Tag Archives: jobs

ETFs To Gain Or Lose After Strong Jobs Report

Wall Street had a strong start to the second quarter courtesy of encouraging data released on April 1. In particular, a solid March job report injected further optimism into the economy, driving stocks higher. This is especially true as U.S. hiring continued its strong momentum with 215,000 jobs added last month following the revised 245,000 job additions in February. This is much above Reuters’ expectation of 205,000 (see: all the Large Cap ETFs here ). The majority of the additions were seen in retail, health care, and construction that more than offset the decline in the manufacturing and mining sectors. Notably, the economy has been creating over 200,000 jobs per month since 2014. Average hourly wages grew by 7 cents to $25.43 in March bringing the year-over-year increase to 2.3%. This is much better than the 2-cent decline in February but lower than the 2.6% year-over-year wage growth in December that marked the strongest improvement since 2009. However, the unemployment rate ticked up slightly to 5% from an eight-year low of 4.9%. Meanwhile, the labor force participation rate, which indicates the percentage of working-age people who are employed or looking for work, climbed to the highest level since March 2014 at 63%. The robust pace of job creation suggests that the U.S. is one of the healthiest economies in the world that will be able to withstand global uncertainty. However, the data failed to alter the cautious expectations for a rates hike. Given this, a few ETFs will severely impact by the solid jobs data while some are expected to gain in the weeks ahead. Below, we have highlighted some of these that are especially volatile post jobs data: ETFs to Gain PowerShares DB USD Bull ETF (NYSEARCA: UUP ) A healthy job market and the resultant improving economy are expected to 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. In terms of holdings, UUP allocates nearly 57.6% in euro and 25.5% collectively in Japanese yen and British pound. The fund has so far managed an asset base of $818.6 million while sees an average daily volume of around 1.7 million shares. It charges 80 bps in total fees and expenses, and lost 0.04% on the day following the jobs report. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook (read: ETF Winners & Losers Following Yellen Comments ). SPDR Homebuilders ETF (NYSEARCA: XHB ) Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in a recovering homebuilding sector, creating a buying opportunity in housing-related stocks and ETFs. The most popular choice in the homebuilding space, XHB, follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 5.73% share. The product focuses on mid-cap securities with 65% share, followed by 27% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of about 3.6 million shares. Expense ratio comes in at 0.35%. XHB added 0.7% on the day and has a Zacks ETF Rank of 2 with a High risk outlook. SPDR S&P Retail ETF (NYSEARCA: XRT ) Retail will also benefit from accelerating job growth and modest wage growth that will lead to increased spending power. XRT tracks the S&P Retail Select Industry Index, holding 100 securities in its basket. It is widely spread across each component as none of these holds more than 1.47% of total assets. Small-cap stocks dominate about three-fifths of the portfolio while the rest have been split between the other two market-cap levels. XRT is the most popular and actively traded ETF in the retail space with AUM of about $605 million and average daily volume of around 4.4 million shares. It charges 35 bps in annual fees and lost 0.1% on the day. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. ETFs to Lose SPDR Gold Trust ETF (NYSEARCA: GLD ) An upbeat jobs report dampened the appeal for gold as it reflects strength in the economy and boosted investor risk sentiment. As a result, the strongest Q1 rally of the yellow metal in nearly three decades could come to a halt and the product tracking this bullion like GLD will lose. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $31.9 billion and average daily volume of around 8.7 million shares a day. Expense ratio came in at 0.40%. The fund was down 0.6% on the day and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The U.S. government bonds would be badly hit as strong hiring led to speculation that the economy can withstand a tighter monetary policy. This would lead to higher Treasury yields and lower bond prices. In particular, bonds and ETFs tracking the long end of the yield curve would be impacted the most. The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $8.1 billion. Expense ratio came in at 0.15%. Holding 32 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.61 years and effective duration of 17.77 years. The fund is up just 0.05% following the jobs report and has a Zacks ETF Rank of 2 with a High risk outlook. Link to the original post on Zacks.com

U.S. Hires More Than Expected In Feb.: ETFs And Stocks To Buy

