ETF Spotlight: Consumer Discretionary SPDR (XLY) | ETF Trends

ETF Spotlight on Consumer Discretionary Select Sector SPDR Fund (NYSEArca: XLY), part of an ongoing series.

Assets: $2.6 billion.

Objective: The Consumer Discretionary Select Sector Index includes companies from retail (specialty, multi-line, internet and catalog); media; hotels, restaurants & leisure; household durables; textiles, apparel & luxury goods; automobiles, auto components and distributors; leisure equipment & products; and diversified consumer services.

What You Should Know:

  • Gross expense ratio: 0.2%.
  • XLY has gained about 4% so far this year. [Consumer Discretionary ETFs Fight Weakness in Target, Staples.]
  • Top holdings include McDonald’s (NYSE: MCD), Disney (NYSE: DIS), Amazon (NasdaqGS: AMZN) and Home Depot (NYSE: HD).
  • First Trust Consumer Discretionary AlphaDex (NYSEArca: FXD) is the next largest ETF tracking the sector by assets.
  • Consumer discretionary stocks are seen as more cyclical, or sensitive to the economy. Consumer staples stocks are more defensive.
  • Consumer discretionary ETFs are among the sectors that have seen a recent pickup in implied volatility, an analyst says. [VIX ETFs Understate Risks?]

The Latest News:

  • Consumer discretionary stocks held up very well in Thursday’s seesaw action as sector ETFs posted decent gains.
  • Standard & Poor’s analysts say within the consumer discretionary sector, discounters are among the best positioned. “Like the dollar stores, Target (NYSE: TGT) is driving store traffic with an expanded food assortment in new and remodeled stories,” they wrote in a recent note. XLY has 2.6% in Target.
  • “To offset margin pressure from rising product and freight costs, as well as from sales being weighted toward lower-margin consumables, Target and the dollar stores are selectively raising prices, expanding private label offerings, and increasing direct sourcing,” S&P added. “On the whole, we think discounters are also doing a good job of managing inventory levels of more discretionary-purchase categories (e.g., apparel, home decor and seasonal merchandise), which is limiting their markdown risk.”

Consumer Discretionary Select Sector SPDR Fund

Tisha Guerrero 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.