Market Overview - Futures have reversed modest overnight gains, with S&P futures down 0.1% and Nasdaq futures down 0.3% as small caps outperform for a record 12th day in a row [1] - The market mood remains shaky, with a significant drop in liquidity as top of book collapsed 60% overnight [4] - Gold continues to hit new highs, approaching $4,900 per ounce, while bond yields are 1-2 basis points lower [1][8] Corporate News - Biohaven (BHVN) rises 3% after an upgrade to outperform by RBC due to supportive data [5] - Halliburton (HAL) climbs 2% after reporting fourth-quarter adjusted earnings per share that beat analyst estimates [5] - Kraft Heinz (KHC) declines 5% as Berkshire Hathaway may sell some or all of its stake in the company [5] - Nathan's Famous (NATH) rises 8% after Smithfield Foods agreed to buy the company for $102 per share [5] - Netflix (NFLX) falls 7% after forecasting first-quarter earnings below analyst estimates and pausing share buybacks [5] Economic Indicators - The US economic calendar includes October construction spending and December pending home sales, with expectations of a 0.1% increase and a 0.25% decrease respectively [18][38] - Inflation in the UK rose to 3.4% in December, slightly above expectations, driven by higher tobacco prices and airfares [27] Geopolitical Developments - President Trump's speech at the World Economic Forum is anticipated to address various topics, including trade and tariffs, amid ongoing tensions regarding Greenland [6][30] - The Supreme Court is set to hear arguments regarding Trump's ability to fire Federal Reserve Governor Lisa Cook, coinciding with a criminal investigation into Fed Chair Jerome Powell [11][25] Sector Performance - European stocks drifted lower, with the Stoxx 600 down 0.6%, weighed down by financials and tech, while materials and luxury names outperformed [13][26] - The Russell 2000 is outperforming the Magnificent Seven by more than 10% year-to-date, indicating a rotation in market leadership [9]

Core Viewpoint - A court-appointed special master has recommended that women suing Johnson & Johnson (J&J) over claims that the company's talc products caused ovarian cancer be allowed to present expert testimony supporting that link, moving the litigation closer to trial [1][2]. Group 1: Litigation Overview - The ongoing litigation includes over 67,500 lawsuits in federal court in New Jersey, with the first trial potentially occurring later this year [2]. - U.S. District Judge Michael Shipp is overseeing the litigation and has brought in retired Judge Freda Wolfson to evaluate expert testimony [3]. - Wolfson's 658-page decision allows plaintiffs' experts to testify about a causal link between J&J talc products and cancer, which J&J disputes [4]. Group 2: Expert Testimony - Wolfson found that the plaintiffs' experts used reliable methodologies, demonstrating a statistically significant association between genital talc powder use and ovarian cancer [5]. - Testimony from J&J's experts will also be allowed to counter the plaintiffs' claims [5]. - Wolfson's role was to assess the reliability of the experts' methods rather than their conclusions [6]. Group 3: Company Response and Historical Context - J&J's Vice President of Litigation criticized Wolfson's ruling as erroneous and stated the company would appeal [7]. - The company has faced significant legal challenges, including attempts to resolve litigation through bankruptcy, which were rejected by federal courts [13]. - J&J has a mixed record in state courts, with some verdicts as high as $4.69 billion awarded to plaintiffs [15]. Group 4: Additional Legal Challenges - J&J has also faced cases alleging its talc products caused mesothelioma, with substantial verdicts in recent months, including over $1.5 billion in Baltimore [16]. - The company stopped selling talc-based baby powder in the U.S. in 2020, switching to a cornstarch product [9].

