Alright folks, thanks for letting me share my musings in the Diary today. I’ll be back here next week, but Tuesday brings the return of America’s Pal, Stephen Sarge Guilfoyle.

Have a wonderful evening and stay alert, we have a big week of data ahead of us.

The previous post discussed tomorrow morning’s economic data but here are Tuesday morning’s earnings reports:

Home Depot HD

James Hardie JHX

Melco Resorts & Entertainment MLCO

Paysafe PSFE

The focal point will no doubt be Home Depot but given past conversations with former James Hardie CEO Jack Truong that we’ve shared, the portfolio will be interested in comments and guidance from James Hardie about the housing market. As we digest those, we’ll be assessing implications for several of the portfolio’s construction-related holdings.

With less than an hour left in trading for today, it’s time to start contemplating what we’re likely to hear after today’s market close and tomorrow morning. After the close, we have no market-moving earnings but we should still look out for for any negative pre-announcements.

Tomorrow morning, we have the July PPI report and as you can see below, expectations call for further progress with both headline and core figures for the month.

If that’s what we get, the market is likely to trade higher but if those figures come in hotter than expected and ABOVE the June figures the likelihood is that would raise questions about 100 basis points of rate cuts expected by the market (see the CME FedWatch Tool) over the Fed’s remaining three policy meetings this year.

With the report out at 8:30 a.m. ET, we’ll be able to dig into it and position accordingly.

Tomorrow, Alphabet’s GOOGL Google will have its latest Made By event during which it is expected to show its new Pixel 9 smartphone and a Pixel 9 Pro Fold.

While the fold version is another positive data point for the Portfolio’s position in Universal Display OLED, it could be overlooked as Google takes the wraps off Android 15, its latest OS. Between this new smartphone hardware and others that may be introduced tomorrow, the big question is how Google’s Gemini AI will be in the mix?

If the event shows some compelling AI-infused applications that drive productivity, it has the potential to get the market excited about the rebounding smartphone market and the AI upgrade cycle. We’re positioned for that in the Portfolio with our shares of Apple AAPL and Qualcomm QCOM.

Our thinking on Marvell MRVL is AI uptake across the enterprise and in AI on PCs and smartphones will lead to the next explosion in digital content creation and consumption. That in turn will pressure existing network capacity levels, resulting in rebound in Marvell’s non-data center business.

Two more hits for consumer spending prospects as we get ready for retailer earnings this week.

The first comes from a fresh New York Fed survey:

“US consumers are increasingly concerned about falling behind on their bills, with delinquency expectations rising to the highest level since the onset of the pandemic.

The average likelihood that consumers would miss a minimum debt payment in the next three months rose to 13.3%, the highest level since April 2020, according to a Federal Reserve Bank of New York survey released Monday. That stress increased the most for people earning less than $50,000 a year and for those with a high school degree or less."

The second is from a CBS interview with Bank of America BAC CEO Brian Moynihan:

“Well, in our consumer base of 60 million customers spending every week, what you're seeing is they're spending at a rate of growth of this year over last year, for July and August so far, about 3%. That is half the rate it was last year at this time. And so the consumer has slowed down. They have money in their accounts, but they're depleting a little bit. They're employed, they're earning money, but if you look at- they've really slowed down.”

In the interest of full disclosure, following up on my post below that mentioned Coty COTY over at the Pro Portfolio we have dialed back the exposure and downgraded the shares to a Four rating. 

You can read the “whys” behind those actions here.

The Cleveland Fed's Q3 2024 Survey of Firms' Inflation Expectations (SoFIE) shows CEO's have trimmed their inflation expectations for the coming year. Per the report, that cohort expects the Consumer Price Index to be 3.4% over the next 12 months, down from 3.8% in the previous quarter and 4.3% a year before.

By comparison, the Cleveland Fed’s Inflation Nowcasting model puts July core CPI at 3.33% and August core CPI at 3.38%, both on a year-over-year basis.

A new study from PYMNTS adds to the growing concern over consumer spending:

“Despite decreases in inflation rates, consumers continue to perceive that the cost of everyday essentials, including groceries and retail products, are on the rise. This is especially true among struggling paycheck-to-paycheck consumers. In addition, 7 in 10 consumers believe that their income has not matched inflation. As a result, from groceries to retail, many consumers are trading down. If they’re buying at all, many are buying cheaper or lesser quality alternatives.”

This adds to the risk retailers will serve up softer-than-expected H2 2024 guidance, something we discussed in today’s Pro Portfolio video.

