Mid-Morning Look: December 14, 2022

Mid-Morning Look

Wednesday, December 14, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks edging higher on light volume with all eyes on the Fed interest rate announcement at 2:00 PM followed by Chairman Powell press conference shortly after. Treasury yields are slightly lower into the comments along with the dollar. The US dollar remains nears its lowest levels in 6-months, drops below 104 (DXY) ahead of the Fed rate decision later, a day after “tamer” CPI inflation eased higher aggressive rate hike fears into 2023. The Fed, after raising interest rates by 75 basis points at four successive meetings, is widely expected to deliver a 50 bp increase when it’s two-day policy meeting concludes at 2:00 PM. Strength early in defensive/interest rate sensitive sectors with Utilities and REITS early gainers along with Technology. Oil prices pare gains after bearish inventory data.


What to watch at today’s Fed meeting as per the WSJ’s Nick Timiraos: 1) The statement: There’s been some speculation by Fed-watchers over when the FOMC modifies the “ongoing increases” language (to “further” or “some further” increases). Most of them think that *doesn’t* happen today. 2) There’s also intense focus on the median of officials’ 2023 interest rate projection. In September, six officials each projected rates ending 2023 at 4.4%, 4.6%, and 4.9%, respectively, for a median of 4.6%. Powell et al have teased “somewhat higher” projections today. The question, then, is whether the median is a shade below 5% (at 4.9%) or above (5.1%). Analysts are split over this. (A wrinkle: if FOMC participants anticipate hiking in H1 and then cutting them in H2 ’23, the 2023 dot—which is as of 12/31/23—won’t reveal their “peak” rate).


Economic Data

·     U.S. import prices fell for a fifth straight month in November, falling (-0.6%) vs. est. (-0.5%) and (-0.4%) prior, weighed down by decreases in the costs of petroleum products and a range of other goods. In the 12 months through November, import prices increased 2.7%, the smallest gain since January 2021, after rising 4.1% in October.







WTI Crude















10-Year Note





Sector Movers Today

·     Housing & Building Products: LEN to report earnings tonight in homebuilder sector; MLM downgraded to equal weight at Morgan Stanley saying share price and volume headwinds from Resi-related dynamics are increasingly offsetting more durable upside from Non-Resi and Public/Infrastructure; in broad sector call, Barclay’s turns positive on homebuilder subsector, with valuations already priced for a sharp housing recession and are now relatively more positive builders vs. building products upgrading LEN and PHM to Overweight while downgrade SKY and SWIM to Equal weight; Within traditional building products, they remain Underweight MHK, Equal Weight OC, with a relative preference for MAS (OW). Prefer secular names that may see a greater deflation benefit and whose volume decrementals are better calibrated (AZEK, WMS). Prefer distributors with residential exposure (BLDR remains Top Pick, FERG)

·     Auto sector: GM recalling 740,000 newer trucks, SUVs in the U.S. because daytime running lights may not deactivate when headlights are on -automaker; LEA & MGA downgraded from Overweight to Equal Weight at Wells Fargo and continue to prefer top pick BWA, and remain Underweight on F in auto outlook noting auto OEMs and suppliers have rallied 21% and 28% (S&P 12%), respectively, since end-Q3; however, most earnings drivers have weakened, except FX. We lower our 2023 global LVP forecast to 1.8% from 7.1%, below S&P’s 4.0; QS downgrade from Neutral to Sell at Goldman Sachs as believe that ramping into volume production as a new entrant could also pressure FCF

·     REITs: DLR announced the departure of CEO and Board member Bill Stein effective immediately to be replaced by President and CFO Andrew Power (shares downgraded at Wells Fargo); Citigroup with several change, downgrading AKR, DEA, HLT, HR, and MAR from Buy to Neutral and cutting BDN, SLG, and VNO from Neutral to Sell, upgraded PLYA from Neutral to Buy; removing KIM from Citi’s focus list and adding PLD; PEAK downgraded to Sector Perform at RBC Capital as believe the near-term earnings trend will be more muted given a lower Mark to market on its 2022-2024 life science lease expirations; As part of its 2023 REIT outlook, KeyBanc upgraded EGP and DOC to Overweight, while downgrading AKR, NTST, LTC, VICI and ESS to Sector Weight; for Wireless Tower REITs, Wells Fargo said believe the sector remains a key defensive sector heading into uncertain 2023, top pick is SBAC where we see the most upside, also believe AMT remains very attractive; in data center REITs, Wells downgraded DLR to EW from OW as sees emerging risks to the 2023 outlook and believe EQIX is best positioned to navigate the potentially choppy waters



·     DAL +2%; said it expects to nearly double its profit next year (EPS about $5.00-$6.00 from prior $3.07-$3.12), driven by “robust” travel demand and a decline in non-fuel operating costs

·     DDOG +3%; upgraded to Outperform with $105 tgt at Oppenheimer saying its unified, real-time view into the entire technology stack remains mission-critical to developers/enterprises

·     KYMR +20%; following positive data from a Phase 1 clinical trial evaluating the treatment it’s developing with Sanofi for two skin conditions: hidradenitis suppurativa, and atopic dermatitis

·     REVG +17%; after Q4 results topped consensus for top and bottom line

·     RNA +64%; shares jump after saying its experimental RNA therapy, when injected into the muscle, has potential as a treatment for myotonic dystrophy type 1

·     SEDG +2%; upgraded to overweight from equal weight at Barclays, citing the company’s game plan to chase business in Europe

·     SOFI +10%; after an SEC filing showed CEO Anthony acquires 1,134,065 shares of SOFI between Friday and Tuesday, buying in the range of $4.28 to $4.70

·     VSAT +3%; upon partnering with Microsoft to increase internet availability to underserved communities globally



·     ABM -6%; reported EPS/EBITDA inline at 89c/$131MM (vs. the St 89c/$130MM) w/revs a tiny bit better ($2.01B vs. the St $1.98B) while shares fall as sees FY23adj EPS $3.40-3.60 vs est. $3.70

·     BRZE -2%; 3Q w/ rev growth of 46% above Street of 42% (but decelerates from 54% growth last quarter) and operating losses were smaller than forecast

·     CHTR -12%; after higher cap-ex spending forecasts given late yesterday at investor day – provided CAPEX guidance for 2023 of $10.5B-$10.8B well above estimate of around $9.2B

·     CZR -3%; downgraded to Neutral from Buy at Bank America along with PENN, underpinned by slowing Y/Y consumer spending growth

·     DLR -1%; announced the departure of CEO and Board member Bill Stein effective immediately to be replaced by President and CFO Andrew Power

·     QS -7%; downgrade from Neutral to Sell at Goldman Sachs as believe that ramping into volume production as a new entrant could also pressure FCF


Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.