ETFs Fly High on Consumer Spending

December 2nd at 8:30am by Tom Lydon

Enthusiasm over better-than-expected retail sales numbers lifted exchange traded funds (ETFs) higher on Thursday morning, even after U.S. weekly jobless claims increased more than analysts anticipated, denting enthusiasm a day before the monthly jobs report. Investors also are keeping an eye on events overseas, as the European Central Bank announced its intent to keep interest rates on hold, as expected.

  • The number of U.S. workers filing new applications for unemployment benefits rose 26,000 in the holiday-shortened Thanksgiving week to 436,000, bouncing off a more than two-year low, according to Labor Department data. Despite the increase, jobless claims have totaled less than 450,000 for four straight weeks, the first time that’s happened this year. Most economists believe weekly claims have to move down toward 400,000 or below to indicate a faster pace of hiring, or at least slower layoffs.
  • MarketWatch reports that the European Central Bank on Thursday left its key lending rate unchanged at a record low 1%, as expected, but investors are focusing on ECB President Jean-Claude Trichet’s upcoming news conference for any sign the central bank will take action to address Europe’s sovereign-debt crisis. Investors are also looking for Trichet to signal that the ECB intends to step up purchases of distressed Euro-zone sovereign bonds, possibly even announcing a numerical target for purchases. SPDR DJ Euro STOXX 50 (NYSEArca: FEZ) is up 1.5% following the news.
  • Helped by earlier-than-ever holiday promotions and strong Black Friday weekend demand, retailers reported better-than-expected November sales Thursday, in another sign that the industry’s biggest selling season has gotten off to a good start. The number of people who shopped stores and online between Thursday and Sunday jumped 8.7% to 212 million shoppers, according to a National Retail Federation survey of 4,306 shoppers conducted by BIGresearch. The total amount spent during the four-day weekend reached an estimated $45 billion. Following the morning bullish trend is the Vanguard Consumer Discretionary (NYSEArca: VCR) is up on the reports.
  • Pending home sales surged a record 10% in October, a welcome surprise for analysts. Low borrowing costs and falling prices helped attract holdout homebuyers. Housing will likely still look weak compared to years past, but any sign of improvement is met with enthusiasm. iShares Dow Jones U.S. Home Construction (NYSEArca: ITB) is up more than 3% following the reports.

Gregory A. Clay contributed to this article.

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