The market spent all weekend frothing at the mouth after seeing Friday’s jobs report. 

The numbers weren’t great, and today marked the first opportunity for traders to react. 

However, it’s less about the present impact and more what it says about the future. 

The crux of the economy’s concerns is the question of what happens when the jobs really slow down… 

Well, the biggest takeaway in that regard was the fact that there just weren’t very many jobs created. 

The JOLTs number showed fewer jobs are out there for those looking for them. 

The unemployment claims are starting to inch up, which is telling us more people are losing the jobs they had. 

And then Friday, the Bureau of Labor Statistics told us the number of new jobs is slowing… 

The main takeaway from all of this is the jobs numbers continue to show signs that the historically tight labor market is in the early stages of an economic slowdown.  

But it wasn’t every sector that showed hiring slowdowns… 

The leisure and hospitality sector of the market saw the largest jump in jobs creation, which is standard for this time of year.  

In the same way that you’re preparing for your spring and summer getaways, businesses are preparing for you. For that reason, we can sort of write that off as seasonality. 

Moving down the list, healthcare and social assistance was second. 

With the U.S. government coming in at No. 3 on the list, that “social assistance” portion definitely has some overlap in that regard. 

But the “healthcare” portion was certainly interesting. 

As you can see, after being beaten down in Q1, Health Care Select Sector SPDR Fund (XLV) was surprisingly one of the strongest performers last week. And jobs are moving into the space.  

Generally speaking, this is a pretty defensive sector – not a lot of aggressiveness with traders in the XLV. 

But we’re now seeing people buying the bottom on a number of companies in this sector. There may be no better evidence of this than with UnitedHealth Group Inc (UNH). 

This is one of many that had been dragging XLV down that popped over the last few days. 

With this development, I think we could see the XLV – and healthcare companies on the whole – become something of the safety trade (alongside energy). 

When we look at the bottom of the performance list in the XLV, we find more than a few insurance providers… 

A number of companies on this list – Cigna Group (CI), Pfizer Inc. (PFE), and Baxter International Inc. (BAX), to name a few – have been substantially underperforming relative to the XLV. 

These are also the companies that saw an increase in volume over the past few weeks, as we saw some of the portfolio managers start to take out a little heavier weighting in this area. 

That’s telling, and it’s probably a sign that traders should do the same. 

When we look at the longer term on the XLV, we see that we are just at that 20-month moving average. 

This has been a defensive play over the last year and a half – after all, it’s better to go sideways than down. But we’re going to want to watch that 20-month moving average closely, as it sits right around the $130 mark. 

In the short term, I’m going to steer clear. There are a lot more attractive trades out there, in my opinion. 

In the longer term, I think we’re going to see a little pullback. That’s only aided by the fact that a lot of these insurance companies are undergoing layoffs as part of their cost-saving efforts. 

But the XLV wasn’t the only place impacted by the jobs announcement… 

Expectations are shifting back toward a potential 25-basis-point rate increase from the Fed in May.  

Now, it’s worth noting that this “68.7%” figure is going to be moving around a bunch this week, what with CPI, PPI, earnings, and the Fed minutes on deck. 

So, with all that volatility, to come, you’re going to want to be patient before you place any trades – at least I know I will. 

There’s a good chance I’ll wait for a lot of the dust to settle before I make my serious moves, but I expect there will be a few odd trades between now and then. 

Regardless, the best way to ensure you get my trades – both big and small – is by becoming a member of my Night Trader service. 

I dedicate a lot of time to finding the best opportunities for my members, and this is going to be a particularly busy time of year with all the things we’ve got coming down the pike. 

Hope to see you there, and as always, I’ll see you at 9:45 a.m. ET for The Long and Short of It.

Talk to you then. 


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