The U.S. labor market continued its strength with solid hiring in February, easily dodging the global slowdown and a tumultuous stock market. The economy added 242,000 jobs in February, much above the market expectation of 190,000. The majority of the additions were seen in healthcare, retail, bars and restaurants, and construction that more than offset the decline in the mining sector. Unemployment remained unchanged at an eight-year low of 4.9% while job gains for December and January were revised upward by a combined 30,000. However, average hourly wages unexpectedly dipped 0.1% after a strong 0.5% increase in January. This reflects the first monthly drop since December 2014 and lowered the year-over-year wage increase to 2.2% from 2.5% for January. The robust data eased fears of a recession in the U.S. and infused further signs of confidence into the economy. Investors’ sentiment thus turned toward risk-on trade once again. While a solid hiring number is strong enough to support the Fed’s gradual interest rates hike this year, tepid wage growth remains a matter of concern. Market Impact The news extended the U.S. stock market’s three-week winning streak seen this year. In particular, the Dow Jones Industrial Average climbed to over 17,000 for the first time since January 5 while the S&P 500 surpassed 2,000 during the trading session but closed at a lower level. Yields on two-year and 10-year Treasury bonds soared to one-month high levels but fell at the close. On the other hand, U.S. dollar remained volatile given that the solid pace of hiring was tarnished by a drop in average hourly wages. Given this, we have highlighted three ETFs and stocks that will be the direct beneficiaries of job gains and see smooth trading in the days ahead. ETFs to Buy PowerShares DB USD Bull ETF (NYSEARCA: UUP ) A healing job market and the resultant improving 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. In terms of holdings, UUP allocates nearly 57.6% in euro and 25.5% collectively in the Japanese yen and British pound. The fund has so far managed an asset base of $830.6 million while sees an average daily volume of around 1.6 million shares. It charges 80 bps in total fees and expenses, and lost 0.3% on the day following the jobs report. The fund has a Zacks ETF Rank of 2 or “Buy” rating with a Medium risk outlook. SPDR Homebuilders ETF (NYSEARCA: XHB ) Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in a recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, slower and gradual rate hikes will not impede the growth prospect of the sector, at least in the short term. The most popular choice in the homebuilding space, XHB, follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 5.21% share. The product focuses on mid-cap securities with 67% share, followed by 24% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of more than 3.7 million shares. Expense ratio comes in at 0.35%. XHB added 0.2% on the day and has a Zacks ETF Rank of 2 with a High risk outlook. SPDR S&P Retail ETF (NYSEARCA: XRT ) Retail will also benefit from accelerating job growth though soft wage growth points to reduced spending power. XRT tracks the S&P Retail Select Industry Index, holding 100 securities in its basket. It is widely spread across each component as none of these holds more than 1.78% of total assets. Small-cap stocks dominate about three-fifths of the portfolio while the rest have been split between the other two market cap levels. XRT is the most popular and actively-traded ETF in the retail space with an AUM of about $617.2 million and average daily volume of around 4.4 million shares. It charges 35 bps in annual fees and gained 0.5% on the day. The product has a Zacks ETF Rank of 1 or “Strong Buy” rating with a Medium risk outlook. Stocks to Buy Though several sectors will benefit from healthy hiring, the direct beneficiary is the staffing industry. The industry bodes well at least for the near term given its superb Zacks Industry Rank (in the top 11%) at the time of writing. Investors seeking to ride out the optimism could look at a few top-ranked stocks handpicked by us using our Zacks Stock Screener . These stocks have a Zacks Rank #1 (Strong Buy) or #2 (Buy), a Growth or Value Style Score of B or better, and an above-average industry earnings growth of 13.7%. Cross Country Healthcare, Inc. (NASDAQ: CCRN ) Based in Boca Raton, Florida, Cross Country is a leading healthcare staffing services’ company which primarily focuses on providing nurse and allied, and physician staffing services and workforce solutions. The stock is expected to deliver year-over-year earnings growth of 26.9% in fiscal 2016. It shed 1.2% in Friday’s trading session and currently has a Zacks Rank #2 with a Growth Style Score of “A”. TrueBlue, Inc. (NYSE: TBI ) Based in Tacoma, Washington, TrueBlue is a leading provider of staffing, recruitment process outsourcing, and managed services in the United States, Canada and Puerto Rico. The company’s earnings are expected to growth 48.4% year over year in fiscal 2016. TBI gained 0.7% on the day and has a Zacks Rank #1 with a Value Style Score of “B”. Insperity, Inc. (NYSE: NSP ) Based in Kingwood, Texas, Insperity provides an array of human resources and business solutions to enhance the performance of small- and medium-sized businesses in the United States. The company has an incredible earnings growth projection of 53.8% for fiscal 2016. The stock was down 0.2% in Friday’s session and has a Zacks Rank #1 with Growth and Value Style Scores of “A” each. Original post

