We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
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.
The latest jobs report bolstered investors’ confidence. This is especially true as the United States added 2.5 million jobs in May — the largest monthly gain since the Bureau of Labor Statistics started tracking the data series in 1939. Economists had expected the government to report that employers shed 8.5 million more jobs last month on top of 21.4 million lost in March and April.
Nearly all industries added jobs, marking a sharp reversal from April. Leisure and hospitality added 1.2 million jobs, after shedding 7.5 million in April. Retailers gained 368,000 after losing nearly 2.3 million in the previous month. Construction companies added 464,000 after cutting 995,000 while education and health services added 424,000 jobs (read: Time for Consumer ETFs as Americans Are Regaining Confidence?).
Meanwhile, unemployment dropped to 13.3%. Though the rate is still the highest since the Great Depression, it is down from 14.7% in April. Economists had warned that unemployment in May could hit 20% or more, rivaling what was seen during the depths of the Depression in the 1930s.
The data indicates that the economy is recovering faster than expected from the coronavirus lockdown and the worst is over for the nation's economy. Thousands of stores, restaurants, gyms and other companies reopened and rehired more quickly than many analysts had forecast. A former commissioner of the Labor Department's Bureau of Labor Statistics said hiring could ramp up relatively quickly in the coming months and reduce unemployment to low double digits by the year's end.
Market Impact
The news has extended the rally for U.S. stocks. The Dow Jones Industrial Average has surged 3.1% while the S&P 500 has jumped 2.6%.
As such, a few ETFs are expected to gain in the weeks ahead buoyed by solid job data while some will be severely impact. Below we have highlighted some of these that are especially volatile post jobs data.
A healing job market and the recovering economy will pull in more capital into the country and lead to appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of the U.S. Treasury securities.
The fund has so far managed an asset base of $660.7 million while seeing an average daily volume of around 1.4 million shares. It charges 79 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Goldman Bets Against U.S. Dollar: ETFs to Win).
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
Robust job gains will increase consumers’ power to spend more on luxury items. While most of the consumer discretionary ETFs will benefit from this trend, the ultra-popular XLY having AUM of $14 billion and average daily volume of 5.8 million shares could be a compelling choice. It tracks the Consumer Discretionary Select Sector Index and holds 63 securities with higher concentration on the top two firms with 22.7% and 12.3%, respectively. Other firms make up for a nice mix with each holding less than 6.6% of assets. The fund charges 13 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Consumer Discretionary ETFs to Bet on in June).
Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)
Leisure and hospitality saw a solid increase in hiring. As a result, PEJ will also see a nice boost. This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 32 stocks. It is pretty well spread out across various securities as none accounts for more than 5.30% of total assets. From an industry look, airlines takes the largest share at 25.2% while broadcasting, movies & entertainment and restaurants round off the next two spots with double-digit exposure each. The ETF has amassed $292.7 million in its asset base and trades in average daily volume of 158,000 shares. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
As pint-sized stocks are closely tied to the U.S. economy and do not have much exposure to the international market, these stocks generally outperform on improving American economic health. IWM is one of the largest and the most-popular ETFs in the small-cap space with AUM of $39.8 billion and average daily volume of 32.8 million shares. It holds 1967 stocks with each holding less than 0.61% share. The fund charges 19 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Sector ETFs at the Forefront of the Small-Cap Rally).
The upbeat jobs report took away sheen from the gold price. As a result, products tracking this bullion like GLD will lose. The fund tracks the price of gold bullion measured in U.S. dollars, and is kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $61 billion and heavy volume of nearly 12.5 million shares a day. It charges 40 bps in fees per year from investors. The product has a Zacks ETF Rank #3 with a Medium risk outlook.
Treasury yields surged after better-than-expected jobs data. The yield on the 10-year Treasury note popped 11 bps to 0.926%, the highest level since Mar 24. The rise in yield will put pressure on U.S. Treasuries as bond prices and yields are inversely correlated. In particular, TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It is one of the most popular and liquid ETFs in the bond space with AUM of $17.1 billion and average daily volume of 12.8 million shares. Expense ratio comes in at 0.15%. The fund has a Zacks ETF Rank #3 with a High risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
ETFs to Gain or Lose From Solid May Jobs Data
The latest jobs report bolstered investors’ confidence. This is especially true as the United States added 2.5 million jobs in May — the largest monthly gain since the Bureau of Labor Statistics started tracking the data series in 1939. Economists had expected the government to report that employers shed 8.5 million more jobs last month on top of 21.4 million lost in March and April.
