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What to watch this week: August jobs data, consumer confidence and Zoom earnings

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It's a big week for earnings and economic data. Yahoo Finance's Myles Udland and Brian Sozzi break down what investors should watch out for this week.

Video Transcript

MYLES UDLAND: And let's begin today talking about the week ahead. And as he is wont to do, Brian Sozzi, laser focused on corporate results. Tonight, after the bell starts, we're going to get Zoom. And, you know, speaking of Peloton, to me when I look at the early defining stay at home COVID trade, it was by Peloton, by Zoom. That's the future of the world.

You bike in your-- you know, you bike in your garage because you can't go anywhere. You work on your computer. And all you do is-- you know, your kids are on school in Zoom. You're doing your meetings on Zoom. And yes, granted, there has been several fits and starts in getting back to normal.

But Zoom is still, to me, again, the epicenter of that, you know, COVID related, stay at home trade and trying, I think, like Peloton to figure out what it's going to be on the other side of this period. Which, while it has dragged on longer than we'd ever hoped, the pandemic is indeed a period, you know, within our history. And it will not be a permanent state of affairs.

BRIAN SOZZI: Well, Myles, who is to say that I'm not on my Peloton Bike right now, in my Peloton shorts? I will leave that up to your imagination here on Monday morning. But I think with Zoom, it's a different setup because it's not like they're cutting prices. You could use Zoom for free. It's not lowering prices to corporate accounts, not least that I have seen or heard out there.

But it will be an interesting report because the stock is down about 12% over the past month. And that doesn't fit too well with the thinking that we've seen COVID cases pick up as the Delta variant spread. We've seen office returns-- return to office push back Apple, HP, you name it. They have pushed those dates back, yet Zoom shares are down.

So if there's any positive set up here for Zoom earnings, the expectations have been lowered for whatever reason. You would as those office dates get pushed back because the Delta variant, that means more people are staying on Zoom. And perhaps those corporate accounts or even individual accounts are realizing that it's time to pay for Zoom if they haven't done so during the pandemic. Trade up, become a long term subscriber to that service. But really, I'm surprised to see the stock is down as much as it is here.

MYLES UDLAND: Well, I think, what's-- you know, speaking of just the stock setup, I mean, it's basically flat over the last year. You look at shares year to date, Zoom shares began the year at about 360. Right now, they're trading at about 340. So again, that's down. We can call that flat.

Then again. I mean, I think the setup here for a Zoom is-- if you look at since the company came public, and this was a strong performer even before the pandemic, right. This was a stock that was bid up multiple times on its initial debut. And in 2019, there were questions like, Oh, my gosh, Zoom, a $100 per share, how is it going to justify that? Well, you know, what? Six months later, is it $400, you know, $300, $400 stock.

So there's certainly been a change in sort of the baseline expectations for Zoom. But it hasn't done a lot over the last year. And I think, you know, Sozzi, maybe the fundamental story around the pricing with Zoom versus the Peloton is completely different. And we don't need to talk too much about the companies themselves but the trade that they fit into is the same trade.

And over the last year, that trade has stopped working. And I think it is a challenging inflection point for investors, who are sitting on perhaps sizable COVID related gains. I mean, Amazon, look, Amazon is a stock that hasn't done a lot over the last six months. Netflix is a stock that hasn't done a lot over the last six months.

You've got people sitting on these gains, huge gains, perhaps, from these trades and figuring out what is next. And, you know, it can be challenging to figure out what are the names to rotate into, especially, when the overall market goes higher every day.

And we all came into August waiting for some big pullback, waiting for some big volatile event. Instead, we got, I think, what, 10, 11, 12 record highs just in this month. S&P 4,500, the street raising their price targets for the index left and right. So I think that's kind of how I think about this result into, again, a set up for the core of the, quote, unquote-- and it was not easy, but a quote unquote, "easy trade" at the beginning of this crisis, this pandemic. And now, one that kind of leaves you saying, OK, what do I do here?

BRIAN SOZZI: Well, I think why you're seeing part of the weakness here, Myles, is really it's twofold. One, the street likely concerned about corporate accounts. You know, is Zoom still gaining accounts worth more than $100,000 a year? Obviously, that was a big win for them over the year, earlier part of the pandemic. Can the company continue to even see modest growth in that going forward?

And number two, Zoom has been aggressively pushing into Zoom phones. Zoom phones is competing with the likes of Cisco. What is it? Essentially, phones inside of people's offices. And that has been called out consistently by Zoom as a key growth area for them. But if we're not going back to office, do we need a Zoom phone?

Now, having said all that, I still don't think when you see the stock down 12% in the month ahead of earnings, I still don't think it reflects the reality. That hybrid work, that's the future. Not the future of the year, it could be the future going forward for work, for how we get things done. And I just don't think the stock reflects it here at current levels.

