Signs of an improving economy paired with a rallying stock market have pushed the Direxion Daily Consumer Discretionary Bull 3X ETF (WANT) over a 100% gain year-to-date, and it could keep going higher, given the latest economic data.
Given that notion, WANT might be something short-term traders need when it comes to maximizing profitability. WANT seeks daily investment results equaling 300% of the daily performance of the Consumer Discretionary Select Sector Index.
As the U.S. Federal Reserve looks to wind down its rate-hiking measures, consumers have been more apt to spend. That comes even despite inflation still being relatively high as consumer-focused companies report their earnings.
“Consumer-focused companies are outperforming this earnings season, defying Wall Street expectations and showcasing the resilience of American spending even as inflation bites into budgets,” CNBC reported, noting that the data includes more than 30% of companies already reporting earnings. Thus far, “consumer discretionary companies have beaten earnings projections by more than 13%, versus an average 7% across the 11 sectors, according to data compiled by Bloomberg,” which translates to discretionary profits totaling $3 billion higher than originally anticipated.
Employment Data Exhibits Strength
Pairing the earnings data is a labor market that’s relatively unfazed by rising interest rates and inflation. According to data from the Labor Department, job vacancies and layoffs were lower during the month of June.
“Employment openings totaled 9.58 million for the month, edging lower from the downwardly revised 9.62 million in May, the department said in its monthly Job Openings and Labor Turnover Survey. That was the lowest level of openings since April 2021 and below the 9.7 million estimate from FactSet,” CNBC reported.
“This is definitely heading in the Goldilocks direction,” said Rachel Sederberg, senior economist at labor analytics firm Lightcast. “We still have a long way to go, and we still have a very high number of openings, especially as compared to where we were pre-pandemic. But we’re heading in the right direction and we’re doing so in a calm manner, which is what we want to see.”
Of course, this data will feed into the minds of central bankers as they decide what to do next with interest rates after raising them by another 25 basis points recently. The CME FedWatch Tool indicated at time of writing that just over 80% expected another rate hike come September.
“A variety of economic data show the U.S. economy was cruising in the second quarter. The June JOLTS data is no exception,” said Nick Bunker, head of economic research for the Indeed Hiring Lab. “The pace of the current slowdown may be too gradual for many policymakers at the Federal Reserve, as job openings are only gradually declining. But workers have much to celebrate and still possess substantial leverage.”
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