Lingering Issues Continue for Retail ETFs

Retail stocks are struggling this year and those struggles are reflected by the SPDR S&P Retail ETF (NYSEArca: XRT). XRT, the largest dedicated retail exchange traded fund, has been in a tailspin in the current quarter and some traders see the group’s misery continuing.

Amazon (NasdaqGS: AMZN) and Dow component Wal-Mart (NYSE: WMT) have recently helped XRT’s rival, the VanEck Vectors Retail ETF (NYSEArca: RTH), perform less poorly than XRT. XRT, an equal-weight ETF, has been plagued by slumping apparel retailers, among other corners of the flailing retail industry.

Related: America’s Less Dressed: 3 Factors Weighing On Retail ETFs

Prior to last week’s Brexit decision, some retail ETFs were showing signs of perking up, but some traders are questioning the veracity of that rally, urging investors to remain cautious lagging retailers until more encouraging signs emerge.

“Whether it was the recent dismal Bed Bath & Beyond Q1 2016 reported results or the Brexit pressuring the major indices, the XRT did break through the $39.95 level on June 27th as expected. Shares of XRT hit an intraday low on this trading day of $39.50, but did not close below $39.95, which is of great significance. Given the backdrop of a significant 6% correction in the major averages, give or take, over the last 2 trading sessions and the XRT closing above $39.95, I would be of the opinion a “dead cat bounce” awaits the ETF. This bounce may prove to recapture $41-$42 a share,” according to a Seeking Alpha analysis of XRT.


However, there are fundamental factors that should buoy consumer discretionary and retail ETFs. For example, the U.S. has been adding about 200,000 new jobs each month for the past two years, a rapid pace not seen since the boom days of late 1990s, and we are now at an unemployment rate of just 5%.