Uncertainty Controls Wall Street

Investors are still unsure what to make of the situation in Ukraine. The U.S. and NATO say Russia is continuing to build its military forces near Ukraine while Russia says it has sent some troops home.

Russian military exercises with Belarus are scheduled to end on February 20. The closing Ceremony for the Winter Olympics in China also happens to be the same day.

If there isn’t some noticeable decrease in Russia’s forces at that time, military experts think the West will amplify the pressures they are trying to put on Russia but who knows?

FOMC “minutes”

Turning to the Federal Reserve, the release yesterday of “minutes” from the January policy meeting confirmed what most on Wall Street already suspected – the Fed is ready to move more aggressively in the upcoming tightening cycle than what’s been done in the past. The minutes said “most” members suggested a faster pace of interest rate increases than in the tightening cycle that began in 2015. Between 2015 and 2018, the Fed lifted rates by 25 basis points a total of nine times, and never more than once in a quarter.

Most members indicated they are comfortable raising rates at consecutive policy meetings, meaning there could be multiple hikes per quarter.

Members also indicated that reductions to the Fed’s balance sheet will likely begin this year by allowing maturing bonds to roll off, though some officials did say outright selling of mortgages may be necessary.

During the 2015 tightening cycle, the Fed didn’t begin reducing its holdings until 2017. Again, Wall Street has already been expecting the Fed to act much quicker this time around so the meeting “minutes” didn’t really provide any new insights. The details as to how high and how fast rates will be raised, and when and by how the balance sheet will be reduced won’t be answered until the Fed’s next policy meeting on March 15-16.

Investor expectations for the Fed’s next moves are already extremely hawkish with the CME’s FedWatch Tool showing traders think there’s a 50% chance that the central bank hikes rates by 50 basis points next month. That’s down from earlier this month but keep in mind, it was considered a nearly 0% probability at the start of 2022.

Bulls want to believe that “Fed Fear” is mostly priced in now and that stocks prices should remain flat-to-slightly higher until the central bank reveals more details. However, there are still two key reports coming up that could significantly impact sentiment – the February Employment Report on March 4 and February Consumer Price Index on March 10. If job growth and inflation surprise to the upside, it will again stoke fears about a more aggressive Fed. The underlying fear is that the faster the Fed moves, the higher the likelihood of a policy misstep.

Data to watch

Today, investors will be digesting January Housing Starts and the Philadelphia Fed Index. Earnings of note today include Airbus, Nestle, Nice, Orange, Palantir, Roku, The Southern Company, and Walmart.

U.S. and Russian Aircraft Flew Perilously Close to Each Other Amid Ukraine Tensions The Wall Street Journal Reported… U.S. and Russian aircraft operating in the Mediterranean Sea flew dangerously close to each other in three separate incidents over the weekend, including one in which the two nations’ aircraft came within 5 feet of each other, defense officials said.

The incidents, which occurred in international airspace Friday and Saturday, involved three Russian Su-35 jet fighters crossing into the flight path of three U.S. P-8A surveillance aircraft, the officials said, and come amid heightened tensions between the U.S. and Russia over Ukraine. At the same time there are some sources reporting that Russia is bringing even more troops to the Ukraine border while others are reporting a possible retreat… so the drama continues with no one really having a clear answer.

Airbnb Could Adopt Cryptocurrencies Thanks to a Twitter Poll

An increasing number of corporate entities are enabling cryptocurrency payment options for their customers. However, some companies are taking an unlikely route in adopting cryptocurrencies.

Airbnb Users Want Company to Provide Crypto Payment Options

A recent poll by Airbnb CEO Brian Chesky has seen its customers ask for cryptocurrency payment options. Chesky conducted a Twitter poll over the weekend, asking his 399k followers to suggest a feature or product the company should launch in 2022.