Group 1 - The fourth quarter earnings season is gaining momentum, with major financial institutions like Charles Schwab and regional banks such as Fifth Third set to report results, alongside Netflix and Intel, which are expected to be focal points of the earnings calendar [1][5] - An optimistic consensus is emerging, with 7% of S&P 500 companies having reported fourth quarter results as of January 16, and analysts projecting an 8.2% increase in earnings per share for the quarter, marking the potential for the 10th consecutive quarter of annual earnings growth for the index [2] - Analysts had initially anticipated an 8.3% increase in earnings per share heading into the reporting period, a decrease from the previous quarter's 13.6% growth rate, but expectations have been raised recently, particularly for technology companies that have been key drivers of earnings growth [3] Group 2 - The current earnings season is expected to test the improved stock market breadth observed at the beginning of 2026, with ongoing themes from 2025, such as artificial intelligence and economic policies, continuing to influence market dynamics [4] - This week's earnings releases will also include reports from notable companies such as United Airlines, 3M Company, D.R. Horton, Johnson & Johnson, GE Aerospace, Procter & Gamble, Abbott Laboratories, and Capital One [5]

Core Viewpoint - Johnson & Johnson (JNJ.US) reported strong Q4 2025 earnings, exceeding Wall Street expectations, driven by robust sales in innovative medicines and medical devices [1][3][4] Group 1: Q4 Performance - The company achieved a quarterly profit of approximately $6 billion, reflecting a year-over-year increase of 22%, with earnings per share at $2.46, slightly above analysts' expectations of $2.44 [1] - Q4 revenue reached $24.56 billion, surpassing the anticipated $24.16 billion, marking a year-over-year growth of 9.1% [1] - The Innovative Medicine segment saw a 10% increase in sales to $15.76 billion, exceeding the expected $15.37 billion [1] Group 2: Medical Devices and Future Outlook - The medical devices segment reported a 7.5% increase in sales to $8.8 billion, outperforming the management's prior estimate of approximately $8.69 billion, driven by strong performance in cardiac devices [3] - For 2026, the company forecasts operational sales between $99.5 billion and $100.5 billion, higher than the consensus estimate of $98.9 billion [4] - Adjusted earnings per share for 2026 are projected to be between $11.43 and $11.63, slightly above analysts' expectations of $11.45 [4] Group 3: Challenges and Market Impact - The company faces challenges, including tariff uncertainties affecting its medical devices segment and increased competition for its psoriasis drug Stelara, which saw a larger-than-expected sales decline [4][5] - Despite the optimistic earnings forecast, the stock price initially dropped over 3% in pre-market trading but later recovered, with a year-to-date increase of over 5% [5] - Johnson & Johnson's market capitalization stands at $525.7 billion, maintaining a significant weight in the S&P 500 index, influencing overall market trends [5] Group 4: Legal Issues - A court-appointed special monitor recommended allowing expert testimony linking the company's talc products to ovarian cancer, with a significant trial expected to begin in late 2026 [6]

Exhibit 99.2 Johnson & Johnson and subsidiaries Supplementary sales data | (Unaudited; Dollars in Millions) | | | FOURTH QUARTER | | | | --- | --- | --- | --- | --- | --- | | | | | | Percent Change | | | Sales to customers by geographic area | 2025 | 2024 | Total | Operations | Currency | | U.S. | $14,195 | 13,204 | 7.5 % | 7.5 | — | | Europe | 5,598 | 4,921 | 13.8 | 5.2 | 8.6 | | Western Hemisphere excluding U.S. | 1,271 | 1,135 | 12.0 | 11.0 | 1.0 | | Asia-Pacific, Africa | 3,500 | 3,260 | 7.4 | 7.2 | 0.2 ...

