Do 5G signals affect aircraft equipment? The answer to that question is dividing the telecom and aviation industries, and many consumers are set to get stuck in the middle. At issue are altimeters, or devices that use radio frequencies to measure the distance between aircraft and the ground, and help planes land in bad weather. Aviation officials and the FAA worry that new cellular frequencies could endanger aircraft by throwing off the readings, while telecom-industry representatives say that is not the case, citing the stance of the FCC and other regulators around the world.

What's happening? AT&T (NYSE:T) and Verizon (NYSE:VZ) are set to deploy their new 5G service on the C-band tomorrow after spending tens of billions of dollars on spectrum auctions (T-Mobile's (NASDAQ:TMUS) licenses only become available in late 2023). While the C-band auctions took place last October, tensions between the sides are coming to a head now because federal agencies did not act earlier to work through the disagreements. In fact, the drama has already delayed the latest 5G rollout twice, first by 30 days and then by two weeks, but this time around the release looks like it is actually happening.

"Unless our major hubs are cleared to fly, the vast majority of the traveling and shipping public will essentially be grounded," the CEOs of American Airlines (NASDAQ:AAL), Delta (NYSE:DAL), United (NASDAQ:UAL), FedEx (NYSE:FDX) and UPS (NYSE:UPS) warned in a letter - that referred to a "catastrophic" aviation crisis. "This means that on a day like yesterday, more than 1,100 flights and 100,000 passengers would be subjected to cancellations, diversions or delays. To be blunt, the nation's commerce will grind to a halt."

Go deeper: AT&T and Verizon have already agreed to buffer zones around 50 airports to reduce interference risks, as well as other steps to cut potential interference for six months. However, airlines not only feel that the precautionary measures could be limiting, but would also render some aircraft types unusable, like Boeing (NYSE:BA) 787s, 777s and 737s. The battle comes as 5G cellular services are rolled out in several frequencies nationwide to keep the networks from becoming too congested.

Volatility sticks around

The rocky start to 2022 is continuing into earnings season as a jump in Treasury yields continues to unnerve investors. The 10-year Treasury yield climbed 6 basis points overnight to 1.83%, a level last seen two years ago, before the first U.S. COVID-19 case was recorded in Jan. 2020. Fears of tighter monetary policy (and the Fed's fight against inflation) have already dragged the S&P 500 and Nasdaq down 2.2% and 4.8%, respectively, in the first two weeks of the year, and futures linked to the indexes fell another 1.3% and 1.9% overnight.

Analyst commentary: "It will be interesting to see if investors are tempted back in now that earnings season is underway," said Craig Erlam, senior market analyst at Oanda. "The emergence of Omicron may mean that many companies don't enjoy the kind of performance that was expected before, but that doesn’t mean there won’t be plenty of positives to take away."

Earnings for S&P 500 companies are expected to rise 22.4% in the fourth quarter, according to data from Refinitiv, which would wrap up a record year where overall earnings soared around 49%. Meanwhile, 26 S&P 500 firms have already reported Q4 results, with 77% of them posting bottom-line results that beat analyst expectations. Reporting this week is Goldman Sachs (GS), Bank of America (BAC), UnitedHealth (UNH), Procter & Gamble (PG), Netflix (NFLX) and Honeywell (HON).

Outlook: More volatility could be in store based on real rates, or bond yields that have been adjusted for inflation. Those have been stuck in negative territory since the pandemic, meaning investors aren't expecting the upcoming moves from the Fed to make much of a dent on the current inflation landscape. The potential for a market repricing could weigh on sentiment, but that could also mean central bank policy could remain somewhat accommodative in the foreseeable future.

Fourth dose

The results are in for the Sheba Medical Center's landmark study of a fourth COVID-19 shot, which took place in Tel Aviv with the Pfizer-BioNTech (PFE, BNTX) vaccine. While the trial was many times smaller than traditional studies (just 154 medical staff were given the extra booster in December), it is the only known study of the effects of a fourth dose. The findings are also preliminary and not yet published.

