Tuesday’s ETF To Watch: Consumer Discretionary SPDR (XLY)

by on February 28, 2012 | ETFs Mentioned:

As February draws to a close, investors will have plenty of key data points to digest as we enter the new month. Some of the biggest focal points of the month have been gold and oil, which have both been surging for the majority of the past few weeks, leaving investors to scramble in and out of commodity positions. Equities, on the other hand, have been largely dominated by progress made in Europe regarding the Greek debt crisis. With a second bailout planned for the indebted nation, investors hope for a much needed break from euro woes and all of the subsequent market volatility as a result [see also Why Warren Buffett Hates Gold].

That break may be coming as we are set for a big week of data releases. Today will see the U.S. durable goods figures for the month of January. This report is defined as “the value of orders placed for relatively long lasting goods. Durable Goods are expected to last more than three years. Such products often require large investments and usually reflect optimism on the part of the buyer that their expenditure will be worthwhile” writes DailyFX. The report will make important commentary on the consumer sector of the country as both discretionary items and staples can fall under the previously mentioned definition [see also Seven Surprising ETF Performance Comparisons].

This report has surpassed expectations for the last three months, but strong numbers today may still have a negative impact given that analysts estimate the release to fall between -0.8% and -1.0% as opposed to last month’s 3% gain. Even if order come in as expected, the sharp drop could spook some investors and spark a selling trend. Analysts are citing rising gas prices as one of the major culprits of the negative prediction, as gas prices have been rising for several months, cutting into spending power of U.S. households and individuals.

In light of today’s key economic indicator, the Consumer Discretionary Select Sector SPDR (XLY) should be relatively active trading. This fund tracks an index designed to include companies from all across the consumer discretionary sector. As such, top holdings include household names like McDonald’s, Amazon, and Ford Motor among others. XLY has nearly $3 billion in assets as well as an average daily volume around 3.2 million. A negative report today, even if it meets expectations, has the potential to sink this fund. But if results surprise the Street, XLY could be in for a lucrative trading session [see also Beyond XLY: Considering Consumer Discretionary ETFs].

Disclosure: No positions at time of writing.