Mid-Morning Look: January 12, 2023

Mid-Morning Look

Thursday, January 12, 2023






DJ Industrials




S&P 500








Russell 2000






U.S. stocks on another roller-coaster ride, with S&P futures trading flat overnight around 4,000 in anticipation of this morning’s CPI inflation report; squeezed higher into the number with highs of 4,021.50 before initially falling to morning lows (Spuz 3,954) on a mostly in-line CPI report – now back around 4,000 (SPX around 3,975). Headline and core numbers were down from the prior month but in-line with economist views. The data remains the key market driver this morning ahead of earnings season kick off tomorrow with bank earnings JPM, WFC, Citi on deck. US inflation cooled again in December, potentially giving the Fed room to slow the pace of interest-rate hikes (implied probability of Fed raising 25bps at next meeting ticks up to 87% after CPI data from 75% pre-data but peak implied rates for June 2023 pretty much unchanged). The CPI reading marked the sixth straight monthly deceleration in inflation since the 2022 peak. Gold prices extend gains, rising above $1,900 an ounce as the dollar slides further. Oil prices jump helping boost shares of energy stocks. Following the CPI print, Federal Reserve Bank of Philadelphia leader Patrick Harker said that while the central bank needs to raise rates more to cool off inflation, it can probably do so at much slower pace compared to the action of last year. “I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Harker said in the text of a speech. “In my view, hikes of 25 basis points will be appropriate going forward.” The Fed penciled in a stopping point of 5.1% for 2023 at the last FOMC meeting while the current range is between 4.25% and 4.5%.


Economic Data

·     Mostly in-line inflation data for December as the Consumer Price Index (CPI) headline rises +6,5% Y/Y vs. est. +6.5% (vs. prior +7.1%) and falls (-0.1%) M/M vs. est. of unchanged. Core consumer prices (CPI), ex: food & energy rises +5.7% Y/Y vs. est. +5.7% (vs. prior +6.0%) and on a M/M basis, rises +0.3% vs. est. +0.3%. Posts sixth consecutive month of declining year-on-year CPI growth.

·     Shelter was biggest contributor to Core CPI 0.3% gain: the increase in the shelter index in December at 0.8% is biggest since 1990s; energy prices-declined by 4.5%, used cars fell by 2.5% & airline fares fell 3.1% in December.

·     Weekly Jobless Claims fell to 205K in latest week from 206K prior and vs. consensus 215K; the 4-week moving average fell to 212,500 in latest week from 214,250 prior; continued claims fell to 1.634M vs. est. 1.705M and prior 1.697M; the US insured unemployment rate falls to 1.1%







WTI Crude















10-Year Note





Sector Movers Today

·     In software: AMPL, LAW, SMWB, WKME, INFA all downgraded in North America Application Software sector at Citigroup as expect the first half to remain challenging from a demand perspective, while are more optimistic on the 2H given easier compares and a potentially more favorable interest rate environment. Top picks are MDB, SNOW and MSFT and ZS downgraded to equal weight from overweight in security software at Morgan Stanley saying while positive on secular tailwinds, the slowdown in security is just starting as the macro & comps remain difficult thru ’23. Valuations largely reflect this, but estimates take longer to bottom. Leaning into consolidators: PANW is top pick, followed by FTNT

·     Aerospace & Defense: BA upgraded to Neutral from Underperform and raises tgt to $200 from $121 at Credit Suisse saying strong order activity, coupled with higher probability of BA regaining market access in China, creates opportunity for upside revisions to its estimates; BAH named top pick for qtr and LDOS top pick in IT Services at Jefferies as they preview Q4 Aerospace & Defense electronics – say they prefer Commercial Aftermarket names over Commercial OE names given recent commentary around supply chain challenges which has delayed production ramps and likely limits upside surprise to estimates; LHX tgt lowered to $240 from $260 at Cowen and issue 2023 estimates below consensus as expect LHX to guide ‘23 close to or even below

·     Several changes in media space at Jefferies, upgrading NFLX from Hold to Buy and raise tgt to $385 PT as expect AVOD + password sharing changes to result in lower churn and a return to consistent DD sub growth; firm downgraded ROKU from Hold to Underperform (tgt to $30 from $45) as do not believe that a significantly slower digital ad market is reflected in NT consensus expectations and the LT trajectory of the business remains unclear; SPOT downgraded to Hold from Buy and cut tgt to $95 as does not see its gross margins returning to 2021 levels until 2024; in other changes, LBTYA was downgraded to Market-Perform at Bernstein

·     In metals: CLF upgrade from Equal Weight to Overweight at Morgan Stanley and raise tgt to $26 from $13.60 on the back of sequentially higher annual fixed pricing contracts; RIO upgraded to Equal Weight from Underweight and raise tgt at Barclay’s saying China’s reopening should underpin an acceleration in commodity demand through 2023; UBS noted the rising gold price remains supportive to GOLD and NEM, with the stocks continuing to price in a discount to spot



·     AAL +6%; sees Q4 adj EPS $1.12-$1.17, above consensus of $0.60 and expected Q4 revs to be better (16%-17% vs. prior 11%-13%) than it previously expected as demand for air travel remained strong through the holiday season (guidance boosts airlines UAL, LUV)

·     BA +2%; upgraded to Neutral from Underperform and raises tgt to $200 from $121 at Credit Suisse saying strong order activity, coupled with higher probability of regaining market access in China, creates opportunity for upside revisions to its estimates

·     CTSH +9%; announced a new CEO and issued higher revenue guidance for Q4 ($4.8B vs. prior $4.72B-$4.77B view)

·     LCID +3%; said produced 3,493 vehicles in Q4, up 53% sequentially and overall, 7,180 vehicles produced in 2022, exceeding guidance of 6,000-7,000 vehicles

·     MPC +2%; as investors rotate back into energy stocks – CTRA, HAL, VLO, EOG after leading sector decliners to start 2023

·     TSM +4%; reported a record net Q4 profit and beat analysts’ expectations but warned Q1 revs would be between $16.7B-$17.5B, 14% worse sequentially than Q4 and below est. $17.64B



·     CCI 2%; was downgraded to Equal Weight at Barclay’s saying long-anticipated demand will not materialize in earnest until 2026 or later

·     CRL -2%; downgraded to hold from buy at Jefferies, citing heightened uncertainty around non-human primate supplies for the scientific research organization

·     KBH -3%; reported a top and bottom line Q4 miss; said Q4 net orders of 692 and net order value of $362.7M fell from 3,529 and $1.77B, respectively; Q4 inventories totaled $5.54B, up 15%

·     LOGI -16%; cuts FY23 revenue growth view to down 15% to down 13%, well below prior guidance of revenue growth down 8% to down 4%; also cut its FY23 operating income view to $550M-$600M from $650M-$750M; sees Q3 revenue at $1.26B-$1.27B vs. est. $1.39B

·     ORMP -76%; after it’s experimental oral insulin failed in a late-stage clinical trial of Type 2 diabetes patients

·     ROKU -2%; cut from Hold to Underperform (tgt to $30 from $45) at Jefferies as do not believe that a significantly slower digital ad market is reflected in NT consensus expectations

·     U -5%; downgrade to Underperform at Jefferies with $19 tgt as believe in real time 3D rendering and Unity has a stranglehold on game engines for mobile, VR, and AR, but they couldn’t make the valuation work with using SOTP peer group multiples


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.