Friday’s ETF To Watch: S&P Retail SPDR (XRT)

by on March 4, 2011 | ETFs Mentioned:

Although oil remains above the psychologically important $100/bbl. level and tensions remain high in the Middle East, some are growing increasingly optimistic that the U.S. economy will be able to power through this setback towards more robust gains in the near future. Obviously one of the main items that holds back the U.S. economy is a lack of job creation; unemployment remains intolerably high above 9% and new jobs continue to trickle in at a very slow rate. However, recent data suggests that this may finally be turning around suggesting that brighter days could be ahead for the world’s largest economy. The run of good news began earlier this week with a solid report from the private sector in the ADP release. This report showed that private companies added 217,000 jobs last month, crushing analyst expectations of a 180,000 increase. The streak then continued with the claims for unemployment data which was released yesterday, once again in a fashion that beat expectations. Claims fell unexpectedly to 368,000– a 20,000 drop from last week– pushing it to the lowest level since May 2008. “The US labor market is picking up decisively, and it isn’t just coming from claims,” Jim O’Sullivan, chief economist at MF Global said. “It’s likely just a matter of time before the pickup becomes more apparent in the payrolls data.” However, both of these reports are but appetizers when compared to the big data release due out today, the change in non farm payrolls. Analysts are expecting the figures to show a 183,000 gain in jobs for the month of February, shattering the relatively low number for January which came in at just 36,000 [also make sure to check out our ETF Stock Exposure Tool].

Due to this crucial jobs report, investors should look for the S&P Retail SPDR (XRT) to remain in focus throughout today’s session. Retail companies are among the most impacted by news of jobs creation since stores need a humming economy to produce a great number of consumers to buy their discretionary products. As a result, if the jobs number surprises investors to the upside look for XRT to be a big winner but if the report turns out to be a disappointment it could make for a rough end to the trading week for the popular discretionary fund [see the full list of ETFs in the Consumer Discretionary ETFdb Category].

XRT In Focus

The fund tracks the S&P Retail Select Industry Index which represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is an equal weighted market cap index which suggests that the small and mid sized securities could play an outsized role in the fund’s performance. The fund currently consists of 65 companies in total with a number of popular and famous retailers comprising the list of the company’s holdings including Walgreen’s, Sears, Netflix, and Office Depot, just to name a few. The fund has gained 2% so far in 2011 but over the past two weeks has slumped back by 2.6% thanks to rising oil prices and fears that this would crush the American consumer. So no matter what happens in tomorrow’s crucial jobs report look for XRT to be in for a volatile day and for the retail sector at large to be one of the most impacted by the news of weak or strong job creation [see all the retail ETFs here].

[For more ETFs to watch sign up for our free ETF newsletter.]

Disclosure: No positions at time of writing.