J.D. DURKIN: Good morning, Action Alerts Plus subscribers. We begin today with a bit of a rewind with the one and only Chris Versace. Chris, thank you for being here, as always. Now, Chris, in Friday's roundup, you described all of the catalysts that impacted markets last week, from the violence in Israel, to inflation, many other pressure points as well. What kind of setup are we looking at as we begin another trading week, Chris?

CHRIS VERSACE: Well, if we rewind it, we really have to consider the flow of events. Last week, we started off really walking into the week knowing we were going to have some potential volatility in the market depending on what we saw with the inflation reports that were the September CPI, PPI. But nobody really expected, when we exited the week before, to have to deal with the latest conflict in the Middle East.

That was clearly an issue that permeated the week. But again, the market came back to inflation. Both reports were hotter than expected. But surprisingly, we saw some comments from Philly Fed President Harker that were far more dovish than I think anybody would have expected, given not only the inflation data of the week but also the findings of consumer inflation expectations, which also have started to rebound now.

So all of that sets us up for kind of what could be a potentially tenuous week. And I say that because as we start the week off, we really don't have a lot going on today. There's not a lot of economic data coming out. There aren't any corporate earnings. And we have Harker coming back out not once but twice today.

Odds are we're going to start the week on-- excuse me, positive footing, kind of like we're already starting to see today. But that could really change throughout the week. We do have a busy week, not only with rampant earnings, but we've got three key pieces of economic data coming. And Thursday, we have Powell. So it's going to be a big week. It could be another volatile week for the market. We're going to start the week off on some cautious footing.

J.D. DURKIN: That's right. When Fed heads speak, we listen. But really, when Fed heads speak, we listen to you, Chris Versace, for the context we need throughout all those important comments. We'll follow them all. Now, what went right, Chris, when it came to the portfolio? And just as importantly, as we like to talk about from time to time, is there anything you wish that you could change if you could?

CHRIS VERSACE: Sure. So just giving my comments about the unexpected developments in the Middle East. We really benefited from that. I hate to say that, but that's the case. We saw that with our XLE and GLD ETFs, as well as the strong rebound in the shares of Lockheed Martin. The other stock that actually performed extremely well last week was the share of Exxon Enterprises.

Just as a reminder to members, we took advantage of that. The reason why was in the span of just a few weeks, Exxon shares popped about 15% compared to 2% for the S&P 500. That really bloated our position well past the 4% threshold. So we rang the register, locked in a arguably big win considering we picked up those shares of Exxon around this time last year.

But to answer your second part of the question, J.D. , is there anything I would have done differently last week? Possibly, I would have said, oh, boy, I really wish we had picked up some shares of Trinity, Capital. They were below 14. We have been closely watching it. And we didn't.

But remember, we have a very busy busy week ahead of us. It's going to culminate with Powell on Thursday. What he says about the potential path for monetary policy, what he says about the strength of the economy, that's really going to dictate where the market ends this week. It's also going to dictate where the yield on the 10-year Treasury ends this week. So I think we're going to have another chance, another bite at that Trinity apple, if you will.

J.D. DURKIN: We've got Powell. We've also got data. This week, we've got retail sales on the calendar, at least for tomorrow, Chris. What can we learn more about the consumer ahead of the all important holiday shopping season, I wonder.

CHRIS VERSACE: Well, the retail sales report is always a great barometer of consumer spending. We are going to want to see, hey, did consumers open their wallets in the month of September more or less than the month of August? And if so, where did they spend? Of course, we dig into this report given a number of positions in the portfolio, everything from Costco, Amazon, McDonald's, Chipotle and of course Mastercard.

But this particular retail sales report is a little different. I say that because, yes, it is for September. But that also means we get all the data for the three months ending in September as well. It's a great barometer, if you will, for the consumer during the entire quarter. And as a result, it becomes kind of a benchmark for what we're going to size up retail earnings and other categories that are reported inside the retail sales report, how did they perform against that three month figure.

J.D. DURKIN: Yeah. So let's talk a little bit more here on earnings. What will you be following from, let's say Bank of America, now that JP Morgan and a few other banks we've heard from so far reported, for the most part, largely better than expected results?

CHRIS VERSACE: You're exactly right. When we heard from JP Morgan, really surprising to the upside. Even Wells Fargo, Citi. What did they all have in common? They all lifted really their net interest income or their NII guidance for 2023. That's something we're going to want to see Bank of America really deliver. We'll also have to take a look at their loan portfolio and some other activity. But if they do not follow with JP and the others did regarding boosting their net interest income expectations, that's going to be disappointing.

J.D. DURKIN: And how about Lockheed Martin is something that you mentioned about earlier here in our conversation. But what more will you be following for that name in the days ahead, Chris? So they're going to report-- and if you remember earlier this year, they kind of issued some dubious guidance just given timing regarding F-35 deliveries. That's a key product for them.

So we're going to want to get an update on that. It had been a software issue. Is that behind them? What does that mean now for delivering F-35s between now and the end of the year? And then the first half of 2024, we're also going to want to get a better sense of this building backlog, how does it translate into revenue over the next several quarters? But more importantly too, what's the margin profile in that backlog? Is it rising? If it is, that's another reason for earnings expectations to build for Lockheed over the next several quarters.

J.D. DURKIN: One more specific name, if I could ask you about. Amex, we'll get results from American Express later on in the week. What will you be following there, Chris?

CHRIS VERSACE: Well, with Amex, two things. One, half of it's going to be about the consumer. What are they seeing? How did they see consumer spending shape up throughout the quarter? What are they seeing in October? More importantly, where are they seeing them spend?

So it'll be a nice compare and contrast with what we learned in the September retail sales report that we already talked about. But we also want to hear from American Express what is it seeing about business spending. Did that accelerate? Did that pullback during the quarter? Are they seeing big spending in travel for business or not? So it'll be a busy week for the consumer, J.D. .

J.D. DURKIN: All right. And before we end for the day here, anything else, Chris, on your radar would like members to keep on their radars as well?

CHRIS VERSACE: I mean, look, like I said, it's going to be a busy week with earnings, not only for the portfolio but outside of it, outside of the economic data that I already mentioned. I would just come back and say, look, Thursday is going to be a big day for the market for a couple of reasons.

One, I already shared that Fed Chair Powell is going to be speaking. That, of course, where we really set the tone. But we also have earnings from Taiwan. Semiconductor out that morning. What they say about high performance-- excuse me, high performance computing, what that means for data center and AI. We'll be listening with regard to Marvell.

What they say about smartphones will be key, not only for Apple but for Qualcomm that are both in the portfolio. And then finally, any changes, good or bad, to their outlook for capital spending. That'll be something we drill into with regard to Applied Materials. So it's going to be a busy week, J.D. . Buckle up.

J.D. DURKIN: We consider ourselves buckled up and ready to go for the journey ahead, Chris. Thanks for taking the time. Great context on those names. We'll do again soon. Chris Versace, thank you.


J.D. DURKIN: Folks, that man, Chris Versace, will be back tomorrow for his take on retail sales and so much more. Thank you for taking the time. We'll see you again soon.