Consumer Discretionary ETFs Fight Weakness in Target, Staples

Consumer discretionary exchange traded funds managed to post gains Wednesday despite heavy selling in Target (NYSE: TGT) and Staples (NasdaqGS: SPLS) after disappointing quarterly results.

Consumer Discretionary  Select Sector SPDR Fund (NYSEArca: XLY) was up 0.6%, while Retail HOLDRS (AMEX: RTH) was flat. The ETFs invest in Target and Staples.

Target’s first-quarter profit beat forecasts “as the credit card business swooped in to save the day,” said analysts at Wall Street Strategies.

“The performance of Target’s retail operations was disappointing to start the year, with weakness in many discretionary departments that had much to do with perception of value at a time of rising prices for households,” they said in a note. “Target patrons are paying more for food and that occasional splurge, but have started to expect less on the quality of those items.”

Target shares were down nearly 4% on Wednesday, while Staples dropped more than 15%.

Staples reported weaker-than-expected earnings. The shares “should get heavily discounted over concerns of increased competition and potential secular headwinds,” Jefferies analysts said in a report.

Retail HOLDRS


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