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

by on April 26, 2011 | ETFs Mentioned:

Thanks to some solid economic data and encouraging news on the job front, many are feeling just a little better about the economy.  However, with oil prices surging and the price for a host of other vital commodities also reaching new highs, some are growing increasingly concerned that more of their disposable income will be eaten up by basic necessities, leaving little for discretionary purchases. Due to this, many investors will likely hone in on the most recent consumer confidence report in order to get more clues about how the embattled consumer feels about the economic situation.

Analysts are expecting April’s reading of consumer confidence to rise to 64.5 up from 63.4 last month. If this takes place, it suggests that consumers are growing increasingly optimistic about the overall economy something that would be especially welcomed news given the surging prices for commodities and especially oil. A gain in confidence will be especially important this month as March’s reading was off by more than 10 points when compared to February leaving the important mark at a three-month low. It will be interesting to see if April’s figures mark a continuation of this downtrend or if consumers are able to bounce back in April as some are predicting [Warning: Commodity Surge Could Sink Consumer Staples ETFs].

Thanks to this report, investors should look for the SPDR S&P Retail ETF (XRT) to remain in focus throughout today’s trading session. The fund is one of the most popular in the retail segment, tracking the S&P Retail Select Industry Index. This benchmark represents the retail sub-industry portion of the S&P TMI which tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. This index is an equal-weighted one and holds 93 securities with most stocks making up about 1.07% of XRT’s total holdings [see more Holdings of XRT].

Should consumer confidence surprise on the upside and if some of the larger consumer product names such as Coca-Cola are able to produce robust results in their quarterly reports, XRT could surge on the day. If, however, consumer confidence plunges thanks to high oil prices and a general concern over the health of the fragile economic recovery, this popular State Street fund could be one of the main losers in the session [see Three Pure Play Consumer Discretionary ETFs].

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

Disclosure: No positions at time of writing.