurchase program.
Yum Brands (YUM) – The parent of KFC, Pizza Hut and Taco Bell was upgraded to “overweight” from “neutral” at Atlantic Equities, which sees the possibility of rising returns from the restaurant chain and calls Yum its favored name in the quick-service restaurant category. Yum rose 1% in the premarket.
FuboTV (FUBO) – The video streaming company was rated “overweight” in new coverage at J.P. Morgan Securities, based on Fubo’s sports-centered offerings as a differentiating factor. The stock jumped 2.8% in premarket action.

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A man looks at GameStop at 6th Avenue on February 25, 2021 in New York.
John Smith | Corbis News | Getty Images

Check out the companies making headlines in after-hours trading:
GameStop — Shares of the video game retailer slid 4% in extended trading Wednesday following the company’s third-quarter results. GameStop said its net loss grew to $105.4 million, up from $18.8 million a year earlier.

Lucid Group — Lucid’s stock declined more than 6% after the company announced a proposed convertible senior notes offering. The offering, which is subject to market and other conditions, would be for $1.75 billion.
Rent the Runway — Shares of the clothing rental company declined 9% after Rent the Runway posted a wider-than-expected loss during the third quarter. The company’s net loss during the period nearly doubled to $87.8 million, up from $44.3 million in the same quarter a year ago. Excluding the one-time costs associated with its IPO, Rent the Runway said its net loss was lower year over year.
RH — The retailer’s stock jumped 11% after the company beat top- and bottom-line estimates during the third quarter. RH earned $7.03 per share, excluding items, on $1.01 billion in revenue. The Street was expecting $6.63 per share on $984 million in revenue, according to estimates compiled by Refinitiv.

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The Fed is expected to say next week it will double the pace of its bond purchase taper, while also likely hinting at more aggressive rate hikes in 2022.
If it meets those expectations, it will mark at least the fourth significant policy change under Chairman Jerome Powell’s leadership.
With policy so unpredictable and forecasts proving often unreliable, the Fed could be facing a substantial credibility challenge.

Jerome Powell, chairman of the U.S. Federal Reserve, speaks in the Eisenhower Executive Office Building in Washington, D.C., U.S., on Monday, Nov. 22, 2021.
Samuel Corum | Bloomberg | Getty Images

If the Federal Reserve meets expectations next week and announces a more aggressive unwind of the measures taken to boost the economy, it will mark an important policy shift for the U.S. central bank and Chairman Jerome Powell.
Again.

The Powell Fed, in fact, has become almost as known for its abrupt changes in direction as it has for the unprecedented levels of stimulus it has provided during the pandemic.
“What the Fed has proven is the difficulty in forecasting by both committee and consensus,” said Joseph LaVorgna, chief economist for the Americas at Natixis and former head of the National Economic Council under former President Donald Trump. “In market parlance, the Fed has bought the high and sold the low. So I do think there will be a credibility issue going forward.”

At its two-day meeting next week, the Fed is expected to say it will double the pace of its bond purchase taper, while also likely hinting at more aggressive interest rate hikes coming in 2022. The moves are coming in response to inflation that is stronger and longer-lasting than Fed officials had anticipated.
But LaVorgna worries that the Fed, after months of calling inflation “transitory,” is now making the mistake of overestimating its duration and tightening at the wrong time. That could necessitate officials again having to change back next year, if the current inflation trend runs out of steam.

A history of pivots

This would be at least the fourth such shift for an institution that prides itself on forecasts and communication, providing what it hopes to be a reliable road map for market participants and the public.

But the whipsaw nature of the U.S. economy has wreaked havoc.
A Fed committed to raising — or “normalizing” — interest rates in 2018 had to change its tune the following year when global weakness came calling. The central bank then closed 2019 with Powell and his colleagues insisting they had cut enough and were confident that rates would hold steady for the foreseeable future.
The pandemic changed all that in 2020, forcing rate cuts and expansive monetary policy that eventually would see the Fed expand its balance sheet by more than $4 trillion.
Later that year, though, the Fed would step in again and announce a paradigm shift in which it would focus more of its efforts on jobs and be willing to tolerate higher inflation. The Fed pledged it would keep policy easy until it had made “substantial further progress” toward employment that was not only full but also inclusive across gender, race and income.
It’s that last move that brings the Fed to its current crossroads: With price increases running at more than 30-year highs, the Fed is now expected to resume its role as an inflation fighter.

