Mid-Morning Look

Thursday, December 18, 2025

After falling for a 4^th straight day on Wednesday, as the S&P 500 closed at the lows along with weakness in the Nasdaq and Dow, markets are recovering nicely following a cooler than expected CPI November inflation report this morning and tech getting a boost after record results and sharply higher guidance from chipmaker Micron (boosting large analyst price tgt hikes), which is lifting tech. The Philadelphia Semiconductor index (SOX) jumps over 3%, looking to snap its five-session losing streak (but has since pared gains as MU also pares gains post results). On a broader scale, The Consumer Price Index (CPI) rose 2.7% over the prior year in November, less than the 3.1% increase that had been expected by economists. On a “core” basis, which strips out the more volatile costs of food and energy, prices rose 2.6% over the prior year in November and also below estimates of over 3%  The data marked the first inflation reading since November, with October’s report canceled as a result of the government shutdown. The data boosted hopes of additional interest rate easing by the Fed and is helping shares of interest rate sensitive sectors and risk assets in general. Note there are nine trading days left in 2025. For the first time in over a year, AAII Bulls exceeded 44% for 3 straight weeks. In Central banks: The Bank of England cut interest rates by 25 basis points to 3.75% in a tight vote, with five members favoring the reduction and four members preferring to keep rates on hold. Some analysts expected six or more members to vote in favor of a rate cut after Wednesday’s below-forecast U.K. inflation data. Later the European Central Bank (ECB) decided to keep the three key ECB interest rates unchanged (as expected) while staff projections show headline inflation averaging 2.1% in 2025, 1.9% in 2026, 1.8% in 2027 and 2.0% in 2028.

• For CPI, the food category with the biggest jump in prices compared to a year ago was beef. Uncooked ground beef (+14.9%), uncooked beef roasts (+21.2%), and uncooked beef steaks (14.7%) all showed elevated prices. The overall meats category was up 8.9%.
• Weekly Jobless Claims fell to 224,000 from 237,000 prior and vs. consensus 225,000; the 4-week moving average climbed to 217,500 from 217,000 prior; continued claims climbed to 1.897M (vs. consensus 1.930M) from 1.830M prior week and the US insured unemployment Rate unchanged at 1.2% Dec 6 week from 1.2% prior week (prev 1.2%).
• Philadelphia Fed business conditions December fell to -10.2 from November -1.7 and well below consensus for a positive reading of 3; prices paid index for December fell to 43.6 vs November 56.1; new orders index December 5.0 vs November -8.6; employment index December 12.9 vs November 6.0; six-month business conditions December 41.6 vs November 49.6 and six-month capital expenditures outlook December 30.3 vs November 26.7.

• In Chemicals: SHW was upgraded to Buy from Neutral at Citigroup with $390 tgt as sees a favorable setup for the shares into 2026 as interest rate cuts should bring a better housing environment in 2027 and Sherwin-Williams shares typically perform well in the year following the beginning of rate cuts. Citi also raise its tgts on ALB to $150 from $100 while adds an “upside 90-day catalyst watch” and also adds DOW to a “downside 90-day catalyst watch” on shares as sees Q1 guidance risk due to compressed polyethylene margins from higher ethane costs and soft demand.
• In Aerospace & Defense: KBR awarded seat on $10B ceiling readiness and sustainment support contract with U.S. Naval Supply Systems Command. PSN said it was awarded a seat on the U.S. Air Force Comprehensive Construction & Engineering Multiple Award Task Order Contract, or MATOC. Managed by the Air Force Civil Engineering Center, this has a $15B ceiling value contract. SPIR said it was selected as an awardee on the Missile Defense Agency’s SHIELD IDIQ contract, which has a ceiling value of up to $151B across the program. Spire says it will compete for task orders tied to satellite-based RF intelligence and analytics for defense missions. The U.S. approved $11.1B in arms sales to Taiwan, including 82 HIMARS launchers and 60 howitzers, plus missiles and anti-tank drones, per the Pentagon’s DSCA.

• DRI +2%; reported mixed Q2 results as EPS of $2.08 missed the $2.10 estimate but sales rose 7.3% to $3.1B topping the $3.07B consensus and comps 4.3% beat the 3% estimate; raised its annual total sales growth in the range of 8.5% to 9.3%, compared to previous projection of 7.5% to 8.5% rise and upped comp sales guide as well.
• LULU +7%; shares jumped on WSJ report that activist investor Elliott Investment Management has built a stake of more than $1 billion in the athletic apparel retailer and lining up a potential CEO candidate https://tinyurl.com/3dx39dpz ; separately, LULU said it will enter 6 new markets in 2026 via franchise partners, its biggest one-year international push.
• MU +12%; after reported strong FQ1 (Nov) results and FQ2 (Feb) guidance, which significantly exceeded expectations (guided Q2 revs $18.3-19.1B well above the consensus $14.199B) as outsized demand for Ai/Data Center is driving a Super Cycle in memory with demand exceeding supply as FQ1 DRAM/NAND pricing increased +20% q/q.
• SOC +67%; after the company said the US Department of Transportation’s Pipeline and Hazardous Materials Safety Administration determined the pipeline connecting the Santa Ynez Unit to Pentland Station terminal in California constitutes an interstate pipeline.
• SPIR +7%; after saying it was selected as an awardee on the Missile Defense Agency’s SHIELD IDIQ contract, which has a ceiling value of up to $151B across the program. Spire says it will compete for task orders tied to satellite-based RF intelligence and analytics for defense missions.
• TLN +3%; along with gains in other independent power producers such as CEG, VSTafter the largest grid operator in the U.S., PJM Interconnection, reported fresh record-high capacity prices of $333.44 a megawatt-day in its auction on Wednesday. Recall The PJM Interconnection’s Base Residual Auction (BRA) for the 2026/2027 delivery year (June 1, 2026–May 31, 2027) cleared on July 22, 2025, at the FERC-imposed price cap of $329.17/MW-day.

• CART -1%; shares fall after news the U.S. Federal Trade Commission is probing CART’s AI pricing tool Eversight, two sources familiar with the matter told Reuters on Wednesday. A study involving 437 shoppers viewing Instacart prices in four cities saw wildly different prices for the same items sourced at the same stores. https://tinyurl.com/66wr9dhd
• INSM -14%; shares declined after saying its Phase 2b BiRCh study of brensocatib in patients with chronic rhinosinusitis without nasal polyps failed to meet primary or secondary efficacy goals, prompting immediate discontinuation of the CRSsNP program.
• INSP -17%; after the LCD for hypoglossal nerve stimulation for the treatment of obstructive Sleep apnea (OSA) removed 64568 as a covered code, with Inspire 5 now reverting to the old 64582 code that Inspire 4 was billed under. JPMorgan notes this represents a significant reduction in reimbursement relative to expectations for next year, with (1) outpatient reimbursement reverting to $31.5K from $45.0K; (2) ambulatory Surgery center (ASC) reimbursement falling to $27.2K from $42.4K; and only partially offset by (3) physician reimbursement moving up to $726 from $664.
• PYPL -1%; was downgraded to Underweight from Equal weight at Morgan Stanley and cuts tgt to $51 from $74 saying improvements to Branded Checkout integrations will be slow and complex and expect sluggish total payments volume dollar growth through 2028 due to share loss, take rate degradation, and a lack of Venmo monetization.