Nearly all industries added jobs, marking a sharp reversal from April. Leisure and hospitality added 1.2 million jobs, after shedding 7.5 million in April. Retailers gained 368,000 after losing nearly 2.3 million in the previous month. Construction companies added 464,000 after cutting 995,000 while education and health services added 424,000 jobs (read: Time for Consumer ETFs as Americans Are Regaining Confidence?).
Meanwhile, unemployment dropped to 13.3%. Though the rate is still the highest since the Great Depression, it is down from 14.7% in April. Economists had warned that unemployment in May could hit 20% or more, rivaling what was seen during the depths of the Depression in the 1930s.
The data indicates that the economy is recovering faster than expected from the coronavirus lockdown and the worst is over for the nation's economy. Thousands of stores, restaurants, gyms and other companies reopened and rehired more quickly than many analysts had forecast. A former commissioner of the Labor Department's Bureau of Labor Statistics said hiring could ramp up relatively quickly in the coming months and reduce unemployment to low double digits by the year's end.
Market Impact
The news has extended the rally for U.S. stocks. The Dow Jones Industrial Average has surged 3.1% while the S&P 500 has jumped 2.6%.
As such, a few ETFs are expected to gain in the weeks ahead buoyed by solid job data while some will be severely impact. Below we have highlighted some of these that are especially volatile post jobs data.
ETFs to Win
Invesco DB US Dollar Bullish Fund (UUP - Free Report)
A healing job market and the recovering economy will pull in more capital into the country and lead to appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of the U.S. Treasury securities.
The fund has so far managed an asset base of $660.7 million while seeing an average daily volume of around 1.4 million shares. It charges 79 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Goldman Bets Against U.S. Dollar: ETFs to Win).
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
Robust job gains will increase consumers’ power to spend more on luxury items. While most of the consumer discretionary ETFs will benefit from this trend, the ultra-popular XLY having AUM of $14 billion and average daily volume of 5.8 million shares could be a compelling choice. It tracks the Consumer Discretionary Select Sector Index and holds 63 securities with higher concentration on the top two firms with 22.7% and 12.3%, respectively. Other firms make up for a nice mix with each holding less than 6.6% of assets. The fund charges 13 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Consumer Discretionary ETFs to Bet on in June).
Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)
Leisure and hospitality saw a solid increase in hiring. As a result, PEJ will also see a nice boost. This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 32 stocks. It is pretty well spread out across various securities as none accounts for more than 5.30% of total assets. From an industry look, airlines takes the largest share at 25.2% while broadcasting, movies & entertainment and restaurants round off the next two spots with double-digit exposure each. The ETF has amassed $292.7 million in its asset base and trades in average daily volume of 158,000 shares. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
iShares Russell 2000 ETF (IWM - Free Report)
As pint-sized stocks are closely tied to the U.S. economy and do not have much exposure to the international market, these stocks generally outperform on improving American economic health. IWM is one of the largest and the most-popular ETFs in the small-cap space with AUM of $39.8 billion and average daily volume of 32.8 million shares. It holds 1967 stocks with each holding less than 0.61% share. The fund charges 19 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Sector ETFs at the Forefront of the Small-Cap Rally).
ETFs to Lose
SPDR Gold Trust ETF (GLD - Free Report)
The upbeat jobs report took away sheen from the gold price. As a result, products tracking this bullion like GLD will lose. The fund tracks the price of gold bullion measured in U.S. dollars, and is kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $61 billion and heavy volume of nearly 12.5 million shares a day. It charges 40 bps in fees per year from investors. The product has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares 20+ Year Treasury Bond ETF (TLT - Free Report)
Treasury yields surged after better-than-expected jobs data. The yield on the 10-year Treasury note popped 11 bps to 0.926%, the highest level since Mar 24. The rise in yield will put pressure on U.S. Treasuries as bond prices and yields are inversely correlated. In particular, TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It is one of the most popular and liquid ETFs in the bond space with AUM of $17.1 billion and average daily volume of 12.8 million shares. Expense ratio comes in at 0.15%. The fund has a Zacks ETF Rank #3 with a High risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>