In a follow-up tweet earlier today, Chesky pointed out that he has received 4,000 suggestions so far, and integrating cryptocurrency payment options tops the list. Airbnb users want to rent their next house or apartment on the platform and pay for the services using Bitcoin or other cryptocurrencies.

Other top requests included transparent pricing displays, a guest loyalty program, updated cleaning charges, and better customer service. The Airbnb CEO said he also received a couple of token ideas. However, he said the company’s payment selection would not be limited to one or two cryptocurrencies.

If Airbnb goes on to integrate cryptocurrency payment options, it wouldn’t be a surprise to the broader crypto community. In an interview with The Verge in November, Chesky said Airbnb is looking into the cryptocurrency and metaverse sectors.

“We are definitely looking into it. Absolutely. Like the revolution in travel, there is clearly a revolution happening in crypto. Airbnb and crypto both have interesting relationships with trust,” he said.

AMC Ran a Similar Poll Last Year

AMC, one of the leading theater chains in the world, entered the cryptocurrency space in November. On November 12, the company announced that it was now accepting Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.

AMC’s CEO Adam Eron conducted a Twitter poll in September to ask his followers if they want the company to start accepting cryptocurrencies. 68.1% of the respondents replied affirmative, and the company now accepts cryptocurrency payments.

The company said it intends to add Dogecoin and Shiba Inu payment options soon.

Situation on Major US Stocks

Apple climbs higher after another symmetric triangle pattern.

Amazon breaks the horizontal resistance and aims north.

Berkshire Hathaway goes down after the false breakout above the crucial horizontal resistance.

eBay is on the lower line of the channel up formation.

Goldman Sachs is more or less in the same situation but bounces with a promising hammer.

3M breaks the lower line of the wedge and aims south.

Netflix, with an evening star pattern and a false breakout above an important horizontal resistance.

Walmart, Covestro, Airbus and Westfield inside of symmetric triangle patterns. Here, a breakout should happen soon and will show us a direction to follow in the next few weeks or months.

Stars Begin to Align for Hydrogen Stock Plug Power

Shares of Plug Power rallied by nearly 13% on Wednesday to above the $30 level. The stock has been on a roll in the month of October so far, with its value having ballooned by more than 30%. Still, Plug Power’s stock is trading approximately 50% below its 2021 peak and is not out of the woods yet.

Plug Power, a hydrogen power company, has had some tailwinds that have helped to make it more attractive to investors of late, including a Wall Street upgrade and a couple of key partnerships. In addition, Plug Power is holding a green hydrogen symposium on Thursday. Analysts have been swooning about Plug Power ahead of this event.

Morgan Stanley analyst Stephen Byrd believes the hydrogen power stock has a runway for more gains. Byrd raised his rating on the stock from equal weight to overweight, saying Plug Power is out front to benefit from the shift to renewable energy sources in the U.S. The analyst is bullish on decarbonization, which is where Plug Power shines. Byrd also increased his price target on the stock by $5 to $40.

In addition, B. Riley’s Christopher Souther revealed in a note that he expects Plug Power to bolster its 2021 outlook at Thursday’s hydrogen-focused event, which could be the catalyst the stock needs. After reporting negative revenue for 2020, Plug Power’s fundamentals are in the spotlight. Souther rates Plug Power a buy with a bullish $45 price target.

Plug Power Catalysts

Strategic deals are important for Plug Power, and the company has just inked a couple more. It has teamed up with plane giant Airbus and oil refining company Phillips 66 to explore ways for airplanes and vehicles to shift to hydrogen power and lessen their carbon footprints.

Plug Power and Airbus say they are studying the feasibility of introducing “green hydrogen to future aircraft and airports worldwide.” For its part, Airbus has already set its sights on building aircrafts with no emissions in the next 14 years, and hydrogen could be its best bet. The deal with Plug Power is designed to bring Airbus closer to its goal, given the clean nature of hydropower production.

As part of their agreement, Plug Power will look into “green hydrogen infrastructure at airports.” Airbus will focus on the possibilities for “hydrogen aircraft characteristics.”

