Tuesday February 14, 2012 ETF To Watch: Consumer Discretionary SPDR (XLY, AMZN, DIS, MCD)
Jared Cummans: After a dismal end to last week, stocks rallied at the market open yesterday as news of strict fiscal cuts in Greece gave hope to a number of investors and analysts alike. ”There was some apprehension about it, but the fact of the matter is it was done, and it’s given some very real clarity to markets in terms of what kind of risk Greece represents to the market,” said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. This good news will hopefully keep Greece on the back-burner for the time being, as a slew of key economic data is slated to be released this week [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].
One of the most significant reports will come from U.S. advance retail sales, which will be detailed during today’s trading session. This report is a monthly measure of the sales of goods to consumers around the country. As such, this statement comments on the consumer spending sector and how willing citizens are to part with their discretionary income. A higher figure is a good sign, as it means that people are willing to spend money believing the economy to either be strong or stable. A lower-than-expected figure could point to increased saving and a lack of overall confidence in our economy.
Today’s report is predicted to come in at 0.7%, a nice jump from December’s 0.1%. This figure would represent the biggest jump in four months, as January saw the biggest gain in automobile sales since 2009. Also, “the drop in unemployment to a three-year low is evidence of an improving job market that’s essential to sustaining purchases, which account for about 70 percent of the world’s largest economy” writes Timothy R. Homan. Note that the actual retail figures has come up short for the last two months, so many will be on the edge of their seats especially given the robust growth prediction for January [see also Beyond XLY: Considering Consumer Discretionary ETFs].
In light of this announcement, today’s ETF to watch will be the Consumer Discretionary Select Sector SPDR (NYSEArca:XLY). This fund, which has over $2.9 billion in assets, measures the consumer discretionary sector of the U.S. market. Top holdings of the fund include names like Amazon (NASDAQ:AMZN), McDonald’s (NYSE:MCD), and Walt Disney (NYSE:DIS). Though this fund is not focused on just retailers, today’s report will make a major statement on the consumer discretionary sector, as it will shed light onto domestic consumption trends and spending habits. If the report comes in shy of expectations, look for XLY to take a hit on the day, while a positive release could make for a rosy afternoon for this ETF [see also ETF Tax Tutorial: Complete List Of ETFs That Issue A K-1].
Written By Jared Cummans From ETF Database Disclosure: No positions at time of writing.
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