5 Economic Charts Help Investors Understand Trump And Sanders

Investors should be capable of asking a very simple question: If the domestic economy is performing admirably, why are Americans fed up with established politicians on both sides of the aisle? On the Democrat side, a 74-year old white male who admires socialism has inspired more voters than the prospect of the first female president in the country’s history. In the Republican corner, an unconventional billionaire and self-proclaimed wave maker has promised to restore America to greatness – he is trouncing competition on the nationalistic notion that America has lost its five-star status. Along these lines, Real Clear Politics reports that two-thirds (66%) of the electorate believe the country is on the wrong track. Only 28% believe the country is moving in the right direction. It follows that the anti-establishment allure of socialism and nationalism tends to thrive when a country’s economy is frail. Of course, many insist that the U.S. economy is in fine shape with admirable job gains, a vibrant consumer and a healthy business segment. The problem with the assertion? The last 15 years of data portray a very different picture. For example, since 2000, fewer and fewer Americans enjoy home ownership – therefore, fewer and fewer benefited from surging real estate prices on ever-decreasing borrowing costs. Similarly, fewer Americans in the prime age demographic (25-54) are participating in the labor force. For all the “pleasant chatter” about low unemployment, millions and millions of working-aged citizens are no longer being counted or compensated. Along these lines, here are five economic charts that investors might want to consider when deciding upon their asset allocation in a contentious election year: 1. American Households Owe… Big Time . Total household debt hit $12.1 trillion in the fourth quarter of 2015. That’s only a fraction below the all-time record of $12.7 trillion reached in the third quarter of 2008. Between the first quarter of 2003 and the third quarter of 2008, debt grew at an astonishing pace of roughly 74%. That bears repeating. Total household debt rocketed 74% in just five-and-a-half years. Since the debt surge occurred at a time when the Federal Reserve was raising its overnight lending rate – since it occurred when the 30-year mortgage remained in a relatively stable range of 5.75%-6.75% – debt servicing became increasingly difficult. Debt servicing became near impossible when wages did not rise as quickly and when home prices stopped appreciating. It killed the “cash-out refi” game. And the Great Recession wasn’t far behind. One would think that a lesson had been learned about the insidious nature of debt. And yet, instead of deleveraging to reduce overall debt obligations, households have taken the Federal Reserve’s ultra-low interest rate bait. Can households service their debts better when a 30-year mortgage is closer to 4% than when its closer to 6%? All things being equal… yes. Sadly, the capacity to service mortgages and other debts is not merely a function of current rates, but also a function of future rates, household income and cost of living adjustments. It follows that when household income growth only amounts to 26% since 2003 – when real income adjusted for inflation actually declines (e.g., soaring medical costs, rising food prices, etc.) – the 66% surge in total debt since 2003 takes on unsavory dimensions. Why? The Federal Reserve may once again create circumstances where borrowing costs either rise or remain range-bound at a time when inflation-adjusted wages stagnate and home prices cease to climb. Once again, households would struggle to service their debts. 2. Americans Earn Less Than They Did In 2000 . Imagine working your tail off for the last 15 years. Your household income on a nominal basis is higher than it was back then, but your money does not buy what it did at the start of the 21st century. Are you going to feel that the country is on the right path? Are you going to believe those who trumpet 2% annualized gross domestic product (NYSE: GDP )? On an inflation-adjusted basis, middle class households today are taking home somewhere in the neighborhood of $56,746 per year. That is less than it was at the inception of the financial collapse ($57,798). Even more disturbing? Households are bringing home less real income than they did after the recession in 2001-2002 ($57,905). No growth in household income since 2000 and a whole lot of growth in household debt. Thank the powers that be for ultra-low interest rates, right? 