VIDEO: We'll Be Focusing on This Number in the May Jobs Report

In today’s Daily Rundown video, Chris Versace shares what to expect Friday from Nvidia’s NVDA 10-for-1 stock split and the figure we will be focusing on in the May Employment Report. 

He also touches on our price target boost for Costco COST today and potential catalysts for further increases.

Transcript 

CHRIS VERSACE: Hey, folks. Chris Versace here, Thursday, June 6. A little bit of a no man's land, I would argue, coming off of the economic data that we got yesterday, and waiting for a couple of things tomorrow. First and foremost, on many people's minds, it's going to be the stock split from NVIDIA. Remember, that is a 10 for 1 stock split, which means that the number of shares we have in the portfolio will grow by a factor of 10. And the price that you'll see reflected in the shares in the portfolio will be divided by 10.

Now, when we think about that, to me, it's, as I've said before, largely cosmetic. Our overall position size isn't going to change. So what's next for us with NVIDIA is we're going to be monitoring and waiting for the next revenue report from Taiwan Semiconductor. I say this because it's going to give us further insight into the strength of high performance computing, which, of course, buzzwords is going to be a signal for us for both AI and data center demand for chips. That, of course, is going to reflect very positively, not only on NVIDIA, but also for Marvell.

So that's going to be our next catalyst for our shares of NVIDIA. And depending on what we see, we may boost our price target. It currently sits at 1,200. After the split, that's going to be adjusted down to 120 per share. But again, we'll be revisiting that as we get some more insight from Taiwan Semiconductor's upcoming May revenue report.

The other big event for the market, especially after all the economic data that we got this week, is going to be tomorrow's May employment report. Now, when we look at the consensus numbers going into it, they still seem to suggest about 185,000 jobs being added during the month. However, we have gotten a number of indications that the job growth is likely to be slower than that. So we could see a downside surprise in the number. Depending on how big of a downside surprise that could kind of get the market a little excited, potentially bad news being good news for rate cuts.

But I do want to share the figure that we will be really focusing on inside that report. It's going to be average hourly gains for wages on a year over year basis. Here's the reason why. When we take a look at the reports we got earlier this week, again, signaling softer job creation during the month of May, there seems to be a key reason for this, which is people who are leaving their jobs are not being replaced. The why behind this stems from wage pressure.

In other words, it's more costly to replace people. No surprise. When we look at ADP's report for May, what did we find? Well, yes, year over year wage gains for job stayers up 5%, kind of hovering at that level for the last few months. But for job changers, still greater at 7.8%. This tells us it's far more costly to replace people once someone has vacated a role. And I think that means we really want to pay attention to the average hourly wage gains in tomorrow's May employment report.

The consensus expectation is 3.9%. And to be fair, it's been coming down over the last few months. But if we see it spike up a little bit, come in hotter than expected, above that expected 3.9%, it would be a little bit of a reversal, and I think that could catch the market off guard.

It could kind of remind them that wage pressures are out there, and that perhaps the Fed signaling something that the market might want to hear about a September rate cut may not be on the table following the Fed's policy meeting next week. That policy meeting, and we'll talk much more about it as we get closer, they're also going to provide their next round of updated economic projections. And of course, we will be tearing into that and what it means for monetary policy in the second half of the year.

But for tomorrow and the May employment report, we really want to pay very, very close attention to what it says about wage gains and what that means for inflation.

One other key thing I want to talk about this morning, we did boost our price target on the shares of Costco. We went to 880 from 830. We told you that we would be watching the company's upcoming monthly sales report as a catalyst for adjusting our price target. Sure enough, last night they reported the May revenue report. And man, those comp sales numbers, simply stellar. Eye popping I think is what we said in our alert, and they sure were, particularly in an environment where we're seeing very mixed results from a variety of retailers. That tells us that Costco continues to take consumer wallet share.

More important, though, or I should say as important, when we look at the press release, we continue to see the numbers for the number of open warehouses. They continue to grow very nicely on a year over year basis. And this tells us that we should see continued growth in Costco's high margin, very important to the bottom line membership revenue stream. And that's without the long anticipated, still waited for membership fee price increase.

So we'll continue to evaluate Costco on a month by month basis as it relates to our price target. We continue to see consumers leaning into it, continue to like the shares. We will have a technical look at the shares out later today just for folks. The portfolio, it's one of our largest positions, 4%, likely to trend higher as we and others boost our price target. So the odds of the portfolio adding additional Costco shares not likely, but the technical review will help us identify some points that could be attractive to newer members and those that don't have a position size like the portfolio.

So great segue-- be sure to check your alerts later today, and in general. We do want you to get our latest thinking about the market, the economy, monetary policy, and, of course, the portfolio. And we also want you right there with us should we make any moves with the portfolio. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long NVDA and COST.