Once again, cyclicals continue to outperform. Financials such as Bank of America
Unemployment has been ever-so-slowly inching downward in recent months, and investors in economically sensitive industries are keen to find out how the jobs market is faring. Yesterday we found out that unemployment benefits claims declined slightly in the first month of 2012. Today we found out that the economy added 243,000 jobs in January, driving the unemployment rate down to 8.3%
As the economy slowly recovers, investors are increasingly placing their bets on cyclical sectors such as materials, financials, capital goods, and consumer discretionary stocks, while eschewing more stable "defensive" sectors such as consumer staples, telcom, and utilities:
Average Return (year to date)
Source: S&P Capital IQ.
An individual jobs report won't make or break cyclicals, but if we continue to see strong employment and manufacturing numbers over the coming months, it's likely they'll continue beating the Dow. If not, they could swing back in the other direction -- hard.
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Ilan Moscovitz doesn't own shares of any company mentioned. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.