Jobless Claims Are Driven by Technology: XLK Up and QQQ Gains



Technology sector drove jobless claims

Technology and technology-enabled companies like Yahoo (YHOO), Alexion Pharmaceuticals (ALXN), and Avago Technologies (AVGO) gained 5.30%, 5.13%, and 4.89%, respectively on May 7, as jobless claims declined in the US for the week ending May 2, 2015.

Declining jobless claims indicate increased household income. This generally translates to an increase in consumer spending. It bodes well for retailers and the consumer sector in general.

As indicated by Wednesday’s ADP Employment Report, the professional and business services sector has been a prime contributor to job growth in the US recently. The professional and business services industry added 34,000 jobs during April—an 0.18% increase compared to March.

So far, technology and technology-enabled services like Internet retail, biotechnology, and healthcare have been leading the US stock markets this year.

The Technology Select Sector SPDR ETF (XLK) has returned about 2.59% to investors so far this year. The iShares Nasdaq Biotechnology ETF (IBB) is up 13.44%, during the same period. The tech-heavy PowerShares QQQ Trust, Series 1 ETF (QQQ) has gained 3.97% since the beginning of the year.

In comparison, the SPDR S&P 500 ETF (SPY) has returned 1.62% YTD (year-to-date). XLK was up 0.74%, IBB gained 0.99%, and QQQ gained 0.60% at the close of trade on May 7. SPY gained 0.40%.

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Jobless claims were at 265,000

For the week ending May 2, there were 265,000 new claims for unemployment insurance—according to a U.S. Department of Labor report released on Thursday, May 7. The figure came in way below the consensus estimate of 278,000 claims. It was up slightly from the previous week’s claim figure of 262,000.

Initial jobless claims show the number of individuals who have filed for unemployment insurance for the first time. The U.S. Department of Labor’s Employment and Training Administration comes out with this weekly report. The report is a good indicator for labor market conditions in the US (IVV). A decrease in jobless claims bodes well for the labor market. It’s also good for the economy’s general well-being and consumer spending, as gauged by the Consumer Discretionary Select Sector SPDR ETF (XLY).

The above chart shows the trend in initial jobless claims and XLY’s price movement. Since the 2009 recession, the US economy saw a declining trend in unemployment insurance claims. As a result, it saw a gain in consumer spending. This is reflected in XLY’s upward trend.

Another indicator that affects the US consumer sector is the consumer credit report. Its figures for March came out on May 7. Let’s take a look.


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