Although there are plenty of signs that the economy is stabilizing, consumer spending may still be weak for awhile, taking a toll on the retail sector and its exchange traded funds (ETFs) during the holiday season.

Traditionally, the retail sector has its best month at the end of year, when everyone is out spending their hard-earned cash on Christmas gifts, but this year things may be a bit different.  The reason behind this is high unemployment rates, restricted credit availability, foreclosures and record levels of savings, states Mike Duff on bNet.

On the other hand, a desire to spend may rally somewhat if gas prices remain stable, home values continue to strengthen and the stock market’s comeback persists enabling retailers to avoid another negative season.

At the end of the day, only time will tell us what happens to the sector that is so dependent on the Christmas season.

• Retail HOLDRs (NYSEArce: RTH)

• SPDR S&P Retail (NYSEArca: XRT)

For more stories on retail, visit our retail category.

Kevin Grewal contributed to this article.

Tags: Retail, RTH, Sector ETFs, XRT