Analysis: AAPL

In today's Action Alerts PLUS Daily Rundown, Chris Versace explains why he cares about CPI, PPI and retail sales.

He also shares his expectations for today's Apple (AAPL) event and the upcoming Senate AI forum.


CHRIS VERSACE: Good morning, Action Alerts PLUS members. Trading for 10a is underway. And the market remains in what we're going to call a "holding pattern" ahead of this week's inflation data retail sales report. Now arguably, the August core CPI will be the most looked at data point this week.

But with the Fed expected to leave the Fed funds rate unchanged after its policy meeting next week, our thinking is it will be the September and October CPI data that will really dictate if the Fed needs to do more with its inflation fight later this year or simply hold steady for a prolonged period of time with interest rates. Now, data in the August PPI report will help set the tone for that September CPI data. So it will bear watching later this week.

Turning to the August retail sales report, it once again will be a barometer on consumer spending. But our thinking is the report could be a little different this time around. And we have a few reasons for that.

First, the August retail sales report will reveal how much pull forward was had in the July data. Remember, the July retail sales report benefited not only from Amazon's Prime Day, but competing efforts as well from Target, Walmart, and Best Buy. Second, retailers recently served up some pretty cautious guidance for the current quarter. And the August retail sales report will tell us exactly how conservative that round of guidance may or may not have been.

And third, following the continued increase in consumer credit, especially for credit card debt, something we talked with you yesterday about, a slower than expected August retail sales data could signal consumers are tapped out and starting to cut back. Now alongside those consumer credit card comments, we talked about the latest assessment for student loan repayments with surveys suggesting that spending is going to be cut on dining out as consumers contend with those payments that are going to sap their disposable income. That trade down and more cautious spending speaks to our rationale for not only owning shares of Chipotle in the portfolio, but also McDonald's.

And yesterday, we took that opportunity to pick up more shares of Mickey D's. And we remind you that our price target on McDonald's remains $325. Now you may be asking, you made that decision ahead of tomorrow's CPI report. And yes, we did, largely because we know that student debt repayments will pressure disposable income for a wide swath of people, likely forcing that trade down from casual dining to quick service and fast food regardless of what the CPI report has to say tomorrow.

Now, let's switch gears. We have Apple's event later today, which will kick off shortly after this video. It's in your inbox. As we discussed in our recent comments, including today's opening ones, the event, in our opinion, is likely to be quieter than usual. We say this because it's primarily going to be focused on upgrades for existing products. And yes, we will be watching the feature sets and price points, especially for those relating to iPhone.

While events will be on today's-- excuse me, while of eyes will be on today's event, it will be, in our opinion, the follow through from the event and what that means for iPhone demand, meaning it will translate into greater demand or not. And that's really what we will be watching. We have to remember Apple's install base is huge and we are likely to see at least a mini upgrade cycle, if not something more. And with that, we'll want to know when the devices start hitting shelves to see how much of an impact they may actually have on the current quarter.

And finally, with AI fresh on people's brains following Oracle's results last night, eyes will stay on big tech with the Senate's inaugural AI forum set for Wednesday. At that gathering, we will have CEOs from NVIDIA, IBM, Microsoft, Meta Platforms, and Tesla. As you can probably guess, that is going to be quite a bit of personality and ego in one room even before we get to that associated with our elected officials.

The forum, in our view, is likely to be a dog and pony show. And while we expect a few zingers to fly, ultimately we are likely to see companies agree to proceed cautiously and prudently when it comes to AI. Think of it pretty much like the Hippocratic oath and promising to do no harm.

Barring anything expected, we do not see this forum posing any meaningful slowdown for AI. Rather, we continue to think that AI will disrupt existing business models the way the internet has done over the last 20 years. However, as investors, the key remains for companies to show revenue and profit growth relating to AI, not just promising headlines. And with that, that's today's rundown. We'll be back tomorrow to answer some of your biggest questions of the week.