The SPDR S&P Retail ETF (NYSEArca: XRT) and the Market Vectors Retail ETF (NYSEArca: RTH), along with other ETFs with heavy retail and consumer discretionary exposure will be in the spotlight today with readings of consumer sentiment and retail sales on the data docket.
Retail ETFs have been one of the better performing areas this year, so investors will be eying Friday’s data points for continued strength in the sector. Overall retail sales are expected to have risen 0.5% last month after a 0.2% increase in July, but excluding cars, gasoline and building materials, the estimate is just a 0.3% for August after a 0.5% rise in July. [Retail ETFs May Ring up Gains on Sales]
Friday’s consumer-related data and how impacts ETFs like XRT may have added significance ahead of next week’s Federal Reserve meeting. Expectations are in place that a recent spate of strong U.S. data points has given the Fed room to taper its quantitative easing program. Some are expecting initial tapering to result in $10 billion being trimmed from the Fed’s $85 billion in monthly bond purchases.
Over the pas three months, yields on 10-year U.S. Treasuries have risen 30.4% while XRT has gained 4.6%. “The impact of interest rates and looser lending standards on auto sales, which last month hit their postcrisis high on an annualized basis, is clear. Borrowing per vehicle has risen sharply even as typical monthly payments have fallen slightly since 2008,” reports Spencer Jakab for the Wall Street Journal.
While retail and discretionary names have proven somewhat sturdy as interest rate-sensitive sectors have languished in the face of rising Treasury yields, there could be reasons for concern with XRT and related ETFs if rates continue to rise.