Where once market participants talked about the “Powell Put,” or the Fed’s willingness to put a policy floor under market drops, the new conversation could be about the “Powell Pivot.”
But with policy so unpredictable and forecasts often proving unreliable, the Fed could be facing a substantial credibility challenge as it shifts gears once more.

‘The world is shifting’

“This has eerie similarities to December 2018 in the sense that the Fed is saying one thing and the markets are saying another,” LaVorgna said, referring to the Fed’s last rate-hiking cycle that ended with the worst-ever Christmas Eve sell-off on Wall Street.
Indeed, for all the talk of rate hikes looming next spring after the Fed winds down its monthly bond-buying program, Treasury yields have held remarkably steady. The bond market has also taken down its 5- and 10-year inflation expectations, albeit from historical highs in mid-November.
However, traders have pulled forward the timing of those hikes, expecting two — and maybe three —quarter-percentage-point increases in 2022.
More broadly, stocks stumbled through November — mostly on pandemic fears — but the Fed’s policy churns don’t seem to be bother too many investors.
“I think it adds to their credibility. The world is shifting underneath them,” Moody’s Analytics chief economist Mark Zandi said. “The Fed is doing exactly what it has to do. It’s trying to thread the needle.”
Powell has been able to forge consensus on moving more quickly to wind down the extremely accommodative monetary policy stance of the pandemic era. Last week, he engaged in a sense of economic diplomacy by saying it was time to retire “transitory” to describe inflation.
Even some of the more dovish Fed members, or those in favor of easier policy, have conceded that it’s time to tap the brakes.
San Francisco Fed President Mary Daly went from saying in mid-November that “the best policy is recognizing the need to wait,” to noting last week that tapering asset purchases is “certainly something that I would anticipate that we could see” as well as raising rates sooner than the Fed consensus indicated in September.
“The pandemic has just completely upended and scrambled everything over and over again,” Zandi said. “It would be shocking if investors didn’t have a higher level of uncertainty at this point given all that is going on. Investors seem to be of one mind, which is to buy.”
In fact, Zandi said a little less clarity about policy might not be such a bad thing, in light of how high stock market valuations are.
Where Alan Greenspan’s Fed always kept the markets guessing about what it was doing, the Powell Fed has been ultra-transparent, seeking to telegraph all its moves that usually are geared toward supporting financial conditions, no matter how frothy.
“If I had a criticism, I think they’re a little too focused on what investors think,” Zandi said. “They’re following. I think they’ve got to lead a little bit more.”

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U.S. stock index futures were little changed during overnight trading on Wednesday, after the major averages posted a third straight day of gains as traders bet that the omicron variant’s economic impacts won’t be as severe as initially thought.
Futures contracts tied to the Dow Jones Industrial Average slid 7 points. S&P 500 futures were down 0.03%, while Nasdaq 100 futures slid 0.08%.

During regular trading the Dow and S&P 500 advanced 0.1% and 0.3%, respectively, with each registering a third straight day of gains. The S&P’s gain over the last three days is the strongest of the year, according to MKM Partners.
The Nasdaq Composite advanced 0.64%, also registering a third day of gains. Apple had the most positive impact on the index, while Nvidia was the biggest drag.
Equities got a boost after Pfizer and BioNTech said Wednesday morning that a booster dose of their vaccine provides a high level of protection against the new omicron variant.
“The range of possibilities is still wide, but in the bigger picture, we think the odds are still very much in favor of the pandemic phase winding down,” Bank of America wrote in a note to clients following the announcement. “In our view, COVID is here to stay, but a shift to the endemic phase is approaching where infections are common but severe outcomes / lockdowns / travel restrictions are not,” the firm added.
With Wednesday’s gain, the S&P 500 is now just 0.9% below its all-time intraday high from Nov. 22.

