Alright folks, thanks for letting play in the sandbox today and I hope I brought some value along with me. I'm off to get ready for the Nike (NKE) earnings call.

Once again I have to thank the editors who make this all look easy, while also making me look smarter than I am. 

Tomorrow, Bret "the man, the myth, the legend" Jensen will take the Diary wheel and lead you into the weekend. You will be in more than capable hands and Doug is set to return on Monday. 

Let's do it again before too long.

In an interview, Starwood Capital Founder and Chief Executive Officer Barry Sternlicht sees "collapse" in Manhattan real estate due to an urban exodus that includes office rents declining about 25% and office values dropping up to 40%. 

Seems a bit doom and gloomy to me, but time will tell.

Apple (AAPL) will close 14 additional stores in Florida.

More often than not when I sit in for Doug at the Diary, folks like to ask about my use of thematic investing, which I define as identifying structural changes that give rise to multi-year changes in consumer behavior that can either lead companies to respond or not. That's the boiled down definition to keep things simple. Those structural changes are identified across the changing landscapes of economics, demographics, psychographics and technology, along with a sprinkling of regulatory mandates and the like.

To illustrate the power of thematic investing, below is a list of the annual model portfolio that I've developed that showcases the best company/stock for the coming year by theme. Are there are others that could fit the bill? Probably, but these are the ones we selected based on their rankings in our thematic scorecard, and I will share that not all of them were on the leader board in 2019 or 2018.

And for those that may ask why is Amazon (AMZN) listed as the Thematic King, it's because more so than almost any other company it has tailwinds from most if not all of the investment themes that I've developed.

And circling back to my question to the group on S&P 500 EPS expectations, note the difference between the Leaders below and the S&P 500.

Enjoy!


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The Trifecta Portfolio is Long AAPL, AMZN, BABA, CMG, COST, NLOK, QCOM shares.
The Stocks Under $10 Portfolio is Long FTCH shares.

With about 90 minutes until today's trading comes to an end, leaving just three more days until we close out the June quarter, the major U.S. equity indices have been bouncing around and are currently modestly positive. 

Soon after the close, we'll hear from Nike (NKE) when it reports its quarterly results. EPS expectations for the quarter range from $0.04-$0.09, while those for the quarter's revenue are $7.26 billion-$7.52 billion. We'll see if Nike gives any specific guidance for the August quarter, which Wall Street currently sees coming in at $0.66 in EPS and $9.97 billion in revenue. 

While shareholders both current and prospective will no doubt be digging into the results and guidance, given Nike's business and geographic reach there are a number of reasons why those that aren't involved in the shares may want to tune in.

You'll want to hear the company's comments on exchange rates; demand in China vs. the U.S. and Europe; Nike's thoughts on sports, especially the shortened NBA and MLB seasons, and how that might impact its business; the degree to which it is seeing consumers switch to its direct to consumer business; and its plans for reopening its Nike stores.

The Centers for Disease Control and Prevention (CDC) is now saying that roughly 20 million Americans have likely been infected with Covid-19. The CDC is basing that on the nationally representative survey it conducted using blood samples. 

To put some context around that 20 million figure, it's about 6% of the domestic population, and is roughly 8x the estimated 2.3 million tests done in the U.S. 

The unknown is what percentage had the disease and have recovered vs. current cases. 

My position? Wear your mask!

A quick reminder that after tomorrow's (June 26) market close, the newly reconstituted Russell indices will take hold.

A full summary of updates along with background information can be found on the reconstitution home page.

Investors that use those indices as benchmarks may want to double check and make any portfolio adjustments as needed before then.

Reports are making the rounds that grocery chain Albertsons (ACI) will likely price its IPO below the targeted $18-$20 range.

I'm not familiar with the details of the offering, but it is a little telling giving the retail strength we've seen in grocery since the start of the pandemic.

Let's tap the Diary readership with an informal poll as a litmus test as to what it's thinking: 

- Do you think consensus 2020 EPS for the S&P 500 will move higher or lower when we exit the June quarter earnings season? Yes or no? 

- Do you think consensus 2021 EPS for the S&P 500 will move higher or lower when we exit the June quarter earnings season? Yes or no? 

