Daily Rundown: February 2

JD DURKIN: Good morning, subscribers. Thursday is once again here all ready. And so our Chris Versace and myself to help answer your biggest questions. Good morning, Chris.

CHRIS VERSACE: Good morning, JD. How is the floor treating you today?

JD DURKIN: How's the floor treating me? It's great as always. Every day is a blessing here on the floor of the NYSE. Let's get down to it with a question here to kick things off with a rule, rather about a rule change from the Bureau of Labor Statistics. Ah, yes. Ahead of jobs reports Friday appropriately so. Essentially, the BLS plans to update, Chris, the spending weights and calculation of the consumer price index yearly instead of every two years in an effort to try and improve a bit of accuracy.

You think this will end up having an impact on the Fed or even the broader market?

CHRIS VERSACE: So we always like to see the tinkering behind these calculations. Sometimes, we agree with them. Sometimes, we don't. But I think what we really have to pay attention to is, what is the resetting of past data mean? And then we can take a little more into context. But remember too, though, the CPI, which is what we're talking about here, is one inflation metric. And as we heard Fed Chair Powell say yesterday, there are a number of things that we have to look at to triangulate not only what's going on with inflation, but the economy.

So, again, interested to see what this brings about. But I don't think it's going to be make or break for what we're thinking or what the Fed is thinking as well.

JD DURKIN: Absolutely, Chris. Now, as much as we love talking about our own book, when you're looking to get a quick idea of what's happened in the market on any given day, what sources do you look to?

CHRIS VERSACE: Wow. There are so many. If it's just the market and trying to get a sense of what's moving, we have access to Bloomberg. We have access to Reuters and their icons suite of services. But I guess the way to think about this, JD, is what's good for members? There are a variety of areas out there. I think one of the easiest ones, candidly, is simply Yahoo Finance. But there's also thestreet.com and what its contributors have to say.

JD DURKIN: What was that last one? Thestreet.com. I'll make sure I write that one down. Because it sounds like a really important one.

CHRIS VERSACE: Yeah. You might have heard about that one. You know what it is? I think they have this great program that airs right after the market open, where some smart looking fellow from the floor of the exchange hosts this program. And they get into the nitty gritty of what's driving the market.

JD DURKIN: Smart looking doesn't necessarily mean I'm a smart. I'll take the complement nonetheless. Moving over to some individual names in the portfolio. Let's do that. Chris, it's been a while here since we last checked in on axon.

First of all, you need to correct me if I'm mispronouncing that. We do have some members wondering if the stock is overvalued. Give us an update there.

CHRIS VERSACE: So we have AXON rated a 3 which means that we're in a holding pattern with that stock. It had a tremendous run for us in 2022. And we know that spending is going to increase for public safety, in particular, non-lethal weapons, but also body cameras. What we're really trying to gauge now is how much of that spending are we likely to see relative to what was expected for the coming year. And that's really going to lead us to revisit our price target.

Odds are it will go higher. But for us, the bigger question really is, will it be enough to justify a ratings change from a 3 to a 2? That's why, again, with the 3 rating, we're in a little bit of a holding pattern with this. But we are eyeing government budgets, particularly at the state and local level trying to see, again, what the added spending umph will be for the coming year.

JD DURKIN: Absolutely. Now, I would like to revisit a question that you answered on Monday's Twitter spaces for people who may have missed it. Why isn't it Nucor in the portfolio? People are wondering.

CHRIS VERSACE: Oh, this is a little bit of a sore subject, JD. We had removed Nucor some time in 2022 with the intent of circling back, revisiting it, getting it back into the portfolio. However, between the time we exited it and the time we added both Vulcan Materials, as well as United Rentals, which has been a home run for the portfolio, we felt that we had enough exposure to the infrastructure law, particularly when we add ChargePoint back in.

