Retail ETFs Higher After March Shopping Spree

Includes: GPS, M, TGT, VCR, VDC, XLP, XLY, XRT
by: Tom Lydon

The U.S. economy may be doing better than we think as the improving jobs market is translating to higher consumer confidence. The government released better-than-expected retail sales numbers Monday, lifting retail stocks and sector-related exchange traded funds.

SPDR S&P Retail ETF (XRT) gained 0.5% on Monday

The Commerce Department announced that retail sales in the U.S. increased 0.8%, compared to the average forecast of 0.3%, following the 1% advance in February, reports Shobhana Chandra for Bloomberg.

Improvements in the jobs market has boosted consumer confidence in spite of rising gas prices. Additionally, the stronger consumer demand will also help the U.S. economy chug through the potential recessions in the eurozone or a "hard landing" in China.

Households "have the income to propel their purchases now that we're seeing job growth," Russell Price, senior economist at Ameriprise Financial, said in the article. "They have adjusted to the higher price of fuel. The economy now needs to build on its own momentum."

"The industry and consumers have been very resilient in the face of higher pump prices," Don Johnson, vice president of U.S. sales at General Motors Co., said in the article. "The steadily improving economy is playing a role and so is pent-up demand and an improved credit market."

Eleven of thirteen retail sub-categories showed improvements, including electronics, clothing and furniture.

Store chain data for more than 20 companies tracked by Retail Metrics also increased 3.9% in March, higher than the 3.3% projections, as consumers took advantage of discounts and early spring shopping. Gap (GPS) sales jumped 8% while Target (TGT) and Macy's (M) both posted 7.3% gains.

Other related sector ETFs include:

  • SPDR Consumer Staples Select Sector Fund ETF (XLP)
  • SPDR Consumer Discretionary Select Sector Fund ETF (XLY)
  • Vanguard Consumer Staples Sector ETF (VDC)
  • Vanguard Consumer Discretionary Sector ETF (VCR)


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Max Chen contributed to this article.

Disclosure: I am long XRT. Tom Lydon's clients own XRT.