I ask this not only given the market's quarter to date tear, but also because current expectations call for less than 1% EPS growth in the S&P 500 between 2019-2021. 

Use the comment section to respond and weigh in.

Thanks!

The Washington Post reports that "The federal government sent coronavirus stimulus payments to almost 1.1 million dead people totaling nearly $1.4 billion, Congress' independent watchdog reported Thursday."

My initial thought: Surely we can do better!

My second thought: Hackers must be having a good chuckle.

My third thought: Very happy we have shares of NortonLifeLock (NLOK)  in the Trifecta Portfolio.

We're at that point of the day where I need to refuel, and for today that means noshing on some gumbo I made last night. As I do that, here are several articles that I'll be perusing: 

California to escalate legal battle with gig companies over worker classification

ECB Sets Up New Backstop for Central Banks Outside Euro Area

Duration of application DDoS attacks increasing, some go on for days

Black Hat Survey: Breach Concerns Hit Record Levels Due to COVID-19

US online sales in April and May reached $53B: Mastercard

Tesla Looks to Double Down in California With New Battery Plant

Enjoy your lunch, and I'll see you shortly.

Research and consulting firm McKinsey & Company is out with some interesting findings following a survey of consumers in China, India and Indonesia about their post Covid-19 spending plans. Here's the scoop: 

• 50% of Chinese respondents and 61% of Indonesian respondents who, before the outbreak, planned to buy cars said that they will forego those purchases this year.
• 59% in China and 39% in Indonesia said the same about planned jewelry purchases.
• Just 13% of Chinese respondents and 7% of those in Indonesia said they are delaying or canceling plans to purchase skincare items. 

That first data point is an interesting one given the continued use of subsidies by China to foster adoption of electric vehicles. Over at Stocks Under $10, we've benefited handsomely with that given our position in NIO Ltd  (NIO) , which we scooped up around $3.70 or so. NIO shares have run pretty hard and we've trimmed the position back a few times already, but the next catalyst will be the company's June vehicle shipment data, if history holds, should be released right after the July 4th holiday weekend.

Longtime readers know that I have a fondness for both McCormick & Co (MKC) , as well as International Flavors & Fragrances (IFF) , and given the pandemic I see both benefiting rather nicely.

We had confirmation of that thought this morning with McCormick's quarterly results that saw its consumer facing business do rather well given the shift to eating at home, which as we all know was due to at first restaurant closures and eventually scaled back offerings.

But here's the thing, while there was a rising tide, McCormick shared on its conference call that it took market share in nine out of 11 categories, including spices and seasonings, dry recipe mixes, hot sauce and mustard. 

Sarge Guilfoyle points some of this out in his Real Money missive and also shares a few ways to investors can jump on board using options.

Clipping this to my notebook as I think about the gaming market ahead of new console arrivals later this year as well as streaming gaming offerings from Apple (AAPL) , Alphabet (GOOGL) , Amazon (AMZN) , and others. 

"The number of gamers around the globe will top 3 billion by 2023", according to market researcher Newzoo. That may sound crazy to expect 39% of all humans to be playing games, but Newzoo says we already have 2.69 billion players, thanks to mobile devices." 

The key to the forecast is the mobile gaming, so investors should not get all that excited about GameStop (GME) . As I've said before, when a retailer loses focus on its business and starts offering all sorts of impulse buy items at the checkout, it's not a good sign at all.

Following the recent news that Starbucks (SBUX) is adding plant based proteins from Impossible Foods to its offering, CNBC is reporting that McDonald's (MCD) ends its trials with Beyond Meat (BYND) in Canada and has no current plans to add it to the menu.

Texas Governor Greg Abbott suspends elective surgeries in several counties in Texas to free up additional hospital capacity.

CNBC reports Airbus (EADSF) Americas CEO Jeff Knittel said the coronavirus pandemic is the "most unpredictable" crisis he's seen the airline industry face during his career. 

My response: No kidding! I'm sure Knittel wasn't fond of the Cowen survey findings I shared earlier this morning.

As the market opens and I jump on a conference call, here are some thoughts from good friend and Real Money contributor Peter Tchir, who is over at Academy Securities. 