So it's a bit of a sore point for us. Do we wish we had Nucor? Sure we do now. But I think that the way the portfolio is constituated for the infrastructure law. I think we're right where we want to be.

JD DURKIN: All right. Fair enough. Let's move over and talk about SH and PSQ. You have any update on the long-term plan there with those names. Are you planning to add or reduce exposure?

CHRIS VERSACE: So we added PSQ and SH more as tactical insurance given what we saw in the market in 2022. And we take a look at yesterday's data that clearly signals from ISM and S&P, regarding the manufacturing economy. That, yes, it continues to slow. There are reasons to think that we might want to continue to hold those two positions. Would we add to them? I don't think so. And I say that, in part, because as we communicated with members in our earlier comments this morning, we are starting to see a real shift in market sentiment turn about.

And I think probably what we will do is put a little more cash to work in the near term as we continue to move through the earnings season, probably continue to hang on to those inverse ETFs, especially as we approach some technical resistance. And then as we move forward, we'll continue to reevaluate. But, again, I think members should be thinking more like, we will use more cash. Keep the portfolio insurance intact. And then after a prolonged period of time, start to bring that down as well.

JD DURKIN: Chris, we've also gotten a few questions about if AAP would ever consider emerging markets or even bonds. Talk to me about your thoughts when it comes to looking beyond simply equities. So we always try and think about what's best for members, how can we enact a position that gives us either broad exposure. It's an efficient manner for members. That led us to use ETFs really beginning last year. And when we look at international markets or even bonds, if we were to do that, that would likely be the way we do it. It's a very efficient way to trade those or own those. And if you think about international markets, where is it listed, what is the cost to trade. So there's a lot of outside the fundamental perspective. A lot of trading questions that, I think, using ETFs would answer. And not to say this is a stock answer, but we're always looking at things, whether or not we might add an ETF for the Turkish market, or South Africa, or another geography. That remains to be seen.

JD DURKIN: All right. Now, that we are through today's member questions, Chris, we do have to talk a little bit about what you're watching after the bell because how could we not mention the big names on tap? Apple, Amazon, Alphabet. We've also got Ford all reporting quarterly earnings. But those first three ones tend to take up a lot of the oxygen in any conversation. What does top of mind and top of priority for you on a very busy earnings day like today?

CHRIS VERSACE: So are we're going to be concerned about the actual December quarter results? Of course, we are. Are we going to be interested in the guidance? Of course, we are. But I think really what we're trying to pay attention to now is to gauge that market sentiment that is shifting. So for us, we're going to continue to really focus even more so on the market's reaction to the earnings. Look, we take a look at what NXP Semiconductor said earlier in the week. Corriveau said last night, the stocks were down a little bit despite some big warnings on the smartphone side.

Do we see that play out for Apple? Do we see that play out for Qualcomm? If it does, that is likely to cement the notion that, yes, the market sentiment has changed. And I think that will give us a little more comfort to put some of that cash that I just talked about slowly to work.

JD DURKIN: On Ford, Chris, it seems as if the Tesla comparisons are more frequent than they've ever been before. Certainly, says something. I'm not entirely clear what it says. But it says something, especially in terms of the world of EVs. What will you be listening for after the bell today?

CHRIS VERSACE: Well, when it comes to Ford, we know that they're leaning into EVs. There's no real secret about that. But we also know that they recently cut prices on those EVs following what Tesla did. So the question that we want to get answered is, what's the road to profitability as these price cuts are had? What's the margin outlook? And are we seeing this transformation that Ford has been on its road with really starting to come through? So that's what we'll be looking for tonight.

JD DURKIN: All right. Thank you, as always, Chris. Great to have you here. Enjoy earnings palooza as it rolls along today.

CHRIS VERSACE: Thank you, JD.

JD DURKIN: All right. Members, please continue sending us all of your questions. You could do so by sending us a note at aapclub@thestreet.com. We look forward to answering them next Thursday. Have a great day. We'll see you next time.