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The past few weeks have seen plenty of causes for concern among equity investors, as the ongoing sovereign debt crisis in Europe and fears of a slowdown in China weighed on the markets. Despite this lingering issues, U.S. equity markets have managed to broadly move higher thanks to strong retail data, and bullish earnings reports from a variety of important market bellwethers. This focus on key data has led to somewhat of a ‘Santa Claus’ rally on Wall Street as of late; however, a key piece of data scheduled to be released later today could either sink the markets or turn into a early Christmas present for investors.

Later today, investors will focus in on the key durable goods report for the month of November, a figure that shows how much businesses are spending and if they are taking part in the modest recovery. After a sharp 3.4% drop in October’s reading, investors have low expectations for the report, with analysts showing a consensus of a 0.5% decline in the index for the most recent month. However, given the increase in consumer spending, many analysts are looking for businesses to keep pace in order to demonstrate that this recovery has some steam left heading into 2011. “Everything else is clicking, we wouldn’t want to see business spending roll over,” said JPMorgan Chase economist Mike Feroli. Should businesses fail to match expectations and show another month of declining orders for durable goods it could break the recent winning streak for the markets and send the markets tumbling [see Who Else Wants ex-Sector ETFs?].

Due to this crucial report, which is one of the last major data releases before markets take a break for Christmas, the Industrial Sector SPDR (NYSEARCA:XLI) should be active in Thursday trading. The fund tracks the Industrial Select Sector Index which includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. Some of its top holdings–including General Electric, United Technology Corp, and 3M–are the country’s biggest manufacturers and the ones most likely to be impacted by changes in the level of business spending. As a result, look for today’s durable good orders report to weigh heavily on XLI and the rest of the Industrial ETFdb Category, potentially setting the tone for the industry heading into 2011 and possibly giving further clues as to how deep and broad any recovery is likely to be going forward [read Industrials ETFs Continue Impressive Rally].

Disclosure: No positions at time of writing.

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Source: Thursday's ETF to Watch: Industrial Sector SPDR