Looking for an ETF to watch out for this week? Keep an eye on the SPDR S&P Retail ETF (NYSEARCA:XRT).
The beleaguered retail sector has been the market’s whipping boy for some time now. Over the past 12 months, the S&P 500 has returned a total of 25%. The retail sector? Just over 6%. Traditional brick and mortar retailers, however, have fared much worse. The S&P 500 Department Store subindex is down more than 12% during the same time frame and is down roughly 25% from highs reached just in December.
How bad is it right now? We’ll get a pretty good idea during this short week since the retail sector will be the last major group to report a large percentage of its earnings. In all, Home Depot (NYSE:HD), Wal-Mart (NYSE:WMT), J.C. Penney (NYSE:JCP), Macy’s (NYSE:M), Nordstrom (NYSE:JWN), Kohl’s (NYSE:KSS), Advance Auto Parts (NYSE:AAP) and Foot Locker (NYSE:FL) will report this week.
These companies represent only around 10% of the Retail ETF’s assets but the steady stream of reports will no doubt move most of the retail sector. Expectations at this point are relatively low even though the broad market has emerged from the recent earnings recession posting a roughly 7% year-over-year gain in EPS.
President Trump met with the heads of several major retailers recently. Among the chief concerns were Trump’s potential policy initiatives surrounding immigration and a border tax - both factors which executives have stated will hurt their businesses.
It’s difficult to imagine the sentiment getting much worse for retailers right now. By Friday, we’ll know if there are any reasons for hope.