Wall Street wisens up to discretionary spending slowdown

|By:, SA News Editor

Merrill Lynch analyst Savita Subramanian cut consumer discretionary stocks to Underperform on her view the sector is greatly overvalued. Margins are stretched to the limit and rising interest rates are creating some savers out of spenders, she notes.

Warnings signs of a cautious stance by U.S. consumers have been popping over the last weeks from teenage retailers to restaurants, but the unexpected strength in the automobile market has largely muted the argument. It took Wal-Mart dipping into negative comp sales growth to swing the pendulum on Wall Street in force.

Related discretionary stocks: HD, LOW, JCI, CMCSA, MCD, PCLN, TJX, VFC.

Related ETFs: XLY, VCR, PEZ.