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These Dow stocks are the ones to own after that blowout jobs report, history shows

CNBC logo CNBC 7/7/2017 Evelyn Cheng
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History shows that industrial stocks like United Technologies (UTX) rally after large beats on the headline jobs figure.

The nonfarm payrolls report Friday showed the addition of 222,000 jobs to the U.S. economy in June, topping the consensus estimate of 179,000 from economists polled by Reuters. That's a beat by 43,000 jobs.

Five trading days after the monthly jobs figure has beat by a similar amount, the best performers in the Dow Jones industrial average are United Technologies, 3M (MMM) and Boeing (BA), according to historical analysis using Kensho, a quantitative analytics tool used by hedge funds.

Each of the three stocks rose roughly half a percent or more on average, while the S&P 500 (.SPX)declined slightly over the next week. The Kensho study looked at 25 similar jobs reports beats since March 2009, the beginning of this bull market.

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United Health (UNH) was the fourth-best performing Dow stock, rising 0.43 percent on average, according to the Kensho analysis of markets after similar beats in previous jobs reports.

June's employment report showed the health care industry contributed the most to the headline jobs figure, with 37,000 new positions.

The Kensho study also showed industrials and financials have been the best performing sectors in the S&P 500, up 0.2 percent and 0.17 percent on average, respectively, in the five trading days following.

Industrials benefit from the broader pickup in the economy, as shown by better-than-expected jobs reports.

The better economic picture gives the Federal Reserve more reason to raise interest rates and bond traders more optimism on the economy, leading to higher Treasury yields. The higher yields allow financial companies to generate more profits, helping the industry's stocks.

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The benchmark U.S. 10-year Treasury yield (US10Y) held higher near 2.39 percent after the report, while the 2-year yield (US2Y), most sensitive to near-term expectations about Fed policy, edged lower to trade around 1.40 percent.

Bond traders noted some disappointment that wage growth remained muted at a 2.5 percent annualized rate. However, most analysts still expect the Fed to stay on track with tightening measures such as reducing its balance sheet and raising interest rates later this year.

Friday's jobs report also showed the unemployment rate held at 4.4 percent, still near historical lows but above the expected decline to 4.3 percent.

U.S. stocks opened slightly higher Friday.

— CNBC's John Melloy, Jeff Cox and Patti Domm contributed to this report.

Disclosure: CNBC's parent NBCUniversal is a minority investor in Kensho.

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