That has us revisiting our Coty COTY in the Portfolio as they once again flirt with their $9 panic point.

Position: The Pro Portfolio is long COTY shares.

Seems the Pro Portfolio wasn’t the only one being opportunistic last week:

Acrosa (ACA) President and Chief Executive Officer bought 12,125 shares at $80.32 - $82.75 worth approx. $995K.

AGCO (AGCO) Director bought 1,415 shares at $88.26 - $88.31 worth about $125K.

Apple Hospitality REIT (APLE) Executive Chairman bought 5,000 shares at $14.045 worth about $70K.

Appian Corp. (APPN) 10% owner Abdiel Capital bought 275,000 shares worth approx. $7.6 million.

AMREP Corp. (AXR) 10% owner bought 5,000 shares at $23.125 - $23.68 worth about $117K.

Custom Truck One Source (CTOS) President - Sales bought 84,254 shares at $3.95 - $4.00 worth approx. $335K.

Walt Disney (DIS) Director bought 11,756 shares at $85.0191 - $85.09 worth approx. $1 million.

Groupon (GRPN) Director bought 15,000 shares at $10.61 worth about $159K.

Goodyear Tire & Rubber (GT) President, EMEA bought 18,292 shares at $8.20 worth about $150K.

Ligand Pharmaceuticals (LGND) Chief Executive Officer bought 2,500 shares at $97.3922 worth approx. $243K.

Moneylion (ML) Director bought 10,000 shares at $42.62 - $47.62 worth approx. $459K.

ODP Corp. (ODP) Director bought 3,875 shares at $25.77 worth ~$100K.

OneWater Marine (ONEW) Directors (2) bought 61,705 shares worth approx. $1.4 million.

CPI Card Group (PMTS) Director bought 2,000 shares at $25.26 worth ~$51K.

PRA Corp. (PRAA) Director bought 11,750 shares at $21.25 - $21.45 worth approx. $251K.

Talos Energy (TALO) 10% owner Control Empresarial de Capitales S.A. de C.V. bought 650,000 shares at $10.275 - $10.40 worth approx. $6.7 million.

Dentsply Sirona (XRAY) Director bought 8,212 shares at $24.305 - $24.38 worth about $200K.

Zoominfo Technologies (ZI) Chief Executive Officer bought 1,500,000 shares at $8.17 - $8.70 worth approx. $12.7 million.

CNBC’s David Faber is making some news this morning reporting:

• Mars is still in talks with Kellanova K and there is an expectation the deal will get done
• It doesn't appear "there is a story" around activist position in Starbucks SBUX

The Pro Portfolio has no position in either stocks, but we will say we used the sharp drop in the shares of Dutch Bros BROS last week to start a new position. For those keeping score, BROS offers far superior earnings per share growth in the coming quarters compared to SBUX as it follows the time-tested strategy of expanding its geographic footprint.

That’s the same playbook used by Starbucks, Dunkin’s, Shake Shak SHAK and even McDonald’s MCD back in the day. It was also the one that led me to add the shares of Habit Burger to the Stocks Under $10 portfolio, and we did better than well on that given its being acquired by Yum! Brands YUM in 2020.

Bob Lang gives us quick technical look at the S&P 500 as we start off this week’s trading.

You can find that analysis here.

As we gear up for retailer earnings this week, including those from Home Depot HD, Walmart WMT, Dillard’s DDS and Ross Stores ROST, here’s some perspective on the retail sales environment.

Also be sure to tune into today’s video where I discuss which big box retailer could disappoint relative to consensus expectations.

Upgrades:

Allstate ALL upgraded to Equal Weight from Underweight at Wells Fargo; target raised to $177

Blend Labs BLND upgraded to Buy from Hold at Canaccord Genuity; target raised to $4.75

Brown & Brown BRO upgraded to Overweight from Equal Weight at Wells Fargo; target raised to $112

Churchill Downs CHDN upgraded to Buy from Neutral at BofA Securities; target raised to $155

Diageo plc DEO upgraded to Sector Perform from Underperform at RBC Capital Mkts

Goldman Sachs BDC GSBD upgraded to Equal Weight from Underweight at Wells Fargo; target lowered to $12

Liberty Global LBTYA upgraded to Neutral from Underperform at BofA Securities; target raised to $21.30

Robinhood Markets HOOD upgraded to Overweight from Neutral at Piper Sandler; target raised to $23 

Downgrades:

Algonquin Power & Utilities AQN downgraded to Equal Weight from Overweight at Wells Fargo; target lowered to $6

Bank of Hawaii BOH downgraded to Underweight from Neutral at Piper Sandler; target lowered to $61

Brighthouse Financial BHF downgraded to Underweight from Equal Weight at Wells Fargo; target lowered to $40

Hillenbrand HI downgraded to Neutral from Buy at DA Davidson; target lowered to $33

Janus International Group JBI downgraded to Peer Perform from Outperform at Wolfe Research

Also, Goldman initiated coverage of Hershey HSY and Kraft Heinz KHC with Sell ratings price targets of $185 and $34

Last year Disney DIS announced it would spend $60 billion over the next decade to expand its theme park and cruise businesses, roughly two-times what it spent over the previous 10 years.

