Here's Our Take on the December Jobs Report
Stronger-than-expected job creation benefits these holdings but means taking some prudent action.
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As we can see in the table below, December job creation came in much stronger than expected, at 256,000 compared to the market consensus of 160,000, and accelerated vs. the revised November figure of 212,000.
Looking at those figures on a three-month moving average in the chart below, we see the pace of job creation remains well ahead of those levels in recent months. That along with the dip in the Unemployment Rate to 4.1% means the labor market is strong enough that the Fed does not need to contemplate additional policy easing.
The knee-jerk reaction we are seeing is the 10-year Treasury yield moving higher and rate-cut expectations, as tracked by the CME FedWatch Tool, being pushed out to October. At a minimum that means rates will be higher for longer and that will have implications on mortgage rates and housing stocks. We recently downgraded Builders FirstSource BLDR to a Four rating, and this morning’s developments led us to exit that position given the prospects for a longer road to a rebound in the housing market.
As it relates to our positions in Amazon AMZN, Costco COST, Mastercard MA, and American Express AXP, we see the combination of more people working and benefiting from real wage growth as a positive for consumer spending as we move into 2025. Earlier this morning, we mentioned levels we’re watching to snatch up some additional AXP shares, and that remains our plan.
Lastly, we would note that the potential for rate cuts moving well into H2 2024 means the December-quarter earnings season and corporate guidance for 2025 will be much more important for the market.
At the time of publication, TheStreet Pro Portfolio was long AMZN, COST, MA and AXP.
