CHRIS VERSACE: Good morning, Action Alerts Plus members. As we wait for yet another rate decision from the Federal Reserve tomorrow, let's take a look at the factors likely shaping sentiment over at the Central Bank. First-- as we saw last week-- depending on the metric, inflation data continues to be stubborn or is moving simply in the wrong direction. Yesterday, the April manufacturing PMI reports showed more of the same, raising even more questions as to how effective the Fed's fight on inflation has been so far.

Second, we have the fallout of the First Republic Bank failure, which is going to contribute to tighter credit conditions following other recent bank failures. While we see those failures benefiting our shares of Bank of America and Trinity Capital, the Fed will be taking this into account when it shares what's ahead for Fed policy in its policy statement and during Fed Chair Powell's press conference tomorrow. Now, the consensus expects a 25 basis point rate hike to be had, but the make-or-break for the market will be how Powell discusses the road ahead.

Think of it this way. Even if the Fed signals it will hit the pause button on the Fed funds rate after tomorrow's meeting, tighter credit conditions will act as another de facto rate hike, tapping the brakes on the economy and earnings expectations in the coming months. We're likely to see Powell peppered with questions during the presser, as well as ones about what conditions or scenarios it would take for the Fed to consider a rate cut. Powell probably won't take the bait directly. But what he does signal will be of keen interest to the market and to us.

Now, discussing First Republic, we have to mention the move we made with the portfolio this morning following the news that Axon will replace the failed bank in the S&P 500. As members are aware, we've been watching Axon shares with an eye toward adding them between the 205 and 210 level. But being added to the S&P 500 led us to add to our Axon position earlier this morning. Typically, when a company is added to that index, it spurs enormous interest in the shares.

And there are a few reasons for that. First, it has to meet all the hurdles to be added-- market cap, trading volumes, and several others that allow it entry into that rare club. Second, there are trillions of dollars that follow the S&P 500 and a variety of mutual funds, other funds, and ETFs. So for those funds to continue to mimic that index, they will have to add Axon shares ahead of Thursday's market open. While we kept our $240 price target for Axon in place, we will look to review it following earnings from Motorola Solutions later this week.

As we discussed in our opening comments this morning and touched on in the Axon trade alert, it was Motorola's last earnings report and conference call that pointed to the strength in state and local funding for security spending as well as the unfolding increase in federal spending as well. That led us to add to our Axon position in early February, which-- in hindsight-- was a very good pickup for the portfolio. That'll do it for today's rundown. I'll be back tomorrow to answer some of your biggest questions of the week. Thanks for watching.