U.S. Hires More Than Expected In Feb: ETFs & 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 health care, 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 (read: Manufacturing Data Point to Recovery: ETFs, Stocks to Consider).

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 2000 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, i 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 US Dollar Bullish Fund (UUP – ETF report)

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 (read: These Commodity Currency ETFs Outpacing Dollar to Start 2016).