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ETF Spotlight on SPDR S&P Retail ETF (NYSEARCA:XRT), part of an ongoing series. U.S. retail sales were unchanged in August, the Commerce Department said Wednesday. The report was weaker than expected.

Assets: $558.03 million.

Objective: The SPDR S&P Retail ETF tries to reflect the performance of the companies in the retail sub-sector.

Holdings: Top holdings include: Pricesmart Inc (NASDAQ:PSMT) 1.69%, Monro Muffler Brake (NASDAQ:MNRO) 1.37%, Wet Seal (WTSLA)1.37%, Whole Foods Market (NASDAQ:WFM) 1.33% and Autonation (NYSE:AN) 1.30%.

What You Should Know:

  • State Street Global Advisors is the provider of the SPDR ETFs.
  • XRT has an expense ratio of 0.35%.
  • The fund is down 0.23% over the last month, 6.04% over the past three months and 2.04% year-to-date.
  • Fund allocations include: Apparel Retail 28.87%, Specialty Stores 14.30%, Automotive Retail 12.97%, Food Retail 9.44%, General Merchandise Stores 7.47%, Department Stores 7.03%, Internet Retail 6.60%, Hypermarkets & Super Centers 5.07%, Computers & Electronics Retail 3.98%, Drug Retail 3.16% and Catalog Retail 1.09%.
  • “SPDR S&P Retail is a cyclical play that is highly correlated with consumer spending,” according to Morningstar analyst Robert Goldsborough. “Needless to say, this is not a fund that one would want to own in a period when the economy potentially is facing a prolonged recessionary environment.”
  • Morningstar data also points out that more than two thirds of the fund’s underlying index may be categorized as discretionary.
  • “While consumer spending may well continue to grow, investors clearly are betting it will stall,” Goldsborough added. “Given still-weak housing prices and continued high unemployment, that possibility certainly can’t be ruled out.”

The Latest News:

  • U.S. retail sales were unchanged in August, Bloomberg reported.
  • Russ Koesterich, iShares global chief investment strategist, says he continues to hold an underweight view of U.S. retailers as they will be hurt the most if consumption weakens. “So far, consumers have been able to deal with the wage decline by drawing on savings. This can continue for a bit longer but obviously not forever,” he writes at the iShares blog. “The bottom line: Unless wage growth picks up in the near-term, which is unlikely, consumption will have to fall.”
  • “August’s retail sales figures will provide the first glimpse of how households responded to the plunge in equity prices at the beginning of the month. We think that sales rose, but only just,” according to a Capital Economics analyst research note, MarketWatch reported. “Coming after a healthy increase in July, though, even a small gain in August would be enough to generate a decent rebound in real consumption growth in the third quarter.”
  • “Anecdotal reports suggest that hurricane preparation near the end of the months spurred activity at hardware outlets, grocery stores, drug stores, and discount department stores. Gains in these categories should help to offset softness in apparel and home electronics,” Morgan Stanley & Co. analysts remarked, in the report.
  • “Consumers are reluctant to spend on anything outside of what they need,” Sean Incremona, a senior economist at 4Cast Inc., commented, reports Shobhana Chandra for Bloomberg. “Policy support is going to be needed.”

SPDR S&P Retail ETF (XRT)

click to enlarge

Max Chen contributed to this article.

Disclosure: None

Source: Spotlight On SPDR S&P Retail ETF