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ETFs to Win Despite Shockingly Soft May Jobs Data

Sanghamitra Saha
May jobs data came in extremely downbeat in the United States. This should help the Fed remain dovish in the coming days and boost these ETFs.

In May, U.S. employers added 75,000 new jobs, after 224,000 gains in April. The latest number fell shy of market expectations of 185,000. Notably, the change in total nonfarm payroll employment for March was revised down from 189,000 to 153,000, and the change for April was revised down from 263,000 to 224,000, per trading economics. After revisions, job gains have averaged 151,000 per month over the last three months.

In May, average hourly earnings increased by 6 cents to $27.83. In a year, average hourly earnings have grown by 3.1%, which is short of expectations. Average hourly earnings of private-sector production and nonsupervisory employees rose 7 cents to $23.38 in May. The U.S. unemployment rate remained at 3.6%, its lowest level for 50 years.

Health Care

As per trading economics, health care added 16,000 jobs in the month. Per tradingeconomics, health care employment increased by 391,000 in a year’s time. This is one of the sectors that has been adding jobs on a continued basis.

The fund iShares U.S. Healthcare Providers ETF IHF should thus benefit. The index of the fund looks to track stocks of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes etc. The Zacks Rank #2 (Buy) stock added about 1% on Jun 7 (read: 5 Must-See ETF Charts on Earnings & Trade War Impact).

Construction

About 4,000 jobs were created in the construction sector in the month. In the last 12 months, the sector generated about 215,000 jobs. May gains were built upon an increase of 30,000 in April (see all industrial ETFs here).

Obviously, such positive data makes us keep a close watch on Invesco Dynamic Building & Construction ETF PKB. The underlying index of the fund picks building and construction stocks on the basis of factors like growth, stock valuation and investment timeliness. Though the fund currently has a Zacks Rank #4 (Sell), it can see some bounce post the release of the May jobs data, especially on low rates.

Gold

For the past few days, talks have become rife of a rate cut from the Federal Reserve. Fed officials have been watching data related to trade war closely and its impact on the U.S. economy. So, with the latest round of surprisingly subdued jobs data, bets of a rate cut have gone. If the Fed actually loosens policy, the greenback will lose some strength, which could a great thing for gold investing. SPDR Gold Trust ETFGLD added about 0.6% on Jun 7 (read: ETFs Set to Soar on Rate Cuts Signal).

U.S. Long-Term Treasuries

U.S. Treasuries gained on the news, pushing the yields lower. U.S. benchmark treasury yield in fact slumped to 2.09% on Jun 7 from 2.12% from a day earlier. The long-term Treasury bond ETF iShares 20+ Year Treasury Bond ETF TLT added about 0.9% on the day. The fund has a Zacks ETF Rank #3 (Hold) (read: Top ETF Stories of May).

Growth Stocks

Hopes of deeper policy easing amid downbeat jobs’ report spurred a rally in global stocks.  UBS AG FI Enhanced Large Cap Growth ETN FBGX gained as much as 3.2% on Jun 7 while Fidelity NASDAQ Composite Index Tracking Stock Fund ONEQ added more than 1.5%. iShares Morningstar Mid-Cap Growth ETF JKH was up 1.2% on the day.

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iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
 
Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports
 
SPDR Gold Shares (GLD): ETF Research Reports
 
iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
 
Fidelity NASDAQ Composite Index Tracking Stock Fund (ONEQ): ETF Research Reports
 
FI-ENH LC GR (FBGX): ETF Research Reports
 
iShares Morningstar Mid-Cap Growth ETF (JKH): ETF Research Reports
 
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