Thursday was a relatively uneventful day on Wall Street, with investors clearly looking ahead to a critical jobs report due out Friday morning. Analysts expect the monthly release to show that employers cut 125,000 from payrolls during the month of November, far fewer than the 190,000 jobs lost in October, but still a meaningful increase in the number of out-of-work Americans. The unemployment rate, generated by a separate survey, is expected to have held steady at 10.2%.
A gravity-defying unemployment rate has been one of the thorns in the side of an economic recovery. Stock markets have gained more than 60% from bear market lows, but near-constant increases in unemployment have raised questions as to the sustainability of the current rally and the likelihood of a double dip. In recent months, investors have pointed to “increases at a decreasing rate” as proof of an improving situation, but the rose-colored glasses are beginning to slide off. Friday’s report could give a clear indication of whether a turning point is near or still a ways off.
White House spokesman Robert Gibbs raised some eyebrows by commenting on Friday’s release in a press conference the day before, referring to Wednesday’s report from ADP to support his prediction of yet another uptick in unemployment. “Obviously, we’ve seen the one payroll estimate–the ADP estimate came out yesterday, and it seemed to suggest that it might tick upward,” Gibbs said in response to a question. The agenda behind Gibbs’ comments (if any) was the subject of some debate, with many believing he was lowering expectations for Friday’s data.
ETFs To Watch
While the statistical release certainly carries enough weight to move the broader market – particularly if results deviate significantly from expectations in either direction – some areas of the economy may be impacted more than others. Below is a look at three funds that could see some big movements on Friday when the highly anticipated numbers are made public. For more actionable ETF investment ideas, sign up for our free ETF newsletter.
- SPDR Select Sector Consumer Discretionary (XLY): The critical holiday shopping season has gotten off to a slow start, and it seems possible that this year’s final tally could be even worse than the dismal 2008 numbers generated when unemployment was nearly 4% lower than current levels. It seems logical that the relationship between the unemployment rate and discretionary spending should be an inverse one, making XLY one of the ETFs in focus on Friday (see a complete list of consumer discretionary ETFs).
- iPath S&P 500 VIX Short-Term Futures ETN (VXX): This ETN is linked to an index composed of futures contracts on the CBOE Volatility Index, sometimes called the “fear index.” As a sense of normalcy has returned of the markets, the VIX has plummeted to near its long-term historical average. But if Friday’s report casts doubt on the sustainability of a recovery, volatility could see a big jump.
- SPDR Gold Trust (GLD): Gold’s march past $1,200 in recent months has been fueled primarily by weakness in the dollar and a desire from foreign investors to shift reserve holdings into a hard currency. But gold is also one of the most popular “safe haven” investments, and a disappointing jobs report could give precious metals twice the firepower.
Disclosure: No positions at time of writing.