U.S. Turns Hotbed Of Hiring: ETFs And Stocks To Surge

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Includes: CCRN, HSII, TEDU, UUP, XHB, XRT
by: Zacks Funds

The U.S. labor market has been on a hiring spree, outperforming other economies across the globe. The economy added 292,000 jobs in December to add up to 2.65 million jobs for all of 2015. This represented the second consecutive year of strong job growth since 1999. Moreover, the unemployment rate held steady at a seven-year low of 5% for the third consecutive month.

While wage growth remained tepid in December with average hourly wages declining by a penny to $25.24, it increased 2.5% for 2015, marking the best year for wage gains since the Great Recession. This shows that wage growth is definitely gaining momentum.

The robust data shows that the U.S. is one of the healthiest economies in the world that has been able to withstand global uncertainty stemming from the China turmoil, a relentless slide in oil price and a strong dollar. Further, it has spread optimism into the economy, which is now likely to be able to handle another rate hike, though the Fed is unlikely to raise rates before March.

Market Impact

Following the upbeat job data, the U.S. stocks initially moved higher, halting a two-day rout that has wiped out $4 trillion from global equities this year. But the renewed slide in crude prices reversed overall gains, pushing the stocks in deep red at the close.

Investors could take advantage of the beaten down prices and buy stocks and ETFs that are the largest beneficiaries of job gains. Below, we have highlighted some of the funds that will likely see smooth trading in the days ahead.

ETFs to Consider

PowerShares DB US Dollar Bullish Fund (NYSEARCA:UUP)

A healing job market and the resultant improving economy will pull in more capital into the country and lead to an 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 while 25.5% collectively in the Japanese yen and British pound. The fund has so far managed an asset base of $1.1 billion while sees an average daily volume of around 1.9 million shares. It charges 80 bps in total fees and expenses, and added 0.2% on the day following the jobs report. The fund has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.

SPDR S&P Homebuilders ETF (NYSEARCA:XHB)

Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in the recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, the slower and gradual rates hike 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 4.71% share. The product focuses on mid-cap securities with 65% share, followed by 25% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of more than 3.5 million shares. Expense ratio comes in at 0.35%. XHB lost 1.7% on the day and has a Zacks ETF Rank of 2 or 'Buy' rating with a High risk outlook.

SPDR S&P Retail ETF (NYSEARCA:XRT)

Retail will also benefit from accelerating job growth and a moderate rise in wages that will increase the consumer spending power. XRT tracks the S&P Retail Select Industry Index, holding 101 securities in its basket. It is widely spread across each component as none of these holds more than 1.33% of total assets. Small-cap stocks dominate more than 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 $616.6 million and average daily volume of around 4.2 million shares. It charges 35 bps in annual fees and shed 3% on the day. The product has a Zacks ETF Rank of 1 or 'Strong Buy' rating with a Medium risk outlook.

Stocks to Consider

Though several sectors will benefit from healthy hiring, the direct beneficiary is the staffing industry. The industry bodes well at least in the near term given the superb Zacks Industry Rank (in the top 10%) at the time of writing. Investors seeking to ride out the optimism could look at a few top-ranked stocks having a Zacks Rank #1 (Strong Buy) or #2 (Buy) with a Growth Style Score of B or better using our Zacks Stock Screener.

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 earnings growth of 26.9% for fiscal 2016 versus the industry average growth of 25.5%. The stock lost 0.9% in Friday's trading session and currently has a Zacks Rank #1 with a Growth Style Score of 'A'.

Heidrick & Struggles International, Inc. (NASDAQ:HSII)

Based in Chicago, Illinois Heidrick & Struggles International is one of the leading global executive search firms. With years of experience in fulfilling clients' leadership needs, it offers and conducts executive search services in every major business center in the world.

The stock is expected to post earnings at a growth rate of 19.2% annually in fiscal 2016, which is higher than the industry average of 17.4%. HSII gained 0.3% on the day and has a Zacks Rank #1 with a Growth Style Score of 'A'.

Tarena International, Inc. (NASDAQ:TEDU)

Based in Beijing, the People's Republic of China, Tarena International is a leading provider of professional education services in China with core strength in information technology professional education services including classroom training.

Tarena has an incredible earnings growth projection of 69.8% for fiscal 2016 compared to the industry average of 17.4%. The stock was up 0.4% in the Friday session and has a Zacks Rank #2 with a Growth Style Score of 'B'.

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