Consumers Start Shopping in February; ETFs Yawn | ETF Trends

Shoppers braved record snowfall to turn out in force and buy stuff. The end result was a hike in retail sales and a lot of shocked economists, who thought sales would decline last month. Despite the surprise, the markets and exchange traded funds (ETFs) stayed flat.

Economists weren’t expecting the 0.3% gain retail sales made in February; they had forecast a decline by the same amount. Excluding auto sales, the results were even better: retail sales gained 0.8%. The results were the fourth gain in five months. Consumer spending is two-thirds of the U.S. economy, so this is understandably a closely minded indicator. Consumer sentiment in early March didn’t fare as well, declining slightly as Americans remained down about the job outlook. SPDR S&P Retail (NYSEArca: XRT) is up slightly this morning. [5 ETFs to Play the New Retail Climate.]

Household debt also declined last year by 1.7%, the fastest rate in more than 60 years – a great sign for the economy. Less debt will help free up disposable income and potentially goad consumer spending. But it also signifies the impact of  bleak job and housing markets, which have forced millions of Americans to find new ways to become frugal.

The Federal Reserve has a new number two in place: the Obama administration has settled on Janet Yellen, president of the Federal Reserve Bank in San Francisco. She succeed Donald L. Kohn, who plans to retire after his four-year term winds up in June. Yellen is seen by many as inclined to keep interest rates low in order to keep the economy moving. Chairman Ben Bernanke has expressed an interest in doing this, too.

The Federal Reserve is expected to make a policy announcement next Tuesday, where it’s anticipated that the central bank will once again state that it’s keeping interest rates low. As a result, long-dated Treasuries are enjoying a rally this morning, led by the 30-year bond. iShares Barclays 10-20 Year Treasury (NYSEArca: TLH) is up slightly this morning.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.