Mid-Morning Look: December 15, 2022

Mid-Morning Look

Thursday, December 15, 2022






DJ Industrials




S&P 500








Russell 2000






U.S. stocks pressured early, as losses deepened after the Federal Reserve signaled plans to lift interest rates through the spring, crushing hopes that recent easing inflation figures might mean rates wouldn’t ultimately have to go so high or could come back down sooner. Major averages are down roughly 2% to start, with all eleven S&P sectors in the “red” following another round of weak economic data (retail sales, NY and Philly Fed manufacturing, Industrial production all missing ests), raising recession fears. In new economic projections released Wednesday, most Fed officials expected to raise the federal-funds rate to a peak level between 5% and 5.5% in 2023 and hold it there until some-time in 2024 – a far cry from the 4.75% forecast in October. Other cautious signs show an early read on credit card metrics (DFS, COF, BAC, JPM) for NCOs and delinquencies moving in the wrong direction: seeing numbers rise notably for a second straight month on debts that are behind or never expected to be repaid. Back to the data, retail sales down most in 11 months, -0.6%, while Industrial production figure of -0.2% the weakest since September of last year. Some still hoping for a “soft landing” for the economy, but given the recent data, Fed comments yesterday about rising unemployment forecasts and falling growth forecasts, it remains a big question if it can be pulled off. Also both the BOE and ECB raised interest rates this morning.


Economic Data

·     Retail Sales for November fell a larger-than-expected (-0.6%) M/M vs. (-0.2%) est. and downwardly revised +1.3% prior (from +1.7%). Core Retail Sales for Nov fell (-0.2%) M/M vs. +0.2% consensus and downwardly revised (-1.2%) prior (from +1.7%). Retail sales ex-Auto & Gas fell (-0.2%) M/M vs. (-0.1%) est.

·     Empire State Manufacturing for December posted negative reading of -11.2 vs. -0.4 consensus, and +4.5 prior as New Orders -3.6 vs. -3.3, shipments 5.3 vs. 8.0, employment 14 vs. 12.2, prices paid unchanged at 50.5, prices received fell to 25.2 vs 27.2

·     Weekly Jobless Claims fell to 211K in latest week from 231K prior (est. 230K) as the 4-week moving average fell to 227,250 from 230,250 prior; continued claims rose to 1.671M from 1.670 mln prior week and US insured unemployment rate unchanged at 1.2%

·     December Philly Fed Business Outlook weaker with -13.8 reading vs. -10 est. (but better than prior -19.4 reading); employment index fell from 7.1 to -1.8, new orders weaker as -25.8 vs. prior -16.2 and prices-paid index 26.4 vs 35.3 prior

·     Industrials Production for Nov fell (-0.2%), the lowest since September of 2021 and below estimates and prior month readings; Capacity utilization fell to 79.7% from 79.8%; U.S. Nov motor vehicle assembly rate fell to 10.25 mln units per year from oct 10.84 mln units y/y

·     Business inventories rose 0.3% in October, missing the +0.4% estimate while inventories were revised to a 0.2% increase from a 0.4% gain previously. Oct business sales +0.8% vs Sept unchanged and inventory/sales ratio 1.33 months’ worth vs sept 1.33 months







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Finance: monthly Net charge offs and delinquency data shows rising debt; COF November domestic credit card net charge-offs rate 3.14% vs 2.93% in October and 30+ day performing delinquencies rate for auto 5.50% at November end vs 5.29% prior; DFS credit card delinquency rate 1.21% at November end vs 1.17% at October end; credit card charge-off rate 1.30% at November end vs 1.17% at October end; JPM reported charge-offs for November of 1.31% and delinquencies 0.73%; BAC credit card delinquency rate was 1.02% at November end vs 0.98% at October end and net charge-off rate was 1.45% in November vs 1.37% in October

