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September U.S. Job Data Mixed: ETFs That Gained

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About 134,000 new jobs were created in September, falling shy of the consensus estimate of 185,000 and 270,000 jobs in August. It marked the lowest reading as Hurricane Florence’s assault on the Carolinas in mid-September took a toll on job creation, per tradingeconomics. However, a significant number of jobs were added in professional and business services, health care, and transportation and warehousing.

On a positive note, the rate of unemployment fell to 3.7% for the first time in nearly 50 years. The job data for August was revised up to 270,000 from 201,000. Closely-watched average hourly earnings rose 8 cents or 0.3% sequentially, in line with August's gain. Average hourly earnings rose 73 cents or 2.8% year over year. Average hourly earnings of private-sector production and nonsupervisory employees increased 6 cents to $22.81 in September.

Market Impact

The lower-than-expected number of job addition is seen as a one-time occurrence and the bond market has taken the strong unemployment data as a sign of economic recovery. As a result, rising rate concerns soar and the benchmark 10-year Treasury yield hit its highest level since 2011.

Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management, sees it as “fairly strong jobs report, and importantly, keeps the Fed on track to continue hiking rates.” However, Invesco DB US Dollar Bullish (UUP - Free Report) lost a little (down 0.1%) post weaker-than-expected job data.

Against this backdrop, we highlight a few ETFs that gained after the jobs report.

Sit Rising Rate ETF

The underlying index consists of exchange traded futures contracts and options on futures on 2, 5 and 10-year U.S. Treasury securities are weighted to achieve targeted negative 10-year average effective portfolio duration. The fund charges 43 bps in fees. It gained around 0.4% on Oct 5 (read: Top-Performing Fixed-Income ETFs of 1H).

AdvisorShares Dorsey Wright Short ETF (DWSH - Free Report)

This fund is actively-managed with an investment focus that involves buying securities that have appreciated more than other securities in the investment universe and holding those securities until they underperform. The fund charges 99 bps in fees and advanced about 0.9% on Oct 5.

WisdomTree Negative Duration High Yield Bond Fund

Negative duration bond ETFs offer exposure to traditional bonds while at the same time short Treasury bonds using derivatives such as interest-rate swaps, interest-rate options and Treasury futures. The short position cuts the fund’s actual long duration, resulting in negative duration (read: 4 Bond ETFs to Play in a Rising Rate Environment).

The underlying BofA Merrill Lynch 0-5 Year US High Yield Constrained, Negative Seven Duration Index provides long exposure to the BofA Merrill Lynch 0-5 Year US High Yield Constrained Index while seeking to manage interest rate risk through the use of short positions in U.S. Treasury securities. The fund charges 48 bps in fees and gained 0.1% on Oct 5.

WisdomTree Negative Dur US Aggregate Bond ETF

The underlying Bloomberg Barclays Rate Hedged U.S. Aggregate Bond Index, Negative Five Duration provides long exposure to the Bloomberg Barclays U.S. Aggregate Bond Index while seeking to manage interest rate risk through the use of short positions in U.S. Treasury securities. The fund charges 28 bps in fees and rose 0.2% on Oct 5 (read: 4 ETF Picks for October).

SPDR Gold Shares (GLD)

As the greenback lost strength, gold prices retreated. The fund, which looks to track the spot price of gold bullion, added about 0.3% on Oct 5.

WisdomTree Emerging Currency Strategy ETF (CEW - Free Report)

Though emerging market currencies have seen a bloodbath this year, the fund, which intends to achieve total returns reflective of both money market rates in selected emerging market countries available to foreign investors and changes to the value of these currencies relative to the U.S. dollar, added about 0.3% on the dollar weakness.

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