Trader Talk

How stock sector performance may shake out after jobs report

Cashin says: Nonfarm payrolls a reversion to the mean

The stunningly strong October jobs report — up 271,000 for the biggest 12-month gains since July 2009 — has many investors high-fiving. But others are surely scrambling to revise their bets.

Read More BOOM! Nonfarm payrolls up 271,000; jobs rate at 5%

The world was divided into two camps: those who believed a hike in December was coming and those who didn't.

Those who did listened to Fed officials' rhetoric — that they really wanted to raise rates — and made bets in that direction. There were several macro bets and stock sector bets.

Macro trend bets

  • Long: dollar, developed markets
  • Short: commodities, emerging markets

Stock sector bets

  • Short: energy, materials, industrials
  • Long: health care, consumer discretionary, financials

Here's one reason we had such an strong (and interesting) rally in October. Because some of the data was weak, the camp that believed there was no chance the Fed was going to raise in December gained traction.

Read MoreFed's Evans: Strong wage growth will help push up inflation

As a result, some began to bet against the trend, and the losers — energy, materials, and industrials — started outperforming, while the earlier winners — health care, consumer discretionary and financials — underperformed.

S&P Sectors in Q4

  • Energy: up 14.4 percent
  • Materials: up 13.2 percent
  • Industrials: up 10.2 percent
  • Consumer discretionary: up 9.6 percent
  • Health care: up 8.6 percent
  • Financials: up 7.8 percent

Assuming that the "Fed hikes in December" camp is now ascendant, I would assume these bets will unwind somewhat.

Healthcare and financials should outperform, while energy, materials, and industrials should underperform.

We already see this happening to a certain extent. The dollar index is at its highest level since April, and the euro is at its lowest level against the greenback since April.

Copper, after modestly rallying in early October, is now at its lowest levels since 2009.

Read MoreChart: What's the real unemployment rate?

As for today, we asked our partners at Kensho what happens when a strong nonfarm payrolls report hits the tape, specifically when the number is roughly 91,000 above consensus, as it was today. This has only happened four times since 2010.

The biggest gainer on those days were financials, up 1.1 percent on the day of the report. Consumer discretionary was also up 0.2 percent. The was only up an average 0.1 percent, indicating there were other losers offsetting the gain in financials.