·     Utilities & Solar: PPL upgraded to Overweight from Equal Weight at Morgan Stanley with $32 tgt saying low regulatory risk as concerns have spiked across the group, greater appreciation for the strong balance sheet, and catalysts for upside; for solar, JPMorgan said following several years of outperformance from residential solar, they believe 2023 sets up favorably for US utility-scale, which should rebound from disruption created in 2022 from geopolitical uncertainty – top picks are ARRY, SHLS, and SEDG as adding ARRY to AFL as Growth ideas and remove RUN; ENPH was downgraded to Neutral from Positive at Susquehanna; note California will vote on a proposal to reduce the rate at which households with rooftop solar panels are credited for exporting surplus power to the grid, a step solar companies warn could slow installations

·     Pharma movers: AZN and MRK said the FDA has extended by three months the Prescription Drug User Fee Act (PDUFA) date for the pending supplemental new drug application for LYNPARZA; NVAX announces proposed $125 million public offering of common stock, sending shares lower; RNA announces $150M common stock offering; ABCL announces partnership with ABBV for antibody therapies; CASI said the Chinese health regulator has accepted its partner Juventas Cell Therapy’s application seeking approval for its cancer therapy; BNTX upgraded to Buy from Neutral with $239 PT at Bank America

·     Retailers & Leisure: POOL initiated at Underperform and $291 tgt at Bank America saying they see downside to consensus EPS estimates (11% below on 2023E EPS) driven by weaker end market demand and near-term margin headwinds; KeyBanc previews holiday season saying TGT, WSM, and BBY seem at risk this holiday season, but they believe results are tracking in line with recent commentary and believe WMT and OLLI are positioned for relative outperformance during the holiday period, and 4Q more broadly, while see risk to fundamentals at BBBY and BIG given recent trends and channel checks; SIX shares slide on negative short seller call



·     ALL +1%; said continued to implement significant auto insurance rate actions in response to inflationary increases to loss costs

·     CRL +5%; Evercore ISI said following recent reports that NHP shipments to the U.S. are not currently being suspended, Charles River noted that they are not aware of any current export restrictions and cancellations of shipments

·     LEN +1%; posted Q4 top and bottom-line quarterly beats issued Q1 gross margin guidance of 21%, which was below 24.8% in 4Q

·     NDSN +2%; 4Q ESP $2.44 vs est. $2.33 on revs $684Mm vs est. $649.5Mm; sees 1Q sales $605-630Mm vs est. $619Mm with adj EPS $1.85-2.00 vs est. $2.15; sees FY23 sales +1-7% vs est. +3.85% and adj EPS $8.75-10.10 vs est. $9.83

·     VZ +1%; upgraded to overweight at Morgan Stanley and downgrades ATsaying that North American telecom services sector faces a balanced outlook heading into next year



·     LEN -3%; as posted Q4 top and bottom-line quarterly beats issued Q1 gross margin guidance of 21%, which was below 24.8% in 4Q

·     NFLX -6%; on reports the company lets advertisers take their money back after missing viewership targets https://bit.ly/3W2pvkX

·     NUE -6%; sees Q4 EPS $4.25-$4.35 below est. $4.41 and said in steel mills segment, see considerably lower earnings in Q4 vs Q3 due to lower average selling prices, margin compression, lower volume

·     NVAX -19%; announces proposed $125 million public offering of common stock

·     POOL -5%; initiated at Underperform and $291 tgt at Bank America saying they see downside to consensus EPS estimates (11% below on 2023E EPS) driven by weaker end market demand

·     RBLX -14%; after saying estimated average bookings per daily active user (ABPDAU) for November were between $3.92-$3.97, down 7%-9% y/y

·     SNAP -8%; Jefferies assumed coverage on digital ad tech, downgrading both TTD and SNAP to Hold, keeping PUBM at Hold, and IAS at Buy, more cautious than the street with our lowered ests

·     THRD -77%; said it will discontinue the ongoing early-stage study of its experimental drug to treat patients with severe allergy and inflammation citing safety concerns

·     WDC -7%; Goldman Sachs downgraded to Sell from Neutral and cut tgt to $31 from $43 to reflect 3Q22-end inventory data as well as recent industry discussions that universally point to a severe near-term pricing environment


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.