Eastern Chills: Blizzard Bowls Over Some Sector ETFs
February 13th, 2014 at 2:58pm by Max Chen
Winter storms across the U.S. are having a crippling effect on the economy, with some sector exchange traded funds slowing down as businesses come to a standstill.
The unruly weather system has closed schools and business, made driving treacherous and cancelled thousands of flights.
Analysts warn that the raging winter storm could further pressure the outlook for capital markets activity and the economy in general, the Financial Times reports.
“Net-net, it’s cold out there and travel is hazardous,” Chris Rupkey, chief US economist at Bank of Tokyo-Mitsubishi, said in the FT article. “Consumers made fewer trips to the shopping mall in January, and February winter weather conditions may not be much better.”
The retail report already revealed a drop in activity as sales in the U.S. fell 0.4% in January after a revised 0.1% drop in December, Bloomberg reports.
Meanwhile, U.S. car manufacturers are blaming the cold weather for the poor January showing.
“The January retail sales report is an unmitigated disaster,” Stephen Stanley, chief economist at Pierpont Securities LLC, said in the Bloomberg article. “The entire complexion of the consumer was changed for the worse today.”
Lower car sales could affect the First Trust NASDAQ Global Auto Index Fund (NasdaqGS: CARZ), which tracks the global automobile industry, has declined 1.4% year-to-date. CARZ includes large holdings to Japan at 32.9% and Germany 24.9%, along with a 20.2% weight to the U.S. [Auto ETF Could be Stuck in Neutral]
Grounded flights will put pressure on the airline industry. While there is no longer an airline ETF, the sub-sector is a major component of the transportation ETF, iShares Transportation Average ETF (NYSEArca: IYT), which has a 13.6% allocation to airliners. IYT is down 1.4% year-to-date.
Additionally, the lower foot traffic at the mall has put a crimp in the retail sector. The Market Vectors Retail ETF (NYSEArca: RTH) has declined 4.5%, Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) dropped 3.4% and Vanguard Consumer Discretionary Index Fund (NYSEArca: VCR) dipped 3.3% year-to-date. In contrast, the S&P 500 index is down 1.3% year-to-date.
For more information on market sectors, visit our sector ETFs category.