VIDEO: Today's Good News and Not-So-Good News

In today’s Daily Rundown video, Chris Versace recaps the good news found in Taiwan Semi’s TSM May report and the good-news-is-bad-news May Employment Report. 

Looking to Apple’s AAPL WWDC keynote on Monday, Chris shares what we’ll be focusing on and why. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. And it is Friday, June 7, end of the week. And we've had two big May-related developments unfold this morning, the May employment report and the May revenue report from Taiwan Semiconductor. One good news, the other not quite so good news, even though we were right in our thinking about it. Let's start with that not so good news. That would be the May employment report.

And, yeah, I know, the data has its flaws, like any other government report. But it did show much stronger than anticipated job creation. Honestly, a re-acceleration in hiring compared to the prior month, clearly suggesting the economy is moving along nicely, more people working. A good thing. It also echoed what we saw in the May PMI reports from earlier this week. What I'm talking about is stronger wage growth.

If we look inside the May employment report, the year-over-year average hourly earnings came in at 4.1%. We thought it might be hotter than expected. Clearly, it was much, much more so than the market's expectation for 3.9%. Now, on its face, we would say, oh, more people working, more people earning real wages, that's a good thing for the economy and consumer spending. And it is.

The issue, however, is what the market was expecting. And that was softer job growth and perhaps a surprise in wages. And that's not what we got whatsoever. If anything, it was exactly the reverse. Remember, we were concerned about wage growth, like I said, because of what we saw in the May PMI reports. We were not surprised by that. But we were a little surprised by the strength in the May jobs number.

But the windup is that the market's reaction is that we are seeing expectations for sooner rate cuts-- call it July off the board, September falling-- as the market realizes that the Fed is simply not going to like these numbers. I shared in the alert with you, breaking it all down, my view that the Fed is going to say, wow, little concerned about that re-acceleration in wage growth and the implications that it will have on inflation, as well as the other inflationary data points that we saw in those various PMI reports for the month of May.

We continue to think that those data points are going to show little progress on the May CPI report that's out on Wednesday, the morning the Fed concludes its next monetary policy meeting. So we are going to be in a sit-on-our-hands mode with the portfolio, particularly our shopping list. We may see some compelling opportunities. But if we do not, we're not going to likely spring into a new position or add to existing ones ahead of the Fed's comments.

And remember, when the Fed concludes its monetary policy, it's not only going to lay out what we're likely to see in the back half of the year for the policy, but it's also going to update its economic projections. So we're going to have a lot of work to do on Wednesday afternoon sizing up Fed comments and Fed forecasts. But it's also going to be the revisions compared to the Fed's last set of forecasts in March that we will be paying attention to. And therefore, I suspect the market will be paying attention as well.

Now, let's turn to that good news. That, of course, was the May revenue report from Taiwan Semiconductor. Man, oh, man, were those monster numbers, up 30% year over year. And as I shared in our note to you, if we look at the combined April and May of this year versus last year, up 44%. Big numbers. And clearly, that tells us the strength that is in demand for AI and data center chips. But it also reaffirms the improving landscape for the smartphone market as well. That led us to make some price target revisions higher for Nvidia, for Apple, and for Qualcomm. We also reiterated our one ratings on the shares of Marvell and Universal Display.

Now, before we close out today's video, just a few reminders. We do have Nvidia's 10-for-1 stock split. I talked about it in yesterday's video. But I also walked through it in our alert this morning where we adjusted our Nvidia price target up. Please be sure to check it out. We also will start next week with a very big event that a lot of folks have been looking forward to.

Yes, I'm referring to Apple's WWDC event, with the keynote on Monday. And remember that you're likely to see a lot of articles over the weekend about what Apple may introduce. And I'm sure there'll be quite a few interesting things. But the market, and therefore we, will be focusing on what it has to say about AI across its various operating systems and what that could mean for fostering an upgrade cycle for its devices-- smartphones, Macs, iPads-- in the coming quarters. So that's what we'll really be focusing on.

And that's a reminder, please be sure to check all your alerts, check your emails. We want to make sure you're getting our latest thoughts. We'll even have some thoughts later today and some over the weekend. So give you something to look forward to. And of course, we have the weekly roundup coming late this afternoon. So a lot of weekend reading for you. I'll be doing my own weekend reading. But let's just leave it there, and I'll say thanks for watching today's video.

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