Plug Power’s deal with Phillips 66 is similarly designed to catapult hydrogen production. Phillips 66 already has hydrogen in its infrastructure and fuel mix. Plug Power specializes in “hydrogen fuel cells and electrolyzers.” The companies will look for ways to use Plug Power’s tech in Philipps 66’s business to bolster its hydrogen production.

Airbus Sees 1,000 German Jobs at Risk Without Parts Unit Spinoff

By Alexander Hübner

The group sees 1,000 of its 2,500 jobs in Germany at risk if it continues to manufacture parts within the group, rather than spinning off the activities, said the source who is familiar with plans presented to its works council and trade unions.

Under the shakeup set out four months ago, Airbus’s Premium Aerotec unit in Germany would be split off, with part combined with other Airbus manufacturing plants and the rest folded into a new business specialising in small mass-produced “detail” parts which could be spun off.

Premium Aerotec makes components for commercial and military aircraft, mainly in Augsburg and Varel near Bremen.

The unit has been lossmaking for years and Airbus argues that with a new owner it could also work for competitors or win customers from other industries, and thus better utilise its workforce.

The planemaker has previously said it calculates that Premium Aerotec is between 25% and 30% more expensive than other suppliers. Airbus declined to comment when asked about the numbers of jobs at risk under the restructuring.

Trade union IG Metall is opposed to the spinoff, fearing job cuts and less favourable working conditions after a break-up of the unit, at which fuselages of Airbus aircraft are also assembled.

The issue is taking on a political dimension. Finance Minister Olaf Scholz, the Social Democrats’ (SPD) chancellor candidate for September’s federal election, is planning a “solidarity visit” on Monday to Premium Aerotec in Varel.

Airbus has also promised to examine a future for parts production within the group.

“Our analysis, which we shared with employee representatives at the end of July, clearly showed that the internal route would be much more painful for employees to achieve competitive cost structures,” a spokesperson said.

Therefore, he said, the company wanted to find a better owner who could preserve more jobs. Switzerland’s Montana Aerospace has already expressed interest.

“The window of opportunity to reposition is now, before production rates return to pre-crisis levels,” the Airbus spokesperson said.

(Reporting by Alexander Huebner; Writing by Paul Carrel and David Holmes)

United Airlines Could Post Weak Returns into 2022

United Airlines Holdings Inc. (UAL) has gone on a buying binge, procuring 270 new Boeing Co. (BA) and Airbus SE (EADSY) aircraft in the largest single order in airline history and the biggest by one carrier in the last ten years. In addition, CEO Scott Kirby just told CNBC the carrier will purchase one new aircraft every three days until 2023. Both transactions reflect growing optimism that airline travel is rapidly returning to pre-pandemic levels.

Business Travel Still Lagging

U.S. airline travel is booming in the summer of 2021 thanks to vaccinations but many foreign nations are still restricting access, weighing on quarterly revenues. In addition, the vast majority of current travelers are headed into vacations rather than business meetings, which are still being conducted through Zoom and other virtual meeting places. It’s wise to assume at this point that corporations have noticed they can significantly cut expenses using this digital channel.

Kirby expressed cautious optimism but admitted it will take 18 months for Asia to recover due to ongoing restrictions and Delta variant hotspots. He noted that business travel remains down 60% compared to 2019 but points out it stood above 90% just “weeks ago”. Chief Commercial Officer Andrew Nocella expressed similar optimism before his boss’s comments, insisting that “What you’re seeing in the marketplace is that as people travel more for leisure, the resistance to traveling for business is rolling back quickly.”

Wall Street and Technical Outlook

Wall Street consensus remains cautious despite the travel surge, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 9 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $43 to a Street-high $78 while the stock barely budged after the news and is set to open Tuesday’s session about $13 below the median $65 target. This placement reveals continued skepticism about United’s long-term outlook.