I remain bearish, basically for the same reasons.

• Covid-19. While the country is doing a much better job protecting those that need the most protection, the rapid rise in cases and now hospitalizations is concerning. There are still too many "outliers" (people who seem to be affected far worse than any demographic breakdown would suggest). On a scale of 1-10, I probably got as low as a 3 or 4 in terms of concern about the virus, and that has crept up to a 5 or 6. Nowhere near the 8 in terms of fear back in early March, but enough of a shift to make me very concerned about the progress on reopening.
• Washington. I'm told we are going to get more stimulus. More fiscal spending. Maybe even some infrastructure spending. I think we will too, just not before D.C. does something to spook the market which is pricing in far too much on this front right now.
• "Smart Money" Arrogance? There seem to a lot of pundits out there who now want to be long because allegedly so many day traders are blindly buying everything. Many of these pundits missed the bounce and have decided the only reason they missed the bounce was because of this reckless crew of stimulus check spending day traders. I can think of worse reasons for being long, but not many. It seems far too often that the "smart money" sits back and treats retail investors (so-called "dumb money") as far less sophisticated than they currently are (as a group). It is especially concerning when this "certainty" that main street is doing something wrong on the investment side exists, after they avoided the highs in February and caught a great portion of the bounce. I'm not sure how much this is playing into positioning, but I suspect if the day traders stop buying, or better yet, start putting on bearish trades, the move to the downside will accelerate as the so-called "smart" money will have underestimated the "dumb" money again.
• The Fed. The Fed and Treasury Department will be there to support the broad markets, but so much of that has been priced in, we can get pullbacks despite that support. This support will ensure that any pullback isn't too severe, and that any pullback isn't going to be enduring, but it doesn't mean we can't get a 5% to 10% decline in a hurry.

In addition to the higher than expected weekly jobless claims, we also have the May Durable Orders report out this morning.

The headline data showed a 15.8% increase in new orders for manufacturing durable goods, which for context follows an 18.1% drop in April. May Shipments, on the other hand, rebounded 4.4%, which only regains a portion of April's 18.6% drop. The same picture was had with the closely tracked nondefense capital goods orders for May, which rose 27.1% during the month, while those shipments inched up a far more modest 0.4%. 

The rebounding order rate suggests the staged recovery is poised to continue but things have yet to bounce back to pre-Covid-19 levels.

Target (TGT) announced that by the end of June it will have added hundreds of grocery items, such as fruits, vegetables and meat, to its same-day service in which shoppers buy the items online and pick up their bagged purchases inside of the store or curbside.

The company looks to offer this service at more than 1,500 stores in time for the year-end holidays, a smart move in our opinion given the accelerating shift to digital shopping amid renewed Covid-19 concerns. I also think the timing is smart as it positions Target for incremental grocery gains during the food spending splurge that happens during the year-end holidays.

This echoes the smart move made some time ago by Walmart (WMT) and Costco (COST) to grow their grocery business to shrink time between customer visits. The not so secret is the strategy to drive the convenience factor that should drive the attach rate for other items. If you've been to Costco, you know what I'm talking about.

More bad news for airlines this morning.

Cowen published findings from its May survey on when consumers expect to feel 100% safe to resume traveling by airplane again. Per the report, "The average respondent in our survey said that it would be another 7.5 months until they are comfortable traveling via airplane again, down from 7.9 months in our end of May survey." While that sounds somewhat encouraging, 29% of respondents indicated that it would be 12 months or more until they felt 100% comfortable with air travel again.

Let's also keep in mind this survey was taken before the recent rebound in domestic coronavirus case counts.

U.S. weekly jobless claims total 1.48 million vs. 1.35 million estimate.

Macy's (M) announced it is laying off 3,900 corporate jobs in a move to cut costs as its business has been hurt by the coronavirus pandemic.

Let's switch gears and talk about where we are hearing some pockets of strength this morning - housing and consumer spending.

Homebuilder KB Home (KBH) reported May quarter revenue and EPS that missed consensus expectations last night. The homebuilder shared it has seen a "steady and significant improvement" in order trends beginning in May, which has accelerated further during the first three weeks of June.