Ed Moya, senior market analyst with Oanda, said that the market is in a wait-and-see mode ahead of Friday’s inflation report, which could “fuel further Fed rate hike bets.” Economists are expecting the report to show that prices rose 0.7% in November month-over-month, according to estimates from Dow Jones.
“While growth and labor markets have provided reasons to be optimistic about the economy, inflation is also running hot and sits at a 30-year high,” UBS wrote in a recent note to clients. “With the omicron variant entering the picture, investors are now questioning what monetary policy will look like going forward. The pandemic has already greatly increased the uncertainty over the economic outlook,” the firm added, noting that its base case is that the Fed will be patient.
Weekly jobless claims data will be released on Thursday at 8:30 a.m. on Wall Street. Economists are expecting the number of first-time-filers to come in at 211,000, according to estimates from Dow Jones.
There are some notable earnings reports on Thursday, including from Oracle, Broadcom and Lululemon, all of which report after the market closes.

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Source: Stitch Fix

Check out the companies making headlines in midday trading.
Stitch Fix — Shares of the digital personal shopping company plummeted 23% after reporting disappointing guidance for the fiscal second quarter and the full year. Stitch Fix also missed estimates for its fiscal first quarter active customers. The company did, however, beat on the top and bottom lines of its quarterly results.

Roku — Shares of the streaming platform rallied more than 15% after announcing it has reached a multiyear agreement with Google to keep YouTube and YouTube TV on its service. The deal will allow the 56.4 million active Roku accounts to continue to watch YouTube and YouTube TV, Google’s live streaming service, without disruption.
Travel and reopening stocks — While the broader market was flat, travel and reopening stocks rose on Wednesday. Norwegian Cruise Line rose 10%. American Airlines added 3.8%, and United Airlines popped 5.7%. Carnival climbed 7.4%, and Royal Caribbean rose 6.6%.
PagerDuty — Shares of the software company rose 10.4% after PagerDuty reported a loss of 7 cents per share, topping estimates of a loss of 9 cents per share, according to Refinitiv. The company made $71.8 million in revenue, higher than the forecasted $70.0 million. PagerDuty also reported better-than-expected earnings and revenue guidance for the fourth quarter.
Dave & Buster’s — Shares of the arcade company popped 9% after reporting better-than-expected third-quarter results. Dave & Buster’s reported earnings of 21 cents per share, 8 cents higher than estimates, according to Refinitiv.
NXP Semiconductor – Shares of the chip company declined 5% after UBS initiated coverage on the stock with a sell rating. The firm said that while it believes the company will remain a leader in some product categories, NXP’s automotive division growth will lag that of peers. The firm has a 12-month target of $170 on the stock, which is about 28% below where shares closed on Tuesday.

ChargePoint Holdings — Shares of ChargePoint Holdings dipped 5.2% after posting a GAAP per-share loss of 21 cents per share. The company reported revenue of $65.0 million, higher than the estimated $64.8 million, according to Refinitiv.
Honeywell — Shares of Honeywell retreated more than 1% after Bank of America downgraded the stock to a neutral rating from buy. The firm also cut its price target on the stock. Bank of America said supply chain issues and inflationary pressures should impact Honeywell’s revenue and margins in the first half of 2022.
Robinhood — Shares of the millennial-favored trading app gained less than 1% after the company said it was seeking a termination of the resale of its common shares by some of its early investors.
— with reporting from CNBC’s Hannah Miao, Pippa Stevens and Yun Li.

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Check out the companies making headlines before the bell:
Pfizer (PFE), BioNTech (BNTX) – The companies said studies showed that three doses of their Covid-19 vaccine neutralized the omicron variant, while two doses still offered protection. Pfizer and BioNTech also said they’re continuing to work on an omicron-specific vaccine. Pfizer and BioNTech came well off earlier premarket lows on the news, with Pfizer up 1.4% and BioNTech trimming its loss to 1.5%.

Campbell Soup (CPB) – The food producer beat estimates by 8 cents with adjusted quarterly earnings of 89 cents per share, although revenue was slightly below analyst forecasts. Campbell said demand remains elevated for its products, and that it’s been able to moderate the impact of higher input costs through strong pricing and productivity improvements. The stock added 1.4% in the premarket.
Thor Industries (THO) – The recreational vehicle maker earned $4.34 per share for its latest quarter, well above the $3.24 consensus estimate. Revenue was also above Wall Street forecasts amid continued strong demand. Thor jumped 6% in premarket trading.
Weber (WEBR) – The grill maker’s stock rose 1% in the premarket after it reported a narrower-than-expected loss for its latest quarter and beat Wall Street revenue forecasts. Weber lost 13 cents per share, 5 cents less than analysts had anticipated.
Stitch Fix (SFIX) – Stitch was hammered by 23.9% in the premarket after issuing current-quarter revenue guidance and membership metrics that fell short of Wall Street forecasts. The online apparel retailer did post a narrower-than-expected loss for its latest quarter and better-than-expected revenue, but not enough to sway investor concerns.
ChargePoint Holdings (CHPT) – ChargePoint posted an adjusted loss of 14 cents per share for its latest quarter, 1 cent wider than anticipated, while the charging station network operator saw revenue slightly above estimates. The company did give stronger-than-expected current-quarter revenue guidance and raised its full-year outlook. Despite the upbeat outlook, ChargePoint fell 2.7% in premarket trading.