Core Insights - Isomorphic Labs, an AI pharmaceutical company spun off from DeepMind, has announced a collaboration with Johnson & Johnson's Janssen Pharmaceuticals to combine AI design capabilities with drug development expertise [1][5] - The partnership will focus on "cross-modal, multi-target research collaboration," with Isomorphic responsible for computer predictions and design, while the U.S. team will handle experimental testing and project development [1][5] - Isomorphic has also signed significant research collaborations with Novartis and Eli Lilly, totaling over $3 billion [6] Company Developments - Isomorphic Labs was established at the end of 2021 and is based on the technology and team from the renowned AlphaFold2 [6] - The company recently raised $600 million in funding led by Thrive Capital, with participation from GV and Alphabet, aimed at supporting its AI drug design engine and advancing internal projects into clinical stages [5] - In May 2024, Isomorphic and DeepMind jointly released AlphaFold3, a revolutionary tool for predicting the structure and interactions of all life molecules, enhancing drug development capabilities [8] Future Outlook - The founder of Isomorphic, Demis Hassabis, emphasized in a recent interview that AI is the ultimate tool for scientific exploration, capable of solving complex scientific challenges, with AlphaFold's success as a testament [10] - There is optimism that AI will usher in a new golden age of scientific discovery across various fields, including materials science, physics, mathematics, and weather forecasting [10]

Core Viewpoint - Johnson & Johnson reported a 9% revenue growth in the fourth quarter, driven by strong performance in its cancer drug segment [1] Group 1: Revenue Performance - The company achieved a revenue increase of 9% in the fourth quarter [1] - The growth was primarily attributed to the strength of its cancer drugs [1] Group 2: Product Performance - Cancer drugs played a significant role in the revenue growth, indicating robust demand in this therapeutic area [1]

Core Brand Group Strategy - The core brand group of Volkswagen plans to reduce management positions and consolidate its platform to achieve cost savings of 1 billion euros ($1.2 billion) [1]

Core Insights - The medical technology (medtech) sales for 2025 are projected to reach $33.79 billion, reflecting a year-over-year growth of 6.1% [1] - The cardiovascular segment of Johnson & Johnson (J&J) is a significant driver of this growth, with sales totaling $8.93 billion and a year-over-year increase of 15.8% [1][4] - The orthopedic segment, in contrast, has shown minimal growth of 1.1% year over year [1] Group 1: Cardiovascular Business Performance - J&J's cardiovascular business, which includes units like Abiomed and Shockwave Medical, experienced double-digit growth year over year, making it the only medtech unit to achieve such growth [2] - The strong performance in the cardiovascular segment is part of J&J's strategy to focus on higher growth markets, leading to the decision to separate from its orthopedics segment [2] Group 2: Portfolio Transformation and Future Outlook - Tim Schmid, J&J's worldwide chairman of medtech, indicated that the transformation of the portfolio is effective, with nearly 50% of J&J's medtech assets now in higher growth markets, up from 20% in 2018 [3] - This percentage is expected to exceed 70% following the orthopedic separation, suggesting a positive outlook for the company's future growth [3] Group 3: Electrophysiology Segment - J&J's electrophysiology unit reported a year-over-year sales growth of 7%, totaling $5.63 billion, although growth has slowed in the fourth quarter compared to earlier quarters [5] - The Varipulse PFA system has been utilized in nearly 40,000 patients with atrial fibrillation, indicating significant adoption, and J&J plans to release a new PFA catheter annually through the end of the decade [6] - Schmid emphasized that electrophysiology remains a priority for J&J, as the company aims to remain competitive in the face of increasing competition, particularly in pulsed field ablation (PFA) [6]

Group 1 - Kenvue Inc. is receiving institutional support for its proposed merger with Kimberly-Clark, which is valued at $40 billion, as recommended by Institutional Shareholder Services (ISS) [2] - The merger is expected to create positive synergies and advance strategic objectives, despite ongoing talcum litigation and concerns regarding Tylenol's active ingredient [2] - Meridian Hedged Equity Fund believes the market has overreacted to Tylenol safety concerns, noting minimal revenue impact and a lack of new scientific evidence [3] Group 2 - Kenvue's share price has decreased by 35% since its public listing in 2023, while Kimberly-Clark's share price has dropped by 17% since the merger announcement [4] - Kenvue focuses on consumer healthcare products, operating in Self Care, Skin Health, and Essential Health segments globally [4]