Mastercard (MA) reported its switched volume has continued to improve since the end of April. Its U.S. switched volume increased 5% for the week ended June 21, up from +3% in the week ended June 14, and -1% for the week ended June 7. The company's total switched volume fell 1% during the week ending June 21, but that represents as pronounced rebound from the 12% declines registered for the weeks ended May 7 and May 14. Mastercard noted it continued to see discretionary spending improvement in clothing, gas, home improvement, restaurants, auto and domestic travel.

In case you missed it, Texas, Utah, Arkansas, and Arizona are seeing a rise in hospitalizations with Houston reporting its ICUs are near capacity. And as I touched on earlier, California and Florida are seeing record high daily new cases. This is leading to renewed uncertainty over the speed of the domestic economy's reopening. However, we're also getting other reminders that despite the reported progress thus far and the rash of better than expected economic data, the recovery is far from even keel. 

Citing Covid-19's impact on market demand, General Motors (GM) announced it will lay off the third shift at its SUV plant in Spring Hill, TN, leading to the dismissal of 680 workers. The third shift was originally scheduled to return on June 21. 

Due to lower demand for cut-sized paper products resulting from the Covid-19 pandemic, Packaging Corp. (PKG) has notified affected employees that both paper machines and a majority of the converting operations at its Jackson, AL, mill would remain idled during the months of July and August. 

Dow (DOW) President and CFO Howard Ungerleider shared he expects "an additional $350 million headwind" to total June quarter EBITDA vs. current market expectations, primarily due to a delayed and slower recovery in the automotive, construction, appliance and furniture sectors. Ungerleider further commented that coming into the current quarter, Dow expected demand declines of 15%-20% for its polyurethanes applications but now sees it closer to 25%-30%. 

In an SEC filing, Sonos SONO said it would be eliminating 12% of its workforce globally as it looks for more "operating flexibility". Sonos is also closing its retail store in New York and six satellite offices. I suspect this will fan the flames of those rumor mongers that think Apple (AAPL) should scoop up Sonos. 

This suggests my thought that the upcoming June quarter earnings season is going to be a mixed bag is looking more likely.

After state officials indicated they were not planning to issue guidelines to reopen theme parks until after July 4, Disney (DIS) announced it has delayed the planned July 17 reopening of California's Disneyland resort. Tokyo Disneyland is set to welcome guests again starting July 1, and Disneyland Paris launches a phased reopening on July 15.

This will clearly mean another revision to revenue and EPS expectations for the House of Mouse. We'll need to see what happens with the reopening of Disney World and the company's other theme parks in Florida. 

Also, Disney is reportedly now considering postponing the July 24 release of Mulan as the "theatrical landscape continues to be unpredictable." This is likely to lead to a set back in AMC Entertainment (AMC) shares as well as other movie theater stocks.

As Pimm Fox on Bloomberg Radio would say, good morning, good morning! With Doug out today, I'll be once again taking the Diary wheel for a spin.

U.S. equities tumbled on Wednesday as the surge in reported coronavirus cases put the kybosh on the re-opening trade, calling into question hopes that efforts to ease social restrictions and lockdowns would gain momentum. Leading the indices lower were the double-digit declines at Norwegian Cruise Line Holdings (NCLH) , Royal Caribbean Cruises (RCL) and Carnival Corp. (CCL) . Other notable decliners included United Airlines U (AL) , American Airlines (AAL) , Marriott International (MAR) , Expedia Group (EXPE) , Cheesecake Factory (CAKE) and Macy's (M) .

We've got several earnings reports coming at us this morning, including Accenture (ACN) , Darden Restaurants (DRI) , Rite Aid (RAD) and one of my personal favorites, McCormick & Co. (MKC) . And after tonight's close Nike (NKE) reports.

We'll be assessing the the cadence and tone of their respective quarters (and since then), as well as if they issue guidance. Areas of focus will be end demand and geographic demand as well as how they might handle the current resurgence of the coronavirus.

It's all part of collecting pieces that clue us in to what we will likely hear when the sea of June-quarter earnings begins shortly after the July 4 holiday.

Let's grab some coffee and meet back here to discuss the above and much more as we spend the day together.

As I write this, S&P futures are down 0.25%.