United posted an all-time high at 97.85 in December 2018 and dropped into a narrow sideways pattern that broke to the downside in February 2020, dropping to an 8-year low. The subsequent uptick eased into a rising channel, stalling at the 50% selloff retracement and 50-week moving average in March 2021. The stock has been drifting sideways since that time, not reacting to the travel uptick. This apathy could persist, yielding weak returns into the first quarter of 2022.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

United Airlines Closes in On $30 Billion Post-Pandemic Jet Order

By Tim Hepher, Tracy Rucinski and Eric M. Johnson

The order could include up to 200 Boeing 737 MAX and some 70 Airbus A321neo which competes with the top end of the MAX family for single-aisle trips needing most range.

Such a deal would notionally be worth $33 billion at the most recently published list prices, but analysts say airlines typically pay less than half price for deals of this size.

None of the parties commented ahead of an announcement expected at a United investor event on Tuesday. Negotiations are complex and numbers of units can shift, the sources cautioned.

The deal would be the industry’s biggest since the coronavirus pandemic pummelled air traffic and airline balance sheets, eclipsing recent orders for more than 100 MAX from Southwest Airlines.[

It would accelerate a recovery for the MAX which has been logging orders to rebuild momentum damaged by a safety crisis even before COVID-19. A 2019 draft order for 200 MAX from British Airways owner IAG was never finalised.

However, it would not resolve a strategic stalemate which has seen Airbus dominate the busy market for larger single-aisle jets while Boeing relies heavily on demand for its core MAX 8.

A split order would highlight widespread concerns that the MAX “can’t solve the whole problem”, one industry source said. Airlines also have to consider availability when buying.

Such an announcement “could mean only two versus three cheers for Boeing” since the A321neo remains “Boeing’s nemesis at the top end of the narrowbody market with a dominant market share,” Vertical Research Partners analyst Rob Stallard wrote.

United is considered one of the industry’s most influential buyers, whose whopping purchases can set the tone for decades.

A shock Airbus win there in 1992 led to the launch of the most-sold generation of Boeing 737, the 737NG. Boeing hit back with a major win for its successor, the 737 MAX, in 2012.

Reuters reported this month that the MAX portion of the latest order could involve as many as 200 aircraft.

The deal would come days after the first flight of the 737 MAX 10, the largest member of the MAX family of which United has 100 on order.

The MAX 10 was launched in 2017 to strengthen the top end of the portfolio following disappointing sales of the MAX 9, but Boeing continues to lag Airbus in the key long-range niche.

Boeing is now studying a new model to replace the out-of-production 757, which overlaps with the A321neo and MAX 10, but is not expected to decide before 2023 as it ponders how to produce the pair of jets as cheaply as possible.

(Reporting by Tim Hepher, Tracy Rucinski, Eric M. Johnson; Editing by Kirsten Donovan)

Airbus Offers to Assemble Eurofighter in Switzerland to Win $6.5 Billion Deal

Germany, Italy, Spain and Britain, who make the Eurofighter, have also offered Bern sweeping political cooperation should it win the Swiss contest between two U.S. and two European fighter jets, which are to be delivered by 2025.

The Swiss cabinet is set to decide on Wednesday among the Eurofighter, the Rafale from France’s Dassault, Boeing’s F/A-18 Super Hornet and Lockheed Martin’s F35-A Lightning II to replace ageing F/A-18 Hornets.

Swiss television reported last week that the F-35 provided the best technical and financial features in a Swiss evaluation, but the final decision was still open.

The SonntagsZeitung paper quoted Bernhard Brenner, head of sales at Airbus Defence and Space, as saying neutral Switzerland should not go by that evaluation alone.

“The economic and political elements are just as important,” he said. The paper said Airbus has submitted a 700-page dossier on economic “offsets” alone, referring to side deals that funnel contract costs back to local suppliers.

The government is split among those who favour the F-35 and those who would prefer a European deal to help smoothe relations with the European Union after Switzerland ditched a draft bilateral treaty after years of talks.

