VIDEO: Let's Look Below the Surface of the December Jobs Report

We have a jam-packed Pro Portfolio video today. Chris Versace leads off by breaking down the December Employment Report, sharing why the three-month trailing view on the data is likely to lead the market to think the Fed will do more than the one rate cut penciled in in its December set of Economic Projections. It also tells us not to get excited about the housing market just yet.

Chris also discusses our downgrade today of Qualcomm  (QCOM)  shares, and how it’s a reminder that end-market exposure matters when talking about tech and chip companies. 

We also preview what we’ll be listening for when JPMorgan Chase  (JPM)  reports next week, ahead of two of our financial holdings.

At the time of publication, TheStreet Pro Portfolio was long QCOM.

Transcript

CHRIS VERSACE: Hey everyone, Chris Versace here. It is Friday, January 9, and we've just gotten the December employment report. 50,000 jobs were created, weaker than expected. We also had some big negative revisions for the jobs figures that came before October, now a -173,000. And the revised figure as I look at it for November is down to 56,000.

Now, some folks are going to say, OK, 50,000 jobs, not negative, not that bad. I would say, when we look at the three month trailing data now, given the revisions, and this is what the Fed is going to look at, we actually see negative job creation-- again on a three month average basis-- negative in October, November, and December. Granted, yes, the December employment rate fell to 4.4%, and that 4.6% figure that we got for the month of November was revised down to 4.5%.

But when we look at the data again on a three month trailing basis, what we see is that there were job losses throughout the entire December quarter. That's very different than what we saw before. And that's very different what the market was expecting.

When we think about what this says, it tells us that given the Fed's greater focus on the jobs market, this is going to ratchet up expectations for additional rate cuts in 2026. Remember, the divide-- sorry the revised December set of economic projections really just called for one rate cut. I think we're going to start to see other Fed heads talk more about how the Fed might need to do more given this revised data.

Now, we will see some interest rate sensitive stocks likely move today, including the homebuilders. However-- however, let's remember that it's more than just lower rates that drive the housing market. And I understand President Trump is trying to get the housing market moving. We'll have to see what happens on the policy front.

But near term, the fact that there are job losses on a three month trailing basis tells us that there's not going to be robust demand for the housing market. So we're going to continue to stay on the sidelines with that. As it relates to our downgrade this morning of Qualcomm shares to a three rating-- if you missed that alert, please take a look at it. Yes, we did see very positive developments in Taiwan Semiconductors December revenue report.

Yes, the Taiwan Semiconductors December quarter revenue was better than expected. But remember, we are moving into a seasonally slower time of the year for PC and smartphone demands. We are also seeing greater pressure likely to emerge on the PC market as Intel AMD really double down on that. Remember, that's been a key part of Qualcomm's revenue diversification away from smartphones.

So we see that. We see the seasonal downtick in smartphone demand. It just has us a little concerned about Qualcomm's prospects to deliver earnings surprise to the upside in the near term. But also, it likely means the shares are capped, hence our downgrade to a three rating.

And as I telegraphed, if we see strength in the market and especially strength in Qualcomm shares-- and we could see that as a result of this December employment report and what I just discussed about the three month view on the data therein. I think we could see some strength in Qualcomm shares. That might lead us as well to contemplate the Taiwan Semiconductors earnings report out next week.

The cumulative effect could lead Qualcomm shares higher. We would opt to use that strength to take some chips off the table, perhaps come back to shares of Broadcom, shares of Arista Networks, and some others that I spelled out in the alert. Remember, this is the key now, that we have to think about the end-market exposure for the companies that we have that manufacture chips.

Because not all chip companies are the same, the end markets matter. When we think about NVIDIA, we think about Marvell, we think about Broadcom, pronounced exposure to AI and data center-- we continue to see that growing. Qualcomm smartphone is the largest end market. And they are making inroads into AI PC and automotive and IoT.

So again, given the smartphone PC comments that we made a moment ago, likely to be capped. And remember too-- remember too-- and we discussed this in the alert-- the shift in memory capacity from Samsung from Micron that could impact not only memory prices that go into smartphones, making them more expensive, which could be kind of a headwind, but also we're likely to see greater memory shipments allocated to AI and servers that could crimp smartphone and potentially PC demand-- PC shipments, excuse me, in the first half of the year. So that just kind of rounds out our thoughts on Qualcomm.

Take a look, we're going to have some other comments out today, including Meta looking to tie up some power capacity for its data centers. Remember, energy has been kind of a pain point. That's why we continue to be bullish on Eaton shares, even though the shares are, let's just say, back near our panic point.

We see that they are on that short list of stocks that we could use the proceeds from Qualcomm shares to cycle into. The question was posed to me recently, any new thoughts on Eaton? And I will just simply share this with everyone. It's have we seen any dial back? I'm not even sure if that's English, but have we seen any negative revisions to what's expected on the electricity pain point that is the center of our Eaton investment thesis?

And I think the answer is simply no. We will continue to revisit that. That's why we're going to look at utility capital spending figures for 2026 compared to 2025, and see what their multiyear outlook is for their capital programs.

So it's going to be a lot of stuff to watch. I will also share with you, since today is Friday, that next week, we do see the start of big bank earnings. We, of course, will have Bank of America and Morgan Stanley. What are we going to be paying attention to on Tuesday when JP Morgan reports?

What do they have to say about the outlook for investment banking? That's a key part of Morgan Stanley's business. What do they have to say about their outlook for the economy, loan demand, and other insights from Jamie Dimon? Do I expect them to say something about the win of the applecart from Goldman Sachs? I do.

Again, do I think that's kind of a big deal? It's a positive for JPMorgan. But again, that move was largely telegraphed. We talked about it yesterday. I won't bore you with it.

But that is our video for today. We'll have more comments spilling out of and talking about the December employment report. And we will have our weekly roundup, where we'll be talking quite a bit about the week in full, the start of CES, and closing out the week with today's downgrade from Qualcomm.

So be sure to look for it. And we'll have a fresh set of signals for you tomorrow. I think you'll want to pour over them over the weekend. I've already assembled it, a lot of good stuff on the AI front and a lot, a lot of data points that tell us that the cash strapped consumer is unfortunately alive and well.

That keeps us, of course, bullish on the shares of Costco, TJX and Amazon. That's it for now. See you soon.