ETFs
4 Sector ETFs and Stocks Likely to Benefit Despite Weak Jobs Data
The U.S. economy added 175,000 jobs in April, well below Wall Street expectations of 240,000, strengthening bets that the Federal Reserve would be able to cut interest rates in coming months. Health care and social assistance led the way with a gain of 87,000 jobs.
The unemployment rate increased to 3.9% while it was hoped it would remain at 3.8%. Average hourly wages increased 0.2% sequentially and 3.9% year-over-year, both below consensus estimates. The unemployment rate is at its highest level since January 2022. The participation rate, that is, those actively looking for work, remained unchanged at 62.7%.
Slower job growth could be good news on the inflation front, but cause an economic slowdown. Below, we’ve highlighted some of the sectors that will likely see smooth trading in the coming days in light of April’s jobs data.
Targeted sectors
Health care
Health care employment increased by 56,000, matching the average monthly gain of 63,000 over the previous 12 months. Significant employment gains occurred in ambulatory health care services (+33,000), hospitals (+14,000), and nursing and residential care facilities (+9,000).
The Zacks Rank #1 (Strong Buy) Healthcare Select Sector SPDR ETF (NYSE: XLV) can be played to exploit moderate momentum. Health Principle (NYSE:THC), which has a Zacks Rank #1 is worth a mention. It is an investor-owned health care services company that owns and operates general hospitals and related health care facilities for urban and rural communities in many states, and has offices in California and Florida.
Transportation
Employment in transportation and warehousing increased by 22,000 in April. In April, employment also increased in the couriers and messengers sector (+8,000) and in the warehousing and storage sector (+8,000) as well. Zacks Rank #2 (Buy) SPDR S&P Transportation ETF (NYSE: XTN) can therefore be considered for a play. Airline Alaska Air Group (NYSE:ALK) has a Zacks Rank #2.
Retail
Retail trade continued its upward trend in April (+20,000). Over the previous 12 months, the industry created an average of 7,000 jobs per month. In April, notable employment was seen in areas such as general merchandise retailers (+10,000), building materials and gardening equipment and supplies dealers (+7,000), and home improvement product retailers (+7,000). health and personal care (+5,000).
Regarding the fund, SPDR S&P Retail ETF (NYSE:XRT) has a Zacks Rank #2. The Kroger Company. (NYSE:KR), which operates in the low-margin grocery industry, also has a Zacks Rank #2.
Construction
In April, employment in construction (+9,000), after an increase of 40,000 in March. Over the previous 12 months, construction had created an average of 22,000 jobs per month. Investors can monitor the price movement of Invesco Dynamic Building & Construction ETF (NYSE:PKB).
The PKB fund is composed of shares of American companies in the building and construction sector. The index is designed to provide capital appreciation by carefully evaluating companies based on various investment merit criteria, including fundamental growth, stock valuation, investment suitability and risk factors.
As for the stock, Zacks Rank #1 Dycom Industries (NYSE:DY) is a preferred bet. It is one of the leading providers of specialized contracting services in the United States.
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