Quote: "The vaccine, which was very effective against the previous strains, is less effective against the Omicron strain," said Prof. Gili Regev-Yochay, a lead researcher in the experiment. "We see an increase in antibodies, higher than after the third dose. However, we see many infected with Omicron who received the fourth dose. Granted, a bit less than in the control group, but still a lot of infections. The bottom line is that the vaccine is excellent against the Alpha and Delta [variants], for Omicron it's not good enough."

As a result, she is recommending a fourth shot be given to those at higher risk, but signaled that the current campaign, which offers the jab to anyone of 60, could be amended to only include even older groups. Regev-Yochay also noted that while the decision to give the fourth vaccine to the most vulnerable was the correct one, the results didn't support a rollout to the wider population.

Snapshot: Israel was the fastest country to launch initial vaccinations against COVID-19 a year ago, and became one of the first to approve a COVID booster. In clearing a fourth shot, the nation hoped to keep the rapidly-spreading Omicron variant at bay, and avoid overwhelming the hospital system and shutting down businesses. As of Sunday night, over 500K Israelis out of a population of nearly 9.5M have been inoculated with a fourth dose.

Trouble in China?

Fresh data out of China has shown economic growth slowing to a 4% pace in the fourth quarter, from 4.9% Y/Y growth in the Q3, weighed down by property market crisis and new coronavirus outbreaks. While that exceeded economists' forecasts, it was short of the 6.5% growth recorded over the same period in 2020. "We must be aware that the external environment is more complicated and uncertain, and the domestic economy is under the triple pressure of demand contraction, supply shock and weakening expectations," the National Bureau of Statistics said in a statement.

Policy action: Following the data, the People's Bank of China cut key interest rates for the first time since the peak of the pandemic in 2020. Specifically, the rate on its one-year policy loans was reduced by 10 bps to 2.85%, while the same amount was taken off the rate on its seven-day reverse repurchase agreements, which fell to 2.1%. The PBOC made the move while offering 700B yuan ($110B) via its medium-term lending facility - exceeding the 500B yuan coming due - while adding 100B yuan with seven-day reverse repos.

The easing runs counter to the direction of the U.S., which expects quicker rate hikes due to rising inflation. However, China is dealing with other issues, particularly surrounding domestic demand, as it struggles to rebalance its economy. Retail sales growth slumped to 1.7% Y/Y in December and the country's "Zero Covid" policies are a big headwind to consumer spending. The trends also risk China turning to infrastructure and real estate spending to boost its economy, which are dealing with crises of their own.

Commentary: "While the U.S. and some other economies were moving to gradually close the gap from the pre-pandemic path, China has fallen below [the] pre-pandemic potential path recently after a temporary above-trend growth," noted Tingting Ge, a greater China economist at JPMorgan Chase. "More stimulus measures [are] likely to be unveiled if domestic and external circumstances remain unfavorable," added Eswar Prasad, a former head of the IMF's China division.

Today's Markets

In Asia, Japan -0.3%. Hong Kong -0.4%. China +0.8%. India -0.9%.
In Europe, at midday, London -0.7%. Paris -1.1%. Frankfurt -1.1%.
Futures at 6:20, Dow -0.8%. S&P -1.3%. Nasdaq -1.9%. Crude +1% to $84.69. Gold -0.3% at $1810.80. Bitcoin -2.2% to $41817.
Ten-year Treasury Yield +6 bps to 1.83%

Today's Economic Calendar

8:30 Empire State Mfg Survey
10:00 NAHB Housing Market Index
4:00 PM Treasury International Capital

Companies reporting earnings today »

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Unilever (NYSE:UL) sees investor backlash over $68B Glaxo (NYSE:GSK) unit bid.

Goldman's chief commodity strategist sits down to discuss mega trends.

Can Apple (NASDAQ:AAPL) compete with Tesla (NASDAQ:TSLA) in the car space?

Walmart (NYSE:WMT) drawing up plans to enter metaverse, create a crypto.

Crypto.com pauses withdrawals amid suspicious activity in some accounts.

Dog-walking firm Wag in talks to go public through CHW Acquisition (CHWA).

Biden emission reduction goals could triple reliance on electric grid.

Will office demand rebound in 2022 after finishing 2021 on a strong note?