Although huge questions remain over the European debt crisis, investors have seen, in recent days, more bullish data on the American economy. Real GDP came in slightly above expectations, showing a 1.3% annualized gain, while jobless claims plummeted, sinking below 400k for the first time in a long time, crushing estimates which called for claims to come in around the 420,000 mark yet again. Thanks to these reports, some are beginning to feel slightly better about the economy and are now hopeful that we may squeak by without falling into a dreaded double dip. However, in order to confirm this recent trend, analysts will likely look to a couple of key data releases later today in order to help set the record straight.
Investors will look to a couple of key consumer metrics in order to get a better idea on how this important segment of the economy is holding up in this rocky time. Second in importance is the Reuter’s/Unviersity of Michigan consumer sentiment index in which the consensus opinion is calling for the figure to remain unchanged from the previous month. If realized, this would leave the figure flat at 57.8, a low level of sentiment that has not been seen since the financial crisis in late 2008 and the market panic in early 2009. Obviously, analysts will be looking for an increase on this important figure, especially considering that by most accounts, the current economic situation isn’t nearly as bad as it was in those dark days.
Beyond this report, investors will also look to the important release of Personal Income and Outlays which is a good metric of both total inflows into consumers’ pockets as well as purchases of durable and nondurable goods and services. On the income side, analysts are currently calling for a 0.1% increase in month-over-month terms, although expectations range from -0.1% to 0.3%. Investors should also note that this represents a drop from last month in which figures came in at a 0.3% increase. In terms of spending, that figure is expected to decline as well, although it should be noted that it is expected to rise more than income did in the previous month, gaining 0.2% in m/m terms. For specifics, analysts will likely take a closer look at motor vehicle sales as this was one of the weakest components in last month’s survey so a turn around here would be welcomed news [see all the ETFs in the Consumer Discretionary ETFdb Category].
Thanks to these key data points, investors should look for the SPDR S&P Retail ETF (XRT) to be in focus throughout much of today’s trading session. 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, and the components in the fund look to be especially impacted by today’s data releases of consumer sentiment and personal income and outlays [see more info on XRT's fact sheet].
XRT could certainly use a boost from these data releases as the fund, much like the broader economy, has been hard hit as of late, slumping by close to 3.9% in the past month and 10.4% in the past quarter. With that being said, longer time periods are all in the positives so XRT will look to return to these levels should data come in more positively over the next few weeks. So if the two releases disappoint and suggest that consumers are still not feeling too well about the economy and if they are still not spending, XRT is likely to slump to close out the week. If, however, spending and income surge and consumer sentiment is able to get out of the doldrums, look for XRT to jump higher in Friday trading and finish the month on a high note [see more fundamentals of XRT here].
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Disclosure: No positions at time of writing.