The defence ministers of Germany, Italy, Spain and Britain wrote to Bern last year offering not just military cooperation such as training, but also partnerships in economics, energy, science, the environment, transport, cybersecurity and infrastructure, Brenner told the paper.

France has been pushing Bern to pick the Rafale, while U.S. President Joe Biden discussed the deal with Swiss leaders while in Geneva this month to meet Russian President Vladimir Putin.

The defence ministry has declined to comment on the process.

($1 = 0.9175 Swiss francs)

(Reporting by Michael Shields; Editing by Alexander Smith)

‘People Want to Fly Again’: Airbus CEO Expects Business Rravel to Recover -NZZ

Air travel remains in crisis despite accelerating vaccine rollouts in developed countries. With video calls having replaced in-person meetings, it remains to be seen to what extent business travel will recover.

But Faury told Swiss newspaper NZZ am Sonntag corporate thinking had changed.

“Companies realised: at some point they have to meet their customers and suppliers in person again. At some point they must be on site to develop products or build factories,” he said.

“That is what airlines are telling us, since they must decide now how their planes will be seated in future. And we see that they are planning as many seats in business class as before the pandemic.”

When asked about the number of business flights he expects in future, he conceded the sector might not recover fully.

“Maybe it will be slightly fewer. One thing is clear to me: people want to fly again. Hardly more but also probably no less than before the pandemic.”

(Reporting by Francois Murphy; Editing by Nick Macfie)

Airbus Hikes Jet Output Targets in Bet on Aviation Recovery

By Tim Hepher

Shares in the world’s largest planemaker rose more than 6% after it said was exploring an almost two-fold increase in output of key single-aisle jets by the middle of the decade from crisis-depressed levels, while firming up 2021 output plans.

“The aviation sector is beginning to recover from the COVID-19 crisis,” Chief Executive Guillaume Faury said in a statement.

Airbus confirmed plans to increase single-aisle A320neo production by more than 10% from a current rate of 40 airplanes a month to 45 a month by the end of this year.

It gave suppliers a firm new target of 64 a month by the second quarter of 2023 – topping its previous production record of 60 a month and improving on its pre-crisis ambitions of 63.

Shares in Airbus rose as much as 6.8%, soaring back above 100 euros to within a whisker of their 52-week high of 104.54 euros after its projections, which used carefully calibrated language ranging from firm plans to long-term scenarios.

Production of workhorse single-aisle airplanes sets the drumbeat for the global aerospace industry and is closely tied to medium-haul traffic that tends to track the wider economy.

Demand for the jets is recovering more quickly than expected, led by domestic travel in the United States and China.

But industry sources said Airbus could face a battle to persuade suppliers to step up investments for plans that may not come to fruition.

The planemaker said it was asking suppliers to “enable a scenario” where it can produce 70 single-aisle jets a month by the first quarter of 2024.

“Longer term, Airbus is investigating opportunities for rates as high as 75 (a month) by 2025,” it added.

The bold roadmap comes after Reuters reported Airbus had ordered suppliers to demonstrate as soon as possible that they are factory fit for increased single-aisle jet output, while voicing concerns over industrial quality problems.

It also comes less than a week after industry sources disclosed Boeing was discussing a fresh sprint in 737 MAX output to as many as 42 jets a month in autumn 2022 to help shake off overlapping safety and COVID-19 crises.

In the rest of its portfolio, Airbus announced a firm target of increasing production of the small A220 from five a month to six a month in early 2022. It added it was envisaging monthly output of 14 for the same model by the middle of the decade.


The planemaker said production of the wide-bodied A350 was expected to rise from an average of five a month now to six by the autumn of 2022. Long-haul travel on jets like these is expected to be slowest to recover.

Only the wide-bodied A330 family is excluded from the higher production ambitions and will stay at two a month.

