Despite the disappointing sales data, consumer discretionary and retail exchange traded funds have been outperforming and hit all-time highs Friday.
Including the Market Vectors Retail ETF (NYSEArca: RTH), SPDR S&P Retail ETF (NYSEArca: XRT) and Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), eight discretionary and retail ETFs reached new highs Friday.
Year-to-date, RTH increased 5.7%, XRT rose 1.5% and XLY advanced 3.2%. In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY) gained 1.6% so far this year.
It would seem that a few knock out performances helped offset weakness in other areas of the space. For instance, online retailer Amazon (NasdaqGS: AMZN), which makes up 6.3% of XLY and 8.5%, helped support the ETFs after surging 29.5% over the past month on better-than-expected earnings. Additionally, Netflix (NasdaqGS: NFLX), which is 1.2% of XLY, also strengthened the space after jumping 43.3% over the past month on a rise in subscribers.
Nevertheless, large retailers and department stores plodded along as American consumers opted to stash away the cheap gasoline windfall instead of spending . According to the Commerce Department, retail sales dipped 0.8% in January, which marked the weakest start to the year after the strongest quarter of consumer spending since 2006, Bloomberg reports.
Specifically, sales dipped at clothing stores, sporting goods outlets, furniture stores and department stores. On the other hand, internet retailers, building material outlets and electronic stores saw sales rise.
“Consumers are basically seeing all these positives but they’re being a little more prudent about how they spend,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., said in the article. “We’re not too concerned. Consumer spending is fine, it’s just not doing all that well given the very favorable fundamentals.”
Observers argue that with the faster job growth, retailers and discretionary companies should attract more spending ahead. Moreover, some believe consumers are just holding onto the extra cash from cheaper fuel prices as many Americans are skeptical about the how long low oil prices will last. [Conservative Consumers Keep Discretionary ETFs from Breaking Out]
“I don’t think it’s too troubling,” David Sloan, senior economist at 4Cast Inc., said in the article. “It will take a little bit of time for the consumer to respond to the extra income they’re getting.”
Market Vectors Retail ETF
For more information on the consumer space, visit our consumer discretionary category.
Max Chen contributed to this article.