CHRIS VERSACE: Good morning Action Alerts Plus members. It's Thursday, September 15th. This morning, we got another read on the economy with the release of the latest retail sales data. The headline figure for August came in better than expected. And when we dig into the report, it showed a number of positives for the portfolio. For example, food service and drinking place retail sales rose 10.9% year over year, accelerating from the 10.3% the prior month, clearly a positive for the portfolio's position in the shares of Chipotle Mexican Grill.

Non-star retailers which we know far better as digital shopping, those retail sales rose 11.2% compared to August 2021. Now, they were down sequentially given the sharp increase in July that was up 18.4% year over year. But as we've shared with you, we expected this. The whole reason for the month over month decline was the July strength associated with Amazon's Prime Day for 2022 and a number of competing offerings for other retailers.

Now, if we kind of step back a little bit and with that context re-examine the digital shopping figure for the month of August, I think we see something far, far different, which is that the figure was the second strongest in the month of August, meaning that consumers continue to flock towards digital shopping. And in our view, it really confirms the notion that they are looking to price compare and buy online to stretch those disposable spending dollars. Not only is that good for Amazon, but it's also good for the portfolios position in the United Parcel or UPS as we like to call it.

And finally, let's get to Costco. We always saw as Costco's monthly retail sales numbers up against the retail sales report itself, and what does it show? Once again, Costco clearly continued to take wallet share during the month. And this sets up for a very, very positive earnings report from Costco next week.

Now, we also received several other pieces of economic data which to be frank in our view, counterbalance the better than expected August retail sales report. And when it comes to the manufacturing sector, they all point to further slowing ahead. We also continue to hear a fresh lay offs, including a double-digit chop at tech company, Twilio. And last night, Adobe was the latest company to warn about the dollar as it guided its revenue for the current quarter below expectations.

Here's the thing, we rather doubt that we are done seeing this, which means we expect earnings expectations for the back half of the year to continue to be revised lower in general over the coming days and weeks. This is going to keep us on the prudent path with the portfolio that we've been on, and we're going to continue to balance long-term opportunity with managing near to medium term risk. With that in mind, we continue to watch the 3,900 level on the S&P 500.

Yesterday, we exited Applied Materials, and we added to the portfolios position in both SIBO global markets and American Water Works. Let's discuss. Given the continued supply chain issues that are poised to weigh, excuse me, weigh on margins at Applied Materials as well as the company's significant exposure to markets outside the US and related currency headwinds, and as something that we've discussed recently, potential restrictions to China, we opted to exit the shares of Applied Materials yesterday simply because the near-term risk to longer-term reward profile simply tilts down.

We did place, however, Applied Materials shares into the bullpen. And the reason for that is we want to keep a close eye on them, given the expected uptick in spending associated with the Chips Act. Now, let's remember, any real benefit from the Chips Act is likely to be about nine months out. That's another reason that we opted to exit the shares of Applied Materials. Again, potential risk of a slowdown in the near term while we wait for the Chips Act to really kick into gear.

We did, as I said, funnel some of those proceeds into American Water Works and the shares of SIBO. Simply put, we continue to like the very defensive, inelastic nature of American Water Works, it's rising dividend policy. Meanwhile, as we look forward, again, with those earnings expectations likely to be revisited, the market is still wrapping its head around what the Fed might have to do to combat inflation, odds are market volatility is here to stay. And that's the reason why we added to the portfolio's position in SIBO yet again.

That's today's Daily Rundown. We'll be back with you tomorrow.