MYLES UDLAND: All right, we'll see how those results shake out as we get through them. Again, those earnings start to come out after the bell. Tonight, something else I know you have your eye on, Brian Sozzi, is what's happening in the semiconductor space.

And we have-- and that's been another interesting trade. It's been a quote unquote "easy trade". Everyone is undersupplied. Everyone needs to, you know, build into this huge Capex cycle. And while we have seen the Semis grind higher, it is also at times this year had its challenges in that trade, working, I think, quite as consistently, you know, as some had hoped.

BRIAN SOZZI: Yeah, I think, you know, we've seen this rally here. And the Philly Semiconductor Index, that tracks some of the major moves in the semiconductor space. That's tacked on about 2.5% in the past five days. We are also seeing some pretty good gains. Micron up about 2% over that stretch. Even Intel up close to 2% over that stretch.

And the gains come, I think, after results from Hp last week, Dell last week. Those results, by all accounts, they were OK. Not as good as you would have thought, all things considered. But even still, they weren't as bad as a lot of, I think, folks in the street were positioned for them to be. I think it's becoming fairly recognizable that demand for desktops and notebooks remain very strong. And hence, you're seeing the semiconductor index bounce accordingly.

MYLES UDLAND: All right, let's change gears here and talk a little bit about the week's big event on Friday morning. I will be on a plane headed West when this happens. So, you know, I'm in whatever, jobs preview. But we do have the jobs report. The August jobs report set to come out on Friday.

Fed Chair Jay Powell setting the table for, kind of, how he's thinking about the economy here. Still wants to see a few more strong jobs reports is the basic read through, I think, from his comments last week. 750,000 jobs expected to be added to the economy this year. That's coming off more than 900,000 that we saw in the prior month.

Sozzi, I am reminded of sitting here, Oh, maybe, it was January, February, hearing we'd have several million month job reports. And granted, you know, the error bands on a 900,000 800,000 job gain type data. The error bands on that put a million, kind of, in play of a sort. But it is notable that, you know, looks like we might get through this summer, this re-hiring boom without any seven figure job reports.

BRIAN SOZZI: Myles, I am shocked you're going to miss jobs day. I know it's a very exciting day for you. I hope you have some Wi-Fi in that plane of yours. But yes, we have [INAUDIBLE]. We've been talking about it for months already. We're waiting for that white whale of a report that is a million plus jobs. And it may not come.

And let me highlight this one report from the folks at TD. This preview for jobs really caught my attention. They're saying, quote, "We expect this week's report for August to disappoint. We are forecasting a 400,000 rise in payrolls." A strong number by pre-COVID standards but down sharply from 943,000 in July and well below that consensus we just showed on the screen of 750,000.

Caught my attention because it is in fact an outlier on the street. But I would argue, Myles, one, that is realistic, just given how we've seen just disappointments in various economic data. This morning, I tweeted the Citi Surprise Index. That tracks how macro data is trending versus street estimates. That is not been trending in the right direction. So a lot of other disappointing macro reads, consumer confidence, you name it. So why shouldn't this jobs report disappoint? In large part, because the Delta variant is impacting mobility.

MYLES UDLAND: And I think something we've learned about the labor market or perhaps relearn, right, because maybe we were not thinking about this quite the right way, 6 or 9 months ago looking towards the summer, there's a lot of friction. I mean, it is-- I mean, it does not matter if you're trying to hire servers or busboys at a restaurant, where you kind of just say, hey, you know, go bust the table. You know, it doesn't take a ton of training to do that.

It's not easy to onboard anybody at any level in any position. And I think a lot of what I know, a lot of what we've seen-- economists know a lot of what we've seen is that friction coming up. So again, there was a little bit of this sense of, Oh, well, with seasonal businesses back and they'll just be teeming with kids, teeming with folks who've been out of work, who, you know, want to come in and do something.

And it hasn't exactly been the case. And even if you do find someone, you know, we could go through all these stories around vacation time, benefits, this, that, the other. The reality is that getting someone to go from one job to another regardless of the industry, regardless of the level, you know, regardless of anything is a complicated process.

And I think a lot of what's held back those big numbers was this idea that there was some frictionless path to get us back to, I think, we're what, 5.7 million jobs below total February 2020 employment. There'd be some frictionless smooth path to get us back there given demographics, and so on, and so forth. And really, it's kind of gone the other way.

So it'll be interesting to see how much of that gap we close, let's say, by the end of this year when sort of no matter which way you cut it, the Fed will begin tapering its asset purchases at some point. At the latest, it seems like January, February 2022.