3. Millions Priced Out Of The Home Ownership Dream . Twenty years ago, extraordinary stock market gains and genuine labor force participation growth in high quality, high paying jobs made Americans feel more wealthy. Households began trading up, while first time home-buyers flush with cash entered the real estate market. There was more. In 1995, government regulators created new rules for determining whether a bank was meeting the standards of the Community Reinvestment Act (NASDAQ: CRA ). Banks now had to prove that they were making enough loans to low- and moderate-income borrowers. Suddenly, home-ownership rates began skyrocketing. There was a minor flattening out period during the tech wreck of 2000 and the 2001-2002 recession. However, with the Fed slashing overnight lending rates to 50-year lows, the precipitous drops in mortgage rates, as well as the existence of “no documentation”/”negative amortization” loans, home-ownership rates kept right on ascending. Click to enlarge Real estate sales peaked near 2005, prices peaked by the end of 2006. And the “fit hit the ceiling fan” by 2007. Since June of 2009, however, the U.S. economy has been expanding. One might have expected home-ownership rates to rise or level out. Instead, fewer Americans own homes (on a percentage basis), whether it is attributable to stagnant inflation-adjusted income or higher property prices or unfavorable debt-to-income ratios. Keep in mind, this trend is happening alongside record-low mortgage rates. It does not require a leap of faith to suggest that millions of additional renters contribute to economic angst and a dissatisfied electorate. 4. Employment Growth Is Slower Than Population Growth . U-6 Unemployment at 9.9% is far higher than the 8.5% U-6 Unemployment at the onset of the Great Recession in November of 2007 – the 9.9% unemployment rate is actually on par with how Americans felt AFTER the 2001-2002 recession, when U-6 lingered around 10%. In essence, the jobs picture has only recovered to a place that is similar to recessionary times (10%), as opposed to non-recessionary times (8.0%-8.5%). On the one hand, there’s reason to be pleased with the progress of bringing U-6 Unemployment back from 17% at the worst of the Great Recession. On the surface, then, progress is certainly progress. The difficulty in declaring victory in the jobs arena is the fact that nearly one out of five 25-54 year-olds who are actively looking for work remain unemployed. Specifically, we have an 81% participation rate in the key 25-54 demographic. This participation rate is far more dismal than it was during the 2001-2002 recession – it is not even as strong as the 83%-83.5% participation during the Great Recession. In sum, payroll growth that averages 200,000 per month can pull down an unemployment rate. Yet it is insufficient with respect to a population that is growing at a faster clip. That is, companies hire only enough to keep up with modest demand whereas discouraged workers in the labor force are stuck as “extras” in the growth of the population. They’re missing, they are not counted. Can you blame Americans for feeling that there aren’t enough job opportunities for them? 5. The Government’s Debt Is Our Burden . The national debt recently surpassed $19 trillion. Implicitly, Americans understand that there is something very wrong with the number. If it was $6 trillion at the start of the century, and it was $9 trillion near the end of 2007 when the Great Recession began, then how can the country’s economy be humming if it needed $10 trillion of stimulus to get it humming? According to U.S. Debt Clock at USdebtclock.org , the debt each citizen owes is close to $59,000. The average household – not the average person – brings in approximately $57,000. Try to imagine having a credit card balance that is larger than your income stream. (And that’s for a family of 1!) A four-person household might bring in $57,000, yet owe $236,000. Crazy, right? Well, some estimates may be a little more friendly by removing the Federal Reserve’s ownership of U.S. Treasuries from the equation. The way the graphic below presents it, each child born today has an obligation of $42,759. Straight Outta Nutsville. Naturally, you’re free to believe that the federal debt simply does not matter because low interest rates make it possible for the Federal government to service its debt obligations. And you’re free to decide that America just needs to keep paying the interest – we don’t actually have to pay the debt back in its entirety. In fact, worse case scenario, the Federal government can just print money like the Federal Reserve did with its electronic credits in quantitative easing (QE). Fair enough. Still, there comes a point when rates cannot truly be lowered much further. Even negative interest rates would have a lower bound. The implication? Lower percentages of participation in the labor force, record debt levels at the household level as well as the federal level, stagnant wages and declining home-ownership are tell-tale signs of economic trouble. Americans feel it… that’s why many have chosen to support Bernie Sanders or Donald Trump. The stock market has been feeling it too. On the one hand, investors have been breathing a sigh of relief that the S&P 500 SPDR Trust (NYSEARCA: SPY ) has come back out of correction territory. How bad can things really be if SPY is a stone’s throw from record highs? Yet most investors recognize that a pragmatic fear of higher borrowing costs, a realistic concern about the potentially toxic debts of commodity companies, a lack of wage growth for consumers and the potential for the world economy to drag on the domestic scene have combined to create volatile price swings. What’s more, these things provide perspective on the popularity of political outsiders like Sanders and Trump. Disclosure : Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.