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As we make our way into September, investors are trying their best to pretend that August never happened. After last month saw a number of crushing blows to the economy, including a downgrade of U.S. debts and a two-year freeze on interest rates from the Fed, many ran for the hills as fears of a double-dip were reignited. During all of this time, markets swayed violently back and forth, eating away gains that a number of funds had built up over the year. Now that investors are seeking to move past one of the worst months in recent memory, key economic data will be the biggest market mover as well as a barometer for an outlook on the economy [see also ETFs & Sector Rotation: Large Cap, Small Cap, Or International?].

Today will see one of the most important data releases, as the U.S. details the unemployment rates for the month of August. One of the major sticking points in our current economy is the high unemployment level, which many argue is the biggest anchor to our recovery. Next week, President Barack Obama is set to make a major speech on his jobs outlook and what the government plans to do to put more people back to work. There is already much speculation over what Obama will say, as some want a hard-nosed plan to stimulate jobs-growth, while others are worried that a new plan could put pressure on our already high debt levels [see also ETF Insider: Markets In Limbo].

With Obama’s speech being a week away, on September 8th, all eyes will be fixated on today’s release of current unemployment levels, as it is typically a major market mover. The month of July saw unemployment come in at 9.1%, and that is expected to hold for the month of August. Should the number jump, markets will likely take a hit, but this may pressure the Fed into taking action with Ben Bernanke’s upcoming speech. If unemployment dips, however, markets will take it as a slow but steady sign of recovery and likely finish the day in the black [see also August ETF Roundup: Launches, Filings, and Closures].

In light of this major data announcement, today’s ETF to watch will be the Consumer Discretionary Select Sector SPDR (NYSEARCA:XLY). This fund tracks a number of big-name U.S. companies that derive their primary business from discretionary spending. Top holdings in this ETF include McDonalds (NYSE:MCD), Amazon (NASDAQ:AMZN), Comcast (NASDAQ:CMCSA), and Home Depot (NYSE:HD). XLY has held relatively flat on the year, with current gains of 0.43%. U.S. employment has a direct impact on discretionary spending, as those having trouble making ends meet will rarely spend money on the underlying products of the stocks that make up this popular ETF. Look for XLY to sink on a negative report, but it also has the potential to make strong gains if unemployment comes in lower than expected.

Disclosure: No positions at time of writing.

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Source: Friday's ETF To Watch: Consumer Discretionary SPDR