ETF Spotlight on  SPDR S&P Retail (NYSEArca: XRT), part of a weekly series. Assets: $322 million

Objective: Tracks the S&P Retail Select Industry Index

Holdings: XRT’s top holdings are a mix of apparel, auto and bargain retailers, including Footlocker (NYSE: FL), Jo-Ann Fabrics (NYSE: JAS) and Sears (NYSE: SHLD)

What You Should Know

  • XRT contains 84.4% consumer discretionary stocks, 15.6% consumer staples
  • Value-focused retailers make this fund a good play for a recovering retail sector; companies like Sears, Supervalu (NYSE: SVU) and Officemax (NYSE: OMX) should appeal to consumers looking for deals
  • Retail is one of the most closely watched sectors, because consumer spending is two-thirds of the U.S. economy
  • XRT has an expense ratio of 0.35%

The Latest News

  • In order for a solid recovery in consumer spending to take shape, a turnaround in spending within this subset of spenders is needed. These are the spenders with the truly disposable income and access to credit. So, whatever the word on the street is, that fact remains that consumers are not spending the way they did pre-market meltdown. [As Auto Sales Rebound, Play It With This ETF.]
  • Discretionary spending – the category of spending that usually focuses on “wants” instead of “needs” – is showing some lag. Now many upper-income families have adopted frugality as their new mantra.
  • Business purchases and other indicators say the economy is improving, but unemployment is still at 9.7%. The Consumer Confidence Index fell to 46.0 in February from 56.5 in January, a 10-month low. Booz & Co. conducted a survey that revealed that only 18% of consumers plan on purchasing clothing and shoes at pre-recession levels in the next year and two-thirds say they are willing to go to other stores for lower prices. [Indicators and Job Reports.]

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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.