CHRIS VERSACE: Good morning, Action Alerts Plus members. It's Tuesday, September 13. The stock market is giving back a chunk of its recent gains following the hotter than expected August CPI report that surprised to the upside for both headline and core figures. As we shared in our note to members, this is leading to another rethink on not only the pace of interest rate hikes by the Fed, but also how long those rates are likely to remain at elevated levels to bring inflation back in line with the Fed's 2% target.

Clearly, the market was looking for some progress on the inflation fight. But the August CPI report confirmed it's going to be a long, drawn out battle. With the September Fed meeting now a lock essentially for a 75 basis point rate hike, we and the market will now focus on interest rate hikes for the Fed's November and December meetings and the prospects the Fed's bond rate could exit this year at or above 4%.

Tomorrow brings the August producer price Index report the second big inflation data point for this week. And we expect it will receive an extra review given that it tends to lead what we see in the CPI report. In terms of the AAP portfolio, we've been realizing the distance between the Fed's stated goal of 2% inflation and the recent figures. And that has kept us on a very cautious path recognizing that the Fed, as we said before, would need to go big and go longer than the markets had been expecting.

And as we can see by the market's reaction to the August CPI print, it is starting to wake up to that reality. While our cash and inverse ETFs soften today's move lower in the market, the pullback however, will give us an opportunity in the coming days to further wade into some of the more defensive, inelastic, and US focused positions in the portfolio. Now, you may be asking why US focused?

And the answer is last night, Oracle was the latest company to sound the alarm on dollar and currency headwinds when it cut its outlook for the current quarter. While it's simply the latest company, odds are it isn't going to be the last. Yesterday, we trimmed back our position on Morgan Stanley, something we telegraphed to members would happen if the shares approached the $91 level. And they did just that.

And given the prospects for the IPO market, odds are we're going to continue to use any near-term strength in the shares to lighten up on that position. With that in mind, we've downgraded the shares to a three rating from a two and established an exit price around $91.

A quick check on the bullpen residence, Starbucks in particular, it has its first investor meeting today since it named its new CEO. And while the company is going to share its plan to reinvent itself for the future as investors, and keeping in mind it's in the bullpen, we're going to be far more focused on how it plans to deliver margin expansion and EPS growth despite a number of headwinds ranging from higher wages, higher input costs, and yes, those dollar headwinds.

That's a wrap for today's rundown. Thanks for joining us. We'll be back with you tomorrow.