We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you accept our Privacy Policy and Terms of Service, revised from time to time, and you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
U.S. Job Data Relieves Investors: ETFs to Consider
Read MoreHide Full Article
After back-to-back months of weak job growth, U.S. hiring was stronger-than-expected in June, shrugging off all fears about the momentum loss in the labor market. The month of June saw the addition of 287,000 new jobs – the highest in eight months, which is way above a 180,000 rise expected by analysts.
June job growth also breezed past a downwardly revised and a shockingly low 11,000 last month. So, by now it is clear that May job data was a one-time event and a strike in Verizon was responsible for plenty of job losses.
In June, leisure and hospitality added 59,000 jobs in June. Health care and social assistance and information also generated about 58,000 and 44,000 jobs, respectively, in June. The unemployment rate rose to 4.9%, as more Americans entered the workforce.
Average hourly earnings nudged up 2 cents or about 0.1% to $25.61, which showed a slowdown. Even a downtrodden month like May saw 0.2% growth in average hourly rate. On a year-on-year basis, wage growth was 2.6% after rising 2.5% in May.
Fed Hike or Not?
Many may think that this rebound in the labor market might prompt the Fed to pull its trigger on further policy tightening in the near term. But lukewarm pay growth has put a question mark on the move. We believe that the Fed would like to see more stabilization in the job market before reviewing its policy (read: Dovish Fed Trims U.S. Outlook: ETFs to Buy).
Plus, the latest job report was not as stellar as we saw in earlier months. The three-month average new jobs’ gain figure came in at 147,000 – down from nearly 200,000 recorded in the first quarter – indicating room for improvement. Also, the expected contagion of the Brexit fallout on the global economy is yet to be realized and seems strong enough to keep the Fed away from hiking rates.
Market Impact
No matter what the Fed chooses to do, the market welcomed this bout of optimism after Brexit-induced worries and sell-off. As a result, the stock market saw joyous trading on July 8 -- the day the job data released. Among the big ETFs, SPY gained about 1.5%, DIA added 1.4% and (QQQ - Free Report) advanced about 1.6% in the session. However, all three ETFs were down slightly after hours.
As far as the bond market is concerned, shorter-term, two-year U.S. Treasury bond yields rose 3 bps to 0.61% on July 8 as investors feared a Fed rate hike sooner or later; but the yield on the 10-year U.S. Treasury note slipped 3 bps to 1.37%.
Given this, we have highlighted ETFs that are the direct beneficiaries of job gains and will likely see smooth trading in the days ahead.
ETFs to Consider
PowerShares DB US Dollar Bullish Fund (UUP - Free Report)
A healing job market translates into an improving economy which in turn will attract more capital into the country and lead to the strengthening of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure to a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP added about 0.04% on July 8 and tacked on about 0.2% gains after hours (read: Best Performing Currency ETFs of 1H16).
Since small-cap stocks are mostly tied to the domestic economy, a turnaround in the labor market will bode well for the homeland as well as small-cap ETFs. And nothing could be better than a dividend quotient added to this capitalization in the present rocky environment. Probably this is why DES, which yields about 2.84% annually, added over 2.2% on July 8 and is likely to be a hot favorite in the near term (read: Small-Cap Value ETFs: The Right Play Now?).
IQ US Real Estate Smallcap ETF
As long-term U.S. Treasury yields are toying with record-low levels and the economy is gathering steam, this could be the right time to play a real estate ETF with a small-cap focus. Investors should note that real-estate ETFs are rate-sensitive and perform well in a low-rate environment. Also, the sector is high-yielding in nature. ROOF yields about 5.46% annually and added over 1.9% on July 8 (read: 3 Real Estate ETFs to Play Brexit Fears).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
U.S. Job Data Relieves Investors: ETFs to Consider
After back-to-back months of weak job growth, U.S. hiring was stronger-than-expected in June, shrugging off all fears about the momentum loss in the labor market. The month of June saw the addition of 287,000 new jobs – the highest in eight months, which is way above a 180,000 rise expected by analysts.
June job growth also breezed past a downwardly revised and a shockingly low 11,000 last month. So, by now it is clear that May job data was a one-time event and a strike in Verizon was responsible for plenty of job losses.
In June, leisure and hospitality added 59,000 jobs in June. Health care and social assistance and information also generated about 58,000 and 44,000 jobs, respectively, in June. The unemployment rate rose to 4.9%, as more Americans entered the workforce.
Average hourly earnings nudged up 2 cents or about 0.1% to $25.61, which showed a slowdown. Even a downtrodden month like May saw 0.2% growth in average hourly rate. On a year-on-year basis, wage growth was 2.6% after rising 2.5% in May.
Fed Hike or Not?
Many may think that this rebound in the labor market might prompt the Fed to pull its trigger on further policy tightening in the near term. But lukewarm pay growth has put a question mark on the move. We believe that the Fed would like to see more stabilization in the job market before reviewing its policy (read: Dovish Fed Trims U.S. Outlook: ETFs to Buy).
Plus, the latest job report was not as stellar as we saw in earlier months. The three-month average new jobs’ gain figure came in at 147,000 – down from nearly 200,000 recorded in the first quarter – indicating room for improvement. Also, the expected contagion of the Brexit fallout on the global economy is yet to be realized and seems strong enough to keep the Fed away from hiking rates.
Market Impact
No matter what the Fed chooses to do, the market welcomed this bout of optimism after Brexit-induced worries and sell-off. As a result, the stock market saw joyous trading on July 8 -- the day the job data released. Among the big ETFs, SPY gained about 1.5%, DIA added 1.4% and (QQQ - Free Report) advanced about 1.6% in the session. However, all three ETFs were down slightly after hours.
As far as the bond market is concerned, shorter-term, two-year U.S. Treasury bond yields rose 3 bps to 0.61% on July 8 as investors feared a Fed rate hike sooner or later; but the yield on the 10-year U.S. Treasury note slipped 3 bps to 1.37%.
Given this, we have highlighted ETFs that are the direct beneficiaries of job gains and will likely see smooth trading in the days ahead.
ETFs to Consider
PowerShares DB US Dollar Bullish Fund (UUP - Free Report)
A healing job market translates into an improving economy which in turn will attract more capital into the country and lead to the strengthening of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure to a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP added about 0.04% on July 8 and tacked on about 0.2% gains after hours (read: Best Performing Currency ETFs of 1H16).
Wisdomtree Smallcap Dividend (DES - Free Report)
Since small-cap stocks are mostly tied to the domestic economy, a turnaround in the labor market will bode well for the homeland as well as small-cap ETFs. And nothing could be better than a dividend quotient added to this capitalization in the present rocky environment. Probably this is why DES, which yields about 2.84% annually, added over 2.2% on July 8 and is likely to be a hot favorite in the near term (read: Small-Cap Value ETFs: The Right Play Now?).
IQ US Real Estate Smallcap ETF
As long-term U.S. Treasury yields are toying with record-low levels and the economy is gathering steam, this could be the right time to play a real estate ETF with a small-cap focus. Investors should note that real-estate ETFs are rate-sensitive and perform well in a low-rate environment. Also, the sector is high-yielding in nature. ROOF yields about 5.46% annually and added over 1.9% on July 8 (read: 3 Real Estate ETFs to Play Brexit Fears).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>