Analysts at Jefferies described the move as “punchy production plans,” while Barclays Capital said it was ahead of expectations.

Shares in suppliers rose, with engine maker Safran among the biggest beneficiaries of an Airbus-led rally in Paris.

But some of the company’s network of 8,000 suppliers were privately less optimistic.

The production ramp-up has already led to a stand-off between some suppliers and Airbus over who should bear the risk of investments needed to lift the industry out of the crisis.

“The supply chain doesn’t yet see the signs” of the type of recovery laid out by Airbus in single-aisle jets, a senior industry source told Reuters.

Asked about the proposed increase in A350 output, the source added: “It’s a long way off”.

Airbus moved to reassure suppliers by arranging hurried talks on the plans.

Engine makers in particular are likely to seek guarantees before committing to significantly higher rates, a second senior source said. They effectively have final say, others said.

“Airbus has clearly decided it needs to stress-test its suppliers, and check that they actually can (and will) deliver to higher rates,” Agency Partners analyst Sash Tusa wrote.

(Reporting by Tim Hepher; Additional reporting by Piotr Lipinski; Editing by Muralikumar Anantharaman and Mark Potter)

Exclusive-Airbus Turns up Heat on Suppliers Over Production and Quality

By Tim Hepher

In the letter to suppliers in late March, seen by Reuters, Chief Procurement Officer Juergen Westermeier gave no specific targets but called for “immediate actions” to prepare for higher output, in the latest evidence of a recovery for mid-range jets.

Airbus declined to comment on contacts with suppliers.

The straight-shooting letter from Airbus highlights a slim margin for error as the world’s largest planemaker reboots an industrial ecosystem weakened by a global travel slump.

Reuters reported last week Airbus had told suppliers to be ready for output of 53 A320neo-family jets a month by the end of 2022, up from current monthly output of 40 and a target of 45 by end-2021.

Airbus has declined to comment on any preliminary goals beyond 2021. But underscoring advanced planning for higher output, Airbus urged suppliers in the letter to “demonstrate rate and capability readiness as early as possible.”

Required actions include ensuring parts are ordered from suppliers’ own sub-contractors on time. Suppliers must also implement “proper buffers” or inventory to anticipate future output increases.

Industry sources say the last point may trigger fraught negotiations as some suppliers – squeezed by the industry’s worst ever crisis – are reluctant to spend cash without payment guarantees from planemakers, fearing new coronavirus setbacks.

Medium-haul jets like the A320neo are expected to lead the recovery as regional travel reopens in China, the United States and increasingly Europe, overshadowed by India’s health crisis.


Airbus also set out a tough line on quality-control problems seen disrupting its factories or affecting airline operations.

In 2020, Airbus experienced 370 quality problems from suppliers, equivalent to 1.6 per day, of which half had some impact on aircraft, the letter said.

“We are still facing too many issues … We count on you to secure with rigour and discipline a much better containment and prevention plan,” it said, adding: “Our first priority is to raise the bar on quality.”

Airbus has given suppliers “72 hours max” to contain any new quality defects once they have been discovered. There is no suggestion that such snags have compromised airline safety, but analysts say they can cause costly production delays.

U.S. rival Boeing is also wrestling with production quality problems on best-selling models.

Airbus operates one of the world’s most valuable supply chains, with 8,000 direct suppliers and 18,000 indirect ones providing millions of parts worth some $50 billion a year.

In normal times, suppliers must tell Airbus whenever parts use components or material from a different source or get built at a different site – a change known as a Transfer of Work.

At any one time, manufacturers monitor dozens of such changes. But ensuring that the rising number of switches driven by the crisis happens without any impact on quality and deliveries has moved up the planemaker’s list of concerns.

“Over 2021-22, more than 680 Transfers of Work will be ongoing across the globe, illustrating the deepness of the crisis,” the Airbus letter said, instructing suppliers to act early to head off any disruption.

(Reporting by Tim Hepher. Editing by Jane Merriman)