We had another bout of pain in the market as we entered February. While the market seems to have moved off oil prices for the moment, it remains concerned. Key reasons are slowing economic data (including the recent ISM Manufacturing and ISM Services reports and the Employment Report, all for January) and weaker-than-expected outlooks this earnings season from a growing number of companies. All of this has led to a rethinking of growth expectations and valuations, with growth stocks the hardest hit, as evidenced by the year-to-date move in the Nasdaq Composite Index, which is down almost 13%, compared to dips of 7% and 8% for the Dow Jones Industrial Average and the S&P 500 respectively.

That move lower in the market has been quite good for our ProShares Short S&P500 ([stock_quote symbol=”SH”]) positon, and we’re now up more than 5% in the positon. Let’s set a protective stop loss at $22, which will allow us to lock in gains should the market bounce higher unexpectedly.

On Friday, we received the January Employment Report that showed 151,000 jobs were added during the month, well below the 188,000-190,000 that were expected. Factoring in the revisions to November and December, we are once again on the path of slower job creation month over month (280,000 in November, 262,000 in December and 151,000 in January). This trajectory matches the economic data we’ve been getting, which points to a dramatic slowdown in the domestic manufacturing economy, with the ISM manufacturing index below 50 for the fourth consecutive month in January. As we saw early last week, the pace of the domestic service sector slowed according to the January ISM Services report.

While some observers will point to the uptick in average hourly wages, which climbed 2.5% year over year last month, and the 2.1% increase in the Employment Cost Index, we see the slower job creation corroborating slower growth. Our concern has been that facing higher costs from both wages and benefits in 2016 will slow the rate at which companies add jobs. While the last three months of jobs data could point to that, we would prefer to see more jobs data in 2016 before jumping to any conclusions. As such, we would look to the February Employment Report for more confirming data. Given the falloff in seasonal hiring as the post-holiday return cycle fades, we see a high probability of flat-to-down job creation in February. If that indeed is what happens, it should fan the flames for a later-than-initially-thought interest rate boost from the Fed.

With interest rate hike expectations for 2016 slipping, the U.S. dollar retreated last week, which weighed on U.S. dollar funds and ETFs, like our PowerShares DB US Dollar Index Bullish Fund ([stock_quote symbol=”UUP”]). From my perch, if the Fed does push back its rate hike timing, as is increasingly expected, additional monetary policy moves by the European Central Bank and the People’s Bank of China are likely to devalue those respective currencies relative to the dollar. Such moves would sustain existing foreign currency headwinds talked about by industrial companies such as Danaher ([stock_quote symbol=”DHR”]) and Fastenal ([stock_quote symbol=”FAST”]), and others, like Apple ([stock_quote symbol=”AAPL”]), intact. Let’s continue to hold our UUP shares.

Already, we’ve seen analysts and economists start to weigh the increasing probability of later-than-expected rate hikes in 2016 and recalculate their net interest margin assumptions. Those factors have affected financial stocks from Wells Fargo ([stock_quote symbol=”WFC”]), BB&T Corp. ([stock_quote symbol=”BBT”]) and other banks to brokerage firms, such as TD Ameritrade ([stock_quote symbol=”AMTD”]) and Charles Schwab ([stock_quote symbol=”SCHW”]).

As I’ve pointed out over the last few weeks, as corporate outlooks are catching up to the economic data, it has led and will likely continue to lead to reduced expectations for the S&P 500 group of companies. Last week, expectations for S&P 500 earnings this year continued to tick and now sit at $122.75 per share, down from $130.55 per share in October per data from FactSet. Year over year, the FactSet forecast calls for just 4% growth in collected earnings from the S&P 500 group of companies this year, but there are others that are dialing back the growth even further. Noted economist Ed Yardeni, president of Yardeni Research, has cut his 2016 expectations to $122 per share for the S&P 500, up 3%, and also recast his 2017 expectations to $128 per share, which still reflects 5% growth year over year.

With another third of the S&P 500 companies yet to report their quarterly results, I continue to see more downside than upside for S&P 500 earnings expectations in the near-term. Digging into the revisions we’ve received thus far, once again analysts are calling for pronounced earnings acceleration in the back half of 2016, with 3Q 2016 up 5.5% and 4Q 2015 jumping 10.7% following declines in the first half of the year. When I see such significant reversals, particularly several quarters out, I have to wonder about the underlying assumptions and whether those making them are listening to the data or if they are closing their eyes and wishing for the best. As any investor knows who has tried to wish a stock price higher, it rarely works if the fundamentals are going against you. I’ll continue to stick to digging into the data — it’s worked very well for us so far, and I see no reason to deviate for something found in the Magic Kingdom.

Given the boost in average hourly wages reported in the January Employment Report, mixed with the downward vector in economic data of late, there is a high probability investors will continue to gravitate to consumer staple stocks, such as Clorox ([stock_quote symbol=”CLX”]), Colgate Palmolive ([stock_quote symbol=”CL”]) and the like. In terms of exchange-traded fund (ETF) exposure, one of the best funds that is filled with similar companies is the Consumer Staples Select Sector SPDR ETF ([stock_quote symbol=”XLP”]). Its top holdings include Procter & Gamble ([stock_quote symbol=”PG”]), Coca-Cola ([stock_quote symbol=”KO”]), Philip Morris International ([stock_quote symbol=”PM”]), CVS Health ([stock_quote symbol=”CVS”]), Altria ([stock_quote symbol=”MO”]) and more than 90 others. This is a highly liquid ETF with average daily volume in excess of 12 million shares over the last three months and it boasts a current dividend yield of 3.3%. That’s far better the 1.86% yield that 10-year Treasuries offered at the close of last week. For more pronounced returns, subscribers should add the XLP March $50 calls (XLP160318C00050000) that last traded at $0.78 and that expire on March 18. I recommend that you add both the fund and the options. Set a protective stop loss at $0.70 on the options that will help limit losses if the market once again comes under pressure.

To fund both of these actions, exit your PureFunds ISE Mobile Payments ETF ([stock_quote symbol=”IPAY”]) shares.

I see the same movement toward better dividend yielding and risk-off stocks benefitting our Vanguard High Dividend Yield ETF ([stock_quote symbol=”VYM”]) shares, as well as our Utilities Select Sector SPDR ETF (XLU). You should hold them both.

The bottom line is I continue to feel very comfortable with our more defensive ETF positions as growth expectations for the coming months continue to be reset.

Enjoy your week and as we run the gauntlet of earnings and economic data that promise to make this one of the busiest weeks in some time, I’ll be sure to issue you a special alert should we need to take additional action.