ETFs

Retailers Entice But Fall Short

By Kevin Grewal

Retailers all over the nation successfully enticed consumers on Black Friday as shoppers flooded stores purchasing Christmas gifts and capitalizing on blockbuster deals, but their slashing of prices and massive marketing scheme didn’t give retailers the holiday boost that they needed.

According to data released by the National Retail Federation the number of shoppers that visited stores rose by nearly 10%, however, the total dollar amount spent by each shopper dropped by nearly 8%.   Of all the different types of retailers out there, it seems that the one-stop shop discount retailers like Wal-Mart and Target saw the most traffic and reaped the biggest benefits from Black Friday. 

Further research indicates that the top selling items in these stores were toys, clothing and books.  What makes this a bit optimistic is that two of the three are discretionary items suggesting that consumers are starting to loosen the grip they have on their wallets and indulging a little bit.  To take it a step further, personal incomes rose by 0.2% for the second straight month and savings rates declined in October when compared to September.  This is yet another possible indicator that consumers are starting to spend a little more, which is vital to the U.S. economy because consumer spending is its “bread and butter”. 

However, at the end of the day, big turnouts don’t necessarily translate into big profits and many forecast that annual retail sales will remain weak as a result of high unemployment numbers.  If retailers continue to increase traffic and consumers continue to spend, a boost in the retail sector may transcend. 

Some ETFs to watch are the following:

  • the <B>SPDR S&P Retail (XRT) PRIMARY=”NO”/> which includes online discounters like Amazon (AMZN) and Netflix (NFLX) in its top holdings.  XRT is up 89% from its March low of $18.27 to close at $34.56 on Monday.
  • the Retail HOLDRs (RTH)  which holds Wal Mart (WMT), Amazon and Target (TGT)  in its top holdings.  RTH is up 53% from a March low of $61.26 to close at $93.73 on Monday.
  • The SPDR Select Sector Consumer Discretionary ( XLY) which holds companies like Amazon, Target and McDonalds (MCD) in its top holdings. XLY is up 78% from a March low of $16.11 to close at $28.62 on Monday.

When investing in equities it is important to consider the inherent risks involved and utilizing an exit strategy is a good way to mitigate these risks.  According to the latest data from www.SmartStops.net., an upward trend in the previously mentioned equities could come to an end at the following price points:  XRT at $33.42; RTH at $91.25; XLY at $27.83.  These price points fluctuate with market trends and volatility and updated data can be found at www.SmartStops.net.

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