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6 Sector ETFs to Win on Strong February Job Data

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U.S. employers added 313,000 new jobs in February, after an upwardly revised 239,000 in January and surpassing market expectations of 200,000 jobs. The February figure marks the highest rise in payrolls since July 2016. Solid job gains in the construction, retail trade, professional and business services, manufacturing, financial activities, and mining sectors drove the numbers, per trading economics.

Rate of unemployment was 4.1% — unchanged from the prior month's 17-year low and slightly above market expectations of 4%. The average workweek recovered to 34.5 hours after falling to 34.4 hours in January. However, wage growth remained soft. Average hourly earnings rose 0.1% to $26.75 in February, marking a slowdown from the 0.3% rise in January. This weighed on the year-on-year increase in average hourly earnings.

Per Reuters, a few economists believe that wage growth has actually been stronger than indicated by average hourly earnings. Average hourly earnings for production and non-supervisory workers, which are better measured according to economists, rose 0.3% in February. These economists expect the Fed to be more hawkish this year and enact four rate hikes.

However, a few money market traders reiterated their bets that the U.S. Federal Reserve would raise interest rates three times this year as wage growth is yet to pick up. There is only “one-in-four chance seen for a fourth-rate hike in 2018.”

Whatever be the case, investors should note that there will be changes in some sectors’ performances post solid job data. Below we highlight a few sector ETFs that registered solid job growth in the month and will thus be in focus ahead.

PowerShares Dynamic Building & Construction Portfolio (PKB - Free Report)

As the construction sector was in the limelight with February’s job creations, investors can have a look at this ETF. As per tradingeconomics,construction created 61,000 jobs. The sector has added 185,000 jobs over the last four months. The fund consists of U.S. building and construction companies. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

SPDR S&P Retail ETF (XRT - Free Report)

Tradingeconomics indicated that retail trade employment rose by 50,000 over the month. Within the industry, 18,000 jobs were added in general merchandise stores while clothing and clothing accessories stores generated 15,000 jobs. This makes XRT — a fund with a Zacks Rank #1 (Strong Buy) — an attractive pick for now.

Industrial Select Sector SPDR Fund (XLI - Free Report)

The manufacturing sector added 31,000 jobs in February. Over the past year, manufacturing has created 224,000 jobs, benefiting this Zacks Rank #1 ETF XLI (read: 4 Hot Sector ETFs Springing Up to Rank #1).

SPDR S&P Metals and Mining ETF (XME - Free Report)

As per tradingeconomics, about 9,000 jobs were created in the mining sector in the month. Since a recent low in October 2016, mining has managed to add 69,000 jobs.

Financial Select Sector SPDR ETF (XLF - Free Report)

The financial activities sector added 28,000 jobs in February. In a rising rate environment, financial stocks perform better. If the sentiments around the economy continue to improve and the Fed remains steadfast in hiking rates, bond yields may go up, benefiting this Zacks Rank #1 ETF XLF (read: Financial ETFs & Stocks to Buy Post Fed Minutes).

First Trust Health Care AlphaDEX Fund (FXH - Free Report)

Jobs in the health care sector grew by 19,000 in the month, wherein hospitals gained 9,000 jobs. The sector has added 290,000 jobs over the past year, per tradingeconomics. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs That Crushed S&P 500 in 9-Year Bull Run).

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