PagerDuty (PD) – PagerDuty reported an adjusted quarterly loss of 7 cents per share, 2 cents narrower than analysts had predicted, while revenue topped Street forecasts. The maker of IT response software also gave better-than-expected current-quarter revenue guidance, and its stock surged 10.9% in premarket action.
Toll Brothers (TOL) – Toll Brothers earned $3.02 per share for its latest quarter, compared with a consensus estimate of $2.49, while the luxury home builder also reported better-than-expected revenue. It is also projecting 20% growth in fiscal 2022 revenue as demand remains elevated. Toll added 1.5% in the premarket.
Robinhood (HOOD) – Robinhood filed to terminate a planned share sale by backers of the trading platform company. The stock jumped 3% in the premarket.
BlackRock (BLK) – The asset management firm is pulling about $2 trillion of assets from State Street (STT), which had served as the sole custodian of BlackRock’s ETFs. BlackRock will be shifting some of its ETF custodianship to Citigroup (C), JPMorgan Chase (JPM) and Bank of America (BAC).
Dave & Buster’s (PLAY) – Dave & Buster’s beat estimates by 8 cents with a quarterly profit of 23 cents per share, while the operator of entertainment center-themed restaurants also saw revenue come in above Street forecasts. Dave & Buster’s rallied 4.5% in the premarket.

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Visa said Wednesday it is launching an advisory practice to help clients navigate the world of cryptocurrencies.
The payments processor hopes it can help further mainstream adoption of bitcoin and other digital currencies.
Visa and its rival Mastercard see crypto as a key growth opportunity as they expand beyond card payments.

The Visa logo seen displayed on a smartphone with a bitcoin logo in the background.
Rafael Henrique | SOPA Images | LightRocket | Getty Images

Visa is launching new consulting and advisory services to help its clients navigate the world of cryptocurrencies.
The payments processor said Wednesday its crypto advisory practice, housed within its consulting and analytics division, will offer advice to financial institutions, retailers and other firms on everything from rolling out crypto features to exploring non-fungible tokens.

Visa named American bank UMB as a client that’s already using its crypto advisory services.
The move marks Visa’s latest attempt to push deeper into the crypto industry. From Oct. 1, 2020 to Sept. 30, 2021, the company processed $3.5 billion in digital currency transactions through its crypto-linked card schemes, according to Nikola Plecas, Visa’s European crypto lead.
“Some of these leading exchanges have millions or, in some instances, tens of millions of users,” Plecas told CNBC, adding that the company allows users to spend their crypto at over 80 million merchants.
The company is also developing products geared toward stablecoins — virtual tokens tied to the value of sovereign currencies, typically the dollar — and central bank-issued digital currencies.

Visa hopes its crypto consultancy can help further mainstream adoption of bitcoin and other digital currencies. Like rival Mastercard, the credit card giant sees cryptocurrencies as a key growth opportunity as it expands into areas beyond card payments.

Major payment networks have faced increased competition from an influx of new financial upstarts in recent years. Emerging trends such as open banking, which aims to open up consumer bank information and payment capabilities to rival fintechs, threaten to disrupt their business model.
Meanwhile, Visa is also under pressure from large tech companies. Amazon last month said it would stop accepting Visa credit cards in the U.K. due to the company’s “high fees.” The e-commerce titan has taken similar steps against Visa in Australia and Singapore.
“Crypto for us is a huge new vertical and growth opportunity. And we will be continuing to focus on growing this business moving forward,” Plecas said.
A study released by Visa Wednesday said 94% of people now have some level of awareness of crypto, while nearly one third have used it as an investment or medium of exchange. More than 6,000 people globally were surveyed for the research, which was conducted in partnership with marketing services firm LRW.

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