The retail sector has been a key component helping power the S&P 500 to fresh all-time highs as the economy slowly improves along with sentiment after the financial crisis.
However, consumer discretionary ETFs were sluggish Monday after the Commerce Department said retail sales rose 0.4% last month, less than economists had forecast. Auto sales and rising gas prices were responsible for much of the increase in overall sales.
Lower-than-expected retail sales are “the latest sign of a slowdown in economic growth that could argue against the Federal Reserve’s plan to start trimming its monetary stimulus later this year,” Reuters reports.
“It provides no additional evidence that the economy is gaining momentum,” said Annalisa Piazza, a senior economist at Newedge Strategy, in the article. “It doesn’t allow the Fed’s chairman to have a firmer tone as the U.S. economic recovery remains gradual.”
Consumer spending powers about 70% of the U.S. economy. Consumer discretionary and retail ETFs have been strong performers in recent years as confidence gradually improves. [Consumer Discretionary ETFs Still Crushing the S&P 500]