Over the weekend, Disney held its D23 event, previewing upcoming movies and other programming. It also laid out some of those spending plans:

• Four new cruise ships — on top of four others it had previously announced
• The Magic Kingdom, Disney’s flagship theme park in Florida, will undergo the largest expansion in its 53-year history, with one new “land” devoted to classic Disney villains and another focused-on Pixar’s “Cars” movies
• The Disneyland Resort in California will add two superhero-themed rides, a water-based “Avatar” attraction, the company’s first “Coco” ride and a Main Street, U.S.A., show starring an animatronic Walt Disney.

Other announced projects include a “Monsters, Inc.”-themed suspended roller coaster (with cars that hang under the tracks), a ride-through “Encanto”, a “Lion King” water ride and a major “Spider-Man” roller coaster.

Keep in mind, it was quickly pointed out that the tally for those announcements do not add up to $60 billion. This means the House of Mouse, of Marvel, of Star Wars and of Pixar has other cards up its sleeve. Speculation puts that at still-secret rides, resort hotels and shopping and dining areas as well as technology and infrastructure investments.

I have not been to Disney in years, but given the significant increase in the per day cost to enter the parks, it would seem Disney needs to up the ante to keep folks returning to what has historically been one of its most profitable businesses.

Hearing Cisco Systems CSCO will cut thousands of jobs in a second round of layoffs this year as it shifts focus to higher-growth areas, including cybersecurity and AI.

These reports suggest the number of people affected could be similar to or slightly higher than the 4,000 employees Cisco laid off in February.

In recent days, we’ve learned presidential candidates Kamala Harris and Donald Trump will hold a debate on September 10, but today Elon Musk is expected to interview presidential candidate Trump on X.

Entertaining? Probably, but how constructive remains to be seen. With Trump’s VP nominee J.D. Vance also saying political leadership should have more say over Fed policy, we could see Trump turn his cannons on Fed Chair Powell.

And for those wondering, over at the TheStreet Pro Portfolio we make decisions based on policy, not party.

Hey folks, let’s get an early jump on the trading week. Setting the tone, we have the VIX inching up some in early trading, the Fear & Greed Index is hovering in "Extreme Fear," and equity futures point to a positive start for most of the market save the Russell 200.

But it’s early.

We do have some of the text from Fed Governor Michelle Bowman’s speech set for later today and here are two highlights:

"After seeing considerable progress last year, we have seen some further progress on lowering inflation in recent months. The 12-month measures of total and core personal consumption expenditures (PCE) inflation, which I prefer relative to more volatile higher-frequency readings, have moved down since April, although they have remained somewhat elevated and stood at 2.5 percent and 2.6 percent in June, respectively."

“The progress in lowering inflation during May and June is a welcome development, but inflation is still uncomfortably above the Committee's 2 percent goal. Despite the recent good data reports, core PCE inflation averaged an annualized 3.4 percent over the first half of the year. And given that supply constraints have now largely normalized, I am not confident that inflation will decline in the same way as in the second half of last year. More importantly, prices continue to be much higher than before the pandemic, which continues to weigh on consumer sentiment. Inflation has hit lower-income households hardest, since food, energy, and housing services price increases far outpaced overall inflation over the past few years.”

Those comments set the tone for today’s July Consumer Inflation Expectations report. Those expectations declined to 3.0% in June from 3.2% in May and 3.3% in April, but are expected to remain at 3.0% for July.

That wouldn’t be the first inflation data point we’ve seen stall. The bigger item will be if the July PPI and CPI reports come in warmer than expected tomorrow and Wednesday.

That’s one reason to think the market could stay volatile this week. Another is earnings from Home Depot HD, Walmart WMT, Dillard’s DDS, and Ross Stores ROST given all the talk of consumers becoming increasingly selective.

Two other potentially contributing factors — the market isn’t oversold like it was early last week, and folks are squeezing in that last big of summer vacation.