Back to top

ETF News And Commentary

As equities continue to soar, the benchmark large cap index of the U.S. equity market, the S&P 500, inches closer to its all time high level. This has largely been thanks to strong employment figures, little geopolitical worries, and solid domestic data (read ETFs in Focus This Week: VXX and XRT).

In particular, the retail sector has been in focus due to recent monthly data. While some were expecting weakness in the latest report due to higher taxes and the sequester, it didn’t come to pass in the last release.

In fact, total sales (inclusive of auto sales) reported a 1.1% increase compared to a rather subdued expectation of +0.5%. This continues a solid trend for retail over the past few months, suggesting to many that the consumer is back on track.

This news also helped to push retail ETFs higher once more, keeping a solid winning streak alive for these sector funds.  

In particular, investors saw a good day out of the SPDR S&P Retail ETF (XRT - ETF report) which tracks the companies in the retailing business from the S&P 500, as this fund moved up 1.33%. Beyond this ultra-popular fund, we also saw good days out of the PowerShares Dynamic Retail ETF (PMR - ETF report), which was up by 1.22%, and the Market Vectors Retail ETF (RTH - ETF report), which added 0.85%.

Even without including yesterday’s trading, retail ETFs have been having a pretty good run thus far, primarily fuelled by rising consumer confidence and spending, following the holiday season last year. However, it is true that worries over the fiscal cliff and a payroll tax hike did take a toll on these ETFs in the latter part of December last year (read Impact of Positive Jobs Data on ETFs).

On a one year look, XRT and PMR have returned around 15.5% and 9% respectively. However, their counterpart RTH seems to be comfortably beating them with a one year return of around 19.8%.

Also, investors should note that one characteristic which probably sets RTH apart from the other two ETFs is that it provides a pure play in the retail ETF space without any exposure in the auto space, something that investors should keep in mind if they are curious about diving into the space.

Friday: Another Important Day for the Retail ETFs?

Friday could well be yet another action packed day for the retail ETFs especially considering the fact that the Consumer Sentiment data is slated to be released on that day (read What's Next for Currency ETFs?).

While the Retail Sales data might have completely overshadowed the potentially toxic effects of gasoline price increase and the payroll tax hike on consumption, it will be interesting to see if these factors will weigh on consumer confidence.

If it does, it is quite possible that we could well see a pullback in these ETFs from current levels. However, if the consumer confidence is in alignment with the robust Retail Sales data we could well see another surge in the retail ETF prices on Friday, continuing their solid momentum.

XRT, PMR and RTH all have a Zacks ETF Rank of 2 or ‘Buy’ with ‘High’, ‘Medium’ and ‘Low’ risk outlooks, respectively (see the Zacks ETF Rank Guide).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Please login to Zacks.com or register to post a comment.

If you wish to go to ZacksFunds.com, click OK. If you do not, click Cancel.

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
CENTURY ALU… CENX 22.65 +5.06%
PLANAR SYST… PLNR 4.32 +4.10%
ERBA DIAGNO… ERB 2.89 +3.58%
MALLINCKROD… MNK 71.87 +3.40%
GTT COMMUNI… GTT 12.00 +3.00%