Retail exchange traded funds were the strongest sector performers in Thursday’s nearly 100-point Dow rally on blowout sales from Target (NYSE: TGT) and a better-than-expected report on private payrolls.

SPDR S&P Retail ETF (NYSEArca: XRT) and Retail HOLDRS (AMEX: RTH) climbed about 3% on Thursday, while consumer discretionary ETFs also jumped. Target was among the retailers posting a rise in June sales thanks in part to discounting. Target shares vaulted 7%.

“June is also traditionally a clearance month for apparel retailers and we think bargain hunters took advantage of up to 70% savings on spring assortments to do a bit of self-purchasing,” said Standard & Poor’s Equity Research.

The tech sector also rallied Thursday and Semiconductor HOLDRS (AMEX: SMH) added nearly 3%.

The lift-off in stocks the past two weeks has carried small-cap ETFs back near record highs. [Small-Cap ETFs Rally]

Yet recent trading in options on bearish ETFs suggests some institutional investors are hedging against a possible correction, at least in large-cap stocks. [ETF Chart of the Day]

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