Alright folks, that’s it for me today.

Palo Alto (PANW) reports after the close and tomorrow morning brings earnings from Lowe’s LOW, with Macy’s M, Target TGT and TJX TJX to follow on Wednesday morning.

We talked about the upcoming Fed meeting minutes and Powell’s forthcoming comments on Friday but be sure to keep tabs on this potential rail shutdown in Canada that could have some widespread implications for rail trade across the U.S.

Last I saw, “Despite negotiations over the weekend, no meaningful progress has occurred, and the parties remain very far apart…”

Have a great evening and thanks for letting me share my notes and musings with you. Dougie is back on Wednesday and that means tomorrow, Sarge has the hands on the Diary wheel.

NBC News is reporting Vice President Kamala Harris wants to increase corporate tax rate to 28% from 21%.

Remember, this is called "campaigning" and passage of such promises tend to be more difficult and subject to landscape in Congress.

That said, this will be something to watch as we contemplate 2025, 2026 EPS expectations.

Not sure how many Daily Diary fans are also diehard Boston Celtics fans, but word is that after his failed bid for the Washington Commanders, Jeff Bezos has turned his eyes to the Celtics.

And it’s no secret that the Grousbeck family is looking to sell the franchise after it won its latest NBA championship in June.

The weekend brought a number of articles about Apple’s AAPL modem efforts, including from Bloomberg’s Mark Gurman, who follows Apple like a hawk. 

You can find my thoughts on that and the lack of near-term implications for Qualcomm QCOM here.

CRN is reporting Intel’s INTC partner-centric Sales and Marketing Group (SMG) plans to cut jobs, reduce marketing expenses and “simplify programs end-to-end” as part of a directive to slash costs by more than 35% by the end of the year.

Despite that guidance from EL, Raymond James shared that it had a "very bullish" meeting with e.l.f. Beauty's CEO, CFO and head of investor relations.

The meeting reportedly "reinforced our confidence" in the company's ability to grow sales and profits "well ahead of peers and their own near-term outlook."

Will need to keep an eye on this with Coty COTY and Ulta ULTA reporting near-term, as well as concerns about consumer spending prospects.

Israel Prime Minister Benjamin Netanyahu accepted terms of bridge proposal in ceasefire talks, but Hamas thinks the proposal favors Israel too much.

We’ll continue to watch these developments...

On the heels of that horrible guidance from Estee Lauder EL, Bob Lang shares his thoughts on another beauty company – Ulta Beauty ULTA.

Take it away Bob…

“Ulta Beauty was the subject of some Warren Buffett activity. In last week’s 13F filing on August 14^th we discovered his company Berkshire Hathaway was taking a modest stake in Ulta. On the surface it may seem rather odd that Berkshire is interested in this challenged beauty company, but when you look at the chart and the prior fundamentals it is not hard to see why it happened. In fact, it’s very logical and ‘very Warren’.

Ulta collapsed under its own weight after tagging a new high in mid-March. The stock was up so much already at that point, more than 16% for 2024 that it appeared any good news was already priced into the stock. But, the bad news was not priced in and when a whiff of slowing demand made the rounds the stock fell sharply and was sitting in purgatory for weeks. The big drop in April just continued the spiraling down for the stock as it lost all gains for 2024 and then some.

But there is always a price point where a stock becomes a value, and that likely happened during May/June. That is the timeframe Berkshire probably bought the stock. We see the price of Ulta Beauty has currently lifted to those May/June levels ($380-$420).

In early August, the stock was deeply oversold and now has come back to a respectable ‘overbought’ in the short term. Prior to the rise last week Ulta had a very high short interest (2.28 million shares as of July 31, 2024), which was about 4.8% of the float. Candles are turning amber, a few more days and they will turn teal (cautiously bullish).

With bit more base-building around the range mentioned above we could see Ulta make a big move and keep Warren Buffett’s smile continue. It has already had a nice makeover but is ready for primetime. Onward and upward.

I am long ULTA calls and some stock.”

Hard to believe it is already time to refuel for back half of today’s trading day. With that in mind, here are some of the items on my lunch time reading list:

• Coming to a Cash-Strapped Company Near You: Creditor-on-Creditor Violence
• GM Is Cutting More Than 1,000 Workers From Its Software Business
• Amazon considers moving Amazon Pay into a standalone app in India
• At Jackson Hole, Fed faces pivotal test on unemployment
• Fed is predicted to deliver three quarter-point rate cuts this year: Reuters poll
• Wall Street Still Has Too Many Potholes for My Liking

After 93% of the S&P 500 having reported their latest quarterly results, Goldman shared the following insights:

"1) Revenue growth stabilizing at a healthy level

2) Reports of concern over the U.S. consumer are greatly exaggerated

3) Election uncertainty is likely weighing modestly on capex

4) The labor market is fully rebalanced and hasn’t swung too far in the other direction."

But nowhere did the firm mention that 2H 2024 EPS expectations for the S&P 500 have been revised lower.

Per data from FactSet in late July, 2H 2024 EPS growth for the S&P 500 was expected to rise 11.2% compared to 1H 2024.

As of last week, that rate of growth fell to 7.8%. And we have retailers reporting this week…

I would say the odds are pretty good we see that 7.8% figure revised even lower.

And as it happens, folks will start to realize the market P/E multiple isn’t too far off the high of 23.4x reached a few weeks ago.

Food for thought and a reminder to pick your stocks carefully.

Over the weekend, Arize published a report that made headlines because of its findings that 108 of the Fortune 500 called out generative AI in their latest annual reports.

What stood out even more to me?

281 of the Fortune 500 cited AI as a potential risk factor.

While companies will need to be on guard as it relates to AI-enhanced cybersecurity and the potential for AI to tap into proprietary data that should not be out in the public domain, at least some of this reflects the updating of usual risk disclosures. In many ways, it follows companies adding in risk disclosures for cyberattacks.

And if we look at the kinds of companies mentioning AI risks, the list may not be all that surprising given recent cyber attacks and data leaks over the last few months.

At TheStreet Pro Portfolio, we see it as a nice reminder as to why we want to have cybersecurity exposure.

GRWG director bought 100,000 shares at $1.90 to $2.06 worth ~$197,000.

LAB 10% owner Casdin Partners bought 1,200,000 shares worth ~$1.9 million.

LGF.A 10% owner Liberty 77 bought 562,733 of Class A Voting Common Shares worth ~$4.3 million.

NNBR director bought 20,000 shares at $3.41 worth ~$68,000.

SGC chief executive officer bought 10,000 shares at $13.34 to $13.52 worth ~$135,000.

TMCI director bought 84,000 shares at $5.91 to $6.045 worth ~$501,000.

YUMC director bought 3,000 shares at $33.74 worth ~$101,000.

AMD’s AMD announced acquisition of ZT Systems isn’t the only M&A chatter making the rounds today.

Shares of 7-Eleven parent Seven & i Holdings Co. SVNDY are up following reports the company received a takeover proposal from the owner of Circle K.

Amazon AMZN agreed to acquire Perceive Corporation, the developer of Ergo AI processor, from San Jose, California-based technology firm Xperi XPER for $80 million in cash.

And Piper Sandler called out Utz Brands UTZ, Celsius Holdings CELH and Freshpet FRPT as takeout candidates following the recent move by Mars to pick up Kellanova K. We tend to see companies play a game of musical M&A chairs from time to time, making a move before they are viewed as being left behind. Piper name drops Hershey HSY and it would make sense for the company to diversify away from its core chocolate business in general, but especially now, given what’s being going on with cocoa prices.

For us over at the Portfolio, we like the continued strength in M&A activity given our holdings in Morgan Stanley MS and Bank of America BAC.

With that in mind, we’ll also be watching the expected IPO later this week for autonomous driving company WeRide (WRD) and a few others.

There’s been a lot of flip flopping when it comes to the economy and the risk of a recession, most notably at Goldman Sachs… 15% to 25% and now back at 20%.

Odds are we’re going to see more of that as more data is published in the next few weeks but here is what Bank of America’s August Credit Investor survey shows – a consensus view for a soft landing. Hat tip to Lisa Abramowicz to Xing this.

S&P Global Ratings upgraded Uber Technologies UBER credit profile to BBB- from BB+, a move that graduates the company to “investment grade” from “high yield.”

This doesn’t move the needle for some (like me), but for others it could make the company worth another look.

Upgrades:

Banco Bradesco (BBD) upgraded to Buy from Neutral at Goldman; target raised to $3.20

Burlington Stores (BURL) upgraded to Buy from Hold at Gordon Haskett; target $300

Gates Industrial (GTES) upgraded to Outperform from Sector Perform at RBC Capital Mkts; target raised to $22

Taylor Morrison Home (TMHC) upgraded to Buy from Neutral at BTIG Research; target $78

Downgrades:

HP Inc. (HPQ) downgraded to Equal-Weight from Overweight at Morgan Stanley

Terran Orbital (LLAP) downgraded to Neutral from Buy at H.C. Wainwright; target lowered to $0.25

Shake Shack (SHAK) downgraded to Neutral from Overweight at Piper Sandler; target lowered to $114

Sol-Gel (SLGL) downgraded to Outperform from Strong Buy at Raymond James; target lowered to $4

Initiations

Aligos Therapeutics (ALGS) initiated with a Buy at H.C. Wainwright; target $75

Foghorn Therapeutics (FHTX) initiated with an Outperform at Evercore ISI; target $20

Lineage (LINE) initiated with a Neutral at UBS; target $88

Lineage (LINE) initiated with a In-line at Evercore ISI; target $88

Lineage (LINE) initiated with a Sector Outperform at Scotiabank; target $95

Lineage (LINE) initiated with a Buy at Truist; target $94

Lineage (LINE) initiated with an Equal Weight at Wells Fargo; target $86

Lineage (LINE) initiated with an Overweight at Morgan Stanley; target $100

Lineage (LINE) initiated with an Outperform at Robert W. Baird; target $91

Lineage (LINE) initiated with a Neutral at Mizuho; target $86

Lineage (LINE) initiated with an Overweight at JP Morgan; target $93

Lineage (LINE) initiated with a Buy at Goldman; target $105

NVIDIA (NVDA) reiterated with a Buy at Goldman; target $135

OneStream (OS) initiated with an Outperform at Raymond James; target $32

OneStream (OS) initiated with a Buy at Truist; target $35

OneStream (OS) initiated with a Sector Outperform at Scotiabank; target $34

OneStream (OS) initiated with an Outperform at Wolfe Research; target $32

OneStream (OS) initiated with an Equal-Weight at Morgan Stanley; target $29

OneStream (OS) initiated with a Buy at BTIG Research; target $37

OneStream (OS) initiated with a Neutral at Citigroup; target $34

OneStream (OS) initiated with an Overweight at JP Morgan; target $30

Pure Storage (PSTG) initiated with a Neutral at Piper Sandler; target $60

Rubrik (RBRK) initiated with an Overweight at Piper Sandler; target $42

Skyward Specialty Insurance Group (SKWD) initiated with an Outperform at William Blair

In a surprise to almost no one, Minneapolis Fed President Neel Kashkari (not a voting Fed member) shared that a weaker employment market could trigger a Fed rate cut.

“The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have… the conversation has shifted because “inflation is making progress and the labor market is showing some concerning signs.”

Goldman Sachs GS reiterates a "Buy" rating on "Conviction List" resident Nvidia NVDA shares with a $135 target a week ahead of earnings.

“While the reported delay in Blackwell could lead to some near-term volatility in fundamentals, management commentary, coupled with supply chain data points over the coming weeks, should lead to higher conviction in Nvidia's earnings power in 2025.”

Goldman believes the setup for Nvidia is constructive with a "compelling" risk/reward on potential for positive earnings revisions.

We over at the Pro Portfolio agree, and our NVDA price target is $148.

Hearing Cisco CSCO will cut thousands of jobs in a second round of layoffs this year as the 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.

Advanced Micro Devices AMD is acquiring artificial intelligence infrastructure provider ZT Systems in a cash and stock deal worth about $4.9 billion, a move that looks to shore up its position in data center and AI.

The privately held ZT has approximately 1,000 design and customer headcount and 1,000 manufacturing headcount

AMD expects the transaction to be accretive on an unadjusted basis by the end of 2025. The acquisition is expected to close in the first half of 2025.

Estee Lauder EL sees Q1 adjusted EPS 2c-10c, consensus 63c

Estee Lauder sees FY25 adjusted EPS $2.75-$2.95, consensus $3.96

Given our concerns about potential guidance, this reaffirms our move over at the Pro Portfolio to exit Coty COTY shares when we did.

Good morning; I hope you had a fun and relaxing weekend and are ready for the week ahead. Once again, we start off on a slow foot today with just quarterly results from Estee Lauder EL and the July Leading Indicators report out at 10 a.m. ET.

As we wait for those, with just a few hours to go until U.S. stock markets open, equity futures are little changed following last week’s 3.9% gain for the S&P 500 and the 5.3% move higher in the Nasdaq Composite.

For those keeping score, per CNN, Vice President Kamala Harris has 225 electoral votes in her favor vs. former President Trump with 219. Seven states consisting of 96 electoral votes are in the toss-up column.

And let’s keep in mind that some folks are squeezing in the last bit of summer vacation this week, which means trading volumes are likely to be lower than usual.

I’ll see you back here shortly.