Talking Numbers

This sector could benefit from the jobs growth

This sector could benefit from the jobs growth

Friday's jobs data shows the economy is moving at an expected pace.

In May, employers added 217,000 jobs, bringing employment numbers to slightly above the previous peak reached in January 2008. But, hidden in the report is a big gain in hospitality and leisure jobs.

The consumer discretionary sector – which includes McDonald's and Starwood Hotels among others – is the market's worstperforming so far this year. But does the new jobs data mean we can expect it to turn around?

Gina Sanchez, founder of Chantico Global is not convinced consumer discretionary stocks are on the rebound.

"One data point doesn't yet make a trend," said Sanchez, a CNBC contributor "Expectations for the next few months are actually not as positive [or] optimistic as this one-month print was. So, I'm still on the fence waiting to see what's happening."

Sanchez isn't excited about the sector because consumers are still focused on necessities. Year-to-date, the S&P consumer discretionary sector index is down 0.3 percent while consumer staples are up 4.6 percent.

"People are not spending on things unless they really have to," Sanchez said. "Until I see people kind of making more money and spending more money, I'm going to wait to see where we are. One month of jobs data isn't enough to convince me."

Ari Wald, head of technical analysis at Oppenheimer & Co., is also bearish on the S&P consumer discretionary sector index and the ETF that tracks it, the Consumer Discretionary Select Sector SPDR (XLY).

"When we look at these sectors, we like to look at them relative to the overall market," Wald said. "For XLY, it's really a matter of perspective. As much as it's been the worstperforming sector of the year, it's the best performing sector of the bull market [but] I think that run is over."

Charting the S&P consumer discretionary sector divided by the S&P 500 shows the change in the relative strength of the sector. For over the past few years, it remained above its technically significant 200-day moving average. That changed earlier this year.

"There is a lot of trend deterioration on this recent pullback," Wald said. "It's enjoying a little bit of an oversold bounce now, but we would be selling this bounce."

Wald believes investors instead should focus on late-cycle or defensive sectors. "We would be sellers of discretionary right here, right now," added Wald.

To see the full discussion on the consumer discretionary sector, with Sanchez on the fundamentals and Wald on the technicals, watch the above video.

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