Consumer Durables companies have been obvious casualties of the recession over the past year. With signs of stabilization in the housing market and in consumer spending, some of the largest short positions have begun to decline. Some companies have bucked this trend and show continuing increases in short base.

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Don’t look now, but it appears there is a green shoot in the economy. The ISM new orders index increased by 8.1%, with new orders recorded in Plastics and Computer Products. While the new orders diffusion index increased, we are still far from a full fledged recovery. But it does appear that perhaps some replenishing of inventories is occurring.

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Analysts, however, questioned whether it was reasonable to continue paying a dividend in light of a significant and growing pension deficit.

From supermarket chain The Great Atlantic & Pacific Tea Company's FQ308 conference call (GAP):

Coca-Cola Co.(KO) and bottler Coca-Cola Enterprises (CCE) may lose market share for raising prices higher than Pepsico Inc.(PEP) and bottler Pepsi Bottling Group (PBG) Inc. Coca-Cola Enterprises has said it wanted to raise prices because of higher commodity costs and lower American soda sales. Bottlers set prices for retailers like grocery stores.

On Coca Cola Enterprises' 2009 Outlook call, the company noted that the decline in commodity prices would be felt by customers in H209:

People are eating out less, but they’re still willing to pay for organic foods, laptops and GPSs:

As the retail sector scales back prices to meet newly curtailed budgets nationwide, some investors have begun to bargain hunt among the consumer staples equities hit hard by recent market woes. In a reflection of the sector that it is designed to track, the PowerShares Dynamic Consumer Staples Fund (PSL) has gained momentum in recent months, helping the fund outperform the S&P 500 benchmark index by 2.74% in the week ending September 8.

The consumer staples sector has been surprisingly resilient, even as other sectors wax and wane in the face of increased market volatility. When payroll and unemployment data forced a sharp decline in U.S. markets September 5, bargain hunters scrambled to grab consumer staples—a move that tempered early losses and prompted a rebound in equities.

By Murray Coleman

While the market was sinking in February, Ian Naismith managed to turn a slight profit.

As fears of a recession deepen—last week, Goldman Sachs and Merrill Lynch became the latest big names to forecast one this year—many investors looked to play a little defense. In a note to clients, Goldman, Wall Street’s biggest investment bank, predicted real gross domestic product would shrink in the second and third quarters, ending up the year only slightly positive, according to a Reuters report, and suggested overweighting four sectors: health care, energy, utilities and consumer staples. S&P upgraded the same sectors according to BusinessWeek.

Our PowerShares Momentum Tracker Sector Portfolio holds funds in the first three, prompting a look down the Sector Momentum Table, to where PowerShares Dynamic Consumer Staples ETF (PSL) entered this week up nine spots in nine weeks, at No. 21.

Earlier this month, I gave my eight general predictions for the New Year on financial markets, the Fed, housing, commodities and other important areas. The following summary will give my additional insight by sectors, but are subject to change as new news occurs throughout the year. I have given some highlights of bear and bull cases for each of the sectors and my personal take on each. Please note that these are simply highlights and other factors will also potentially affect each sector. I'll begin with a discussion of the consumer discretionary, consumer staples, energy and financials sectors, and then in my next public blog will discuss the remaining areas.

Consumer Discretionary

Hickey and Walters (Bespoke) submit: Even after the two-day gains in the S&P 500, the index remains in oversold territory, although not at the extreme levels we saw at the end of last week.

The chart below highlights the trading areas of the S&P 500 along with its 50-day moving average and current price. When the index moves in or below the green shading, it is considered oversold (overbought for the red shading).

Global Retail and Consumer Goods & Services ETFs
iShares S&P Global Consumer Discretionary Sector Index Fund (RXI)

The FOMC concluded at its meeting on 9th May that inflationary pressures remain - but that they did not warrant a further rate hike just yet. So Fed Funds remain at 5.25%.

First Trust AlphaDEX Sector ETFs
First Trust Consumer Discretionary AlphaDEX Fund (FXD)
First Trust Consumer Staples AlphaDEX Fund (FXG)
First Trust Energy AlphaDEX Fund (FXN)
First Trust Financials AlphaDEX Fund (FXO)
First Trust Health Care AlphaDEX Fund (FXH)
First Trust Industrials/Producer Durables AlphaDEX Fund (FXR)
First Trust Materials AlphaDEX Fund (FXZ)
First Trust Technology AlphaDEX Fund (FXL)
First Trust Utilities AlphaDEX Fund (FXU)

The P/E of the Consumer Discretionary sector took a dip in recent weeks as prices came in slightly and earnings remained strong. The Energy chart clearly shows the earnings strength of the sector. The price performance of the sector has risen sharply over the past few years, but the P/E has contracted, indicating earnings have outpaced the price rise.

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