The major index exchange traded funds (ETFs) opened down on Thursday as weak labor data offset favorable reports on consumer spending and productivity.

  • Consumers, faced with rising gasoline prices and food costs, proved they will still spend money when given a reason like Easter, according to the latest batch of sales results released by retailers Thursday. Same-store sales at such retailers as Victoria’s Secret parent Limited Brands Inc. (NYSE: LTD), Gap Inc. (NYSE: GPS) and Costco Wholesale Corp. (NasdaqGS: COST) topped analysts’ expectations for April. Still, some of the gains may be driven by more promotions. Gap reported an 8% increase in sales, above estimates for a 0.8% decline, but said it expects its first-quarter merchandise margins to be “significantly down.” It forecast a quarterly profit of 38 cents to 39 cents a share, missing the average Wall Street estimate of 40 cents a share. Retailers’ April sales have gotten a boost from Easter, which fell three weeks later this year, and from consumers shopping for spring merchandise, candy and other holiday-related items. Still, underlying economic concerns remain, as gasoline prices have surpassed $4 a gallon in some markets, a psychological level that some retailers say could affect consumer spending and sentiment. The SPDR S&P Retail ETF (NYSEArca: XRT) is down slightly early Thursday.
  • U.S. companies squeezed more work out of their staffs in the first three months of the year, but the gain in productivity was much slower than the previous three months. The Labor Department says productivity rose at an annual rate of 1.6 percent in the January-March period compared to a 2.9 percent increase in the previous quarter. Labor costs rose at a 1 percent annual rate in the January-March period after falling 1 percent in the previous three months. A slowdown in productivity growth is bad for the economy if it persists for a long period. But it can be good in the short term when unemployment is high; because it signals companies must hire more workers in order to make further gains. The iShares Dow Jones Transportation Average ETF (NYSEArca: IYT) jumped over 1% so far today.
  • European stocks declined Thursday as investors reacted negatively to disappointing earnings from Lloyds Banking Group PLC and Societe Generale SA and as the European Central Bank did as expected, leaving its key interest rate unchanged. Both the European Central Bank and the Bank of England left rates on hold Thursday. What Jean-Claude Trichet will say during the European Central Bank president’s about the timing of potential future hikes held investors’ attention. “We don’t know whether the ECB is going to raise rates in June or July,” said Koen De Leus, strategist at KBC Securities. “The latest producer price index for the euro zone was pretty high. They will have to raise rates if they want to keep their credibility,” he added. Investors who want to play this trend can consider the ProShares Ultrashort MSCI Europe ETF (NYSEArca: EPV) surged almost 3% early Thursday.

Gregory A. Clay contributed to this article.

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.

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