Travel and Leisure ETFs Surge Amid Positive Jobs Data | ETF Trends

Travel and leisure stocks and ETFs are making major moves on Friday, following a better-than-expected  October jobs report, and a fresh development in the coronavirus battle boosting enthusiasm for the economic recovery.

Economists were optimistic about a widespread increase in hiring in October, which suggests that the economy is sloughing off the coronavirus-spurred slump of the third quarter and could accelerate faster than anticipated in Q4.

Employment climbed by 531,000 over the course of the month, with new jobs in a plethora of categories such as manufacturing, hospitality, and professional and business services. The unemployment rate fell to 4.6%, remaining below the normally ideal level of 5%. Revisions to prior months’ data also added a total of 235,000 more payrolls in August and September.

Michael Gapen, chief U.S. economist at Barclays, said that the employment report shows that the economy is back on track after a hiccup in third-quarter growth. “We’re not going to see what we saw in the first half of the year, but we’re not a 2% economy,” Gapen said.

“We’re reaccelerating as the delta wave abates and given the revisions, we’ve weathered the storm,” said Diane Swonk, chief economist at Grant Thornton. “It suppressed spending as people were afraid of the contagion during the delta wave, but it didn’t derail underlying employment, and now we’re picking up again.”

The news was especially advantageous for the travel and leisure industry, which has been on a tumultuous ride since the pandemic first hit, causing a wave of layoffs in the restaurant and airline industries.

With the forthcoming holiday season, however, vigorous hiring at restaurants and bars again helped the leisure and hospitality sector spearhead the month’s employment figures. Employers added almost 120,000 cooks, waitstaff, and other restaurant workers to help push the entire leisure sector up 164,000 for the month.

Employment in the leisure and hospitality sector has advanced by 2.4 million in 2021, though it’s still down 1.4 million, or 8.2%, since February 2020, the start of the pandemic.

The news spurred classic reopening plays, as airlines such as United Airlines and American Airlines rocketed over 6% each, helping the U.S. Global Jets ETF (JETS) to score a 6% gain amid the climb, while Carnival jumped 9% and Norwegian Cruise Line rallied more than 8%.

The Invesco Dynamic Leisure and Entertainment ETF (PEJ) was another fund that saw gains thanks to the new data. The ETF jumped 3.82% on Friday, notching a five-year intraday high.

According to Invesco, “The Invesco Dynamic Leisure and Entertainment ETF (Fund) is based on the Dynamic Leisure & Entertainment Intellidex℠ Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value. The Index is comprised of common stocks of 30 US leisure and entertainment companies. These are companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries. The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November.”

In addition to positive jobs data in the travel and leisure sector, a key development from Pfizer related to its easy-to-administer coronavirus pill also further catalyzed enthusiasm for a smooth reopening, pushing shares of airlines and cruise line operators soaring.

Pfizer shares rallied over 7% after the company said its coronavirus drug, used with an HIV drug, slashed the risk of hospitalization by 89%. Pfizer board member Dr. Scott Gottlieb said on Friday that the pandemic could be over in the U.S. by the time President Biden’s workplace vaccine mandates take effect in early January.

This was great news for the iShares U.S. Pharmaceuticals ETF (IHE), which climbed over 1.3% on Friday.

The news sent the Direxion Daily Travel & Vacation Bull 2X Shares (OOTO) surging more than 13% higher. The Direxion Daily Travel & Vacation Bull 2X Shares seeks daily investment results, before fees and expenses, of 200% of the performance of the BlueStar® Travel and Vacation Index.

According to Direxion, “The BlueStar® Travel and Vacation Index (BTOURNTR) is provided by MV Index Solutions GmbH and is comprised of US-listed stocks, including depository receipts, of companies that are “Travel and Vacation” companies, as defined by the Index Provider. To be eligible for inclusion in the Index, a company must either (a) derive 25% or more of its revenue from, or devote 25% or more of its annual budget to, operating theme parks and/or hotels or (b) derive 50% or more of its revenue from, or devote 50% or more of its annual budget to the following activities: 1. Hotel accommodations; 2. Commercial airlines; 3. Casino resorts; 4. Hotel time shares; 5. Ski resorts; 6. Cruises; 7. Hotel real estate investment trusts; 8. Performing arts centers; 9. Online travel and event booking; 10. Specialty travel and experiences (such as outer space passenger travel), and 11. Operation of theme parks.”

The positive jobs data had a beneficial effect on stocks as well, as the Dow Jones Industrial Average gained 240 points, while the S&P 500 advanced 0.6%, headed for its seventh straight positive day. The Nasdaq Composite also added as much as 0.6%, before all three indexes pared their gains. All three major benchmarks scored their respective intraday records during the session, however.

Job gains for the month of October totaled 531,000, while consensus estimates called for 450,000 jobs added, according to Dow Jones. The report also revised September’s disappointing number up to 312,000 job gains from 194,000 previously, and added to its August figure by a similar amount.

“Markets are cheering a much better than expected jobs report this morning as nonfarm payrolls smashed expectations,” said Cliff Hodge, CIO of Cornerstone Wealth. “Gains were broad-based across industries, and manufacturing was a real bright spot.”

All three major averages are on track to end the week higher. The Dow is up 1.3% on the week, while the S&P 500 is 2.2% higher and the Nasdaq Composite is up 3.3%.

The SPDR Dow Jones Industrial Average ETF (DIA), the SPDR S&P 500 ETF Trust (SPY), and the Invesco QQQ Trust (QQQ) were all also green as 1:30 PM EST Friday.

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