This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Track the Consumer With ETFs

If the American consumer is really carrying the weight of the world on his shoulders, it'd be good to know if he's getting ready to shrug.

So how can you keep a finger on the consumer's pulse? Well, one way is to watch consumer discretionary exchange-traded funds.

Each month the so-called strength of the American consumer is evaluated by various reports such as the Conference Board consumer confidence index. The latest reading showed that consumer confidence declined to 97.7 in April from 103 in March.

Another set of monthly economic releases, the University of Michigan consumer sentiment index, will be arriving on Friday.

But while these reports can dramatically move stocks on the day of their release, their infrequency reduces their effectiveness as market-based measures of the consumer's health.

One alternative is to follow the trading patterns of one of three very different consumer discretionary ETFs -- the Consumer Discretionary SPDR (XLY), the iShares Dow Jones U.S. Consumer Services (IYC) ETF and the Vanguard Consumer Discretionary Vipers (VCR).

The XLY is one of nine select sector SPDRs that combine to hold all the stocks in the S&P 500. The 87 consumer discretionary stocks contained in the XLY currently comprise just over 11% of the index. By comparison, financial stocks account for the heaviest weighting, with close to 20% of the index, followed by technology shares at just under 18%.

As one might expect from an ETF made up of companies that derive their profits from consumers' excess cash, the XLY has healthy weightings in retail, automobile, hotel and leisure, media and restaurant companies. Home Depot (HD) shares maintain the heaviest weighting in the ETF with 6.8% of assets, followed by cable giants Time Warner (TWX) and Comcast (CMCSA).

Oddly, the XLY does not hold shares of the nation's largest retailer, Wal-Mart (WMT), while it does hold rivals Target (TGT) and Lowe's (LOW). Instead, Wal-Mart can be found in the consumer staples category, where it makes up 15% of the heavily concentrated Consumer Staples SPDR (XLP).

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs