This Day On The Street
Continue to site
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

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 - Get Report) shares maintain the heaviest weighting in the ETF with 6.8% of assets, followed by cable giants Time Warner (TWX - Get Report) and Comcast (CMCSA - Get Report).

Oddly, the XLY does not hold shares of the nation's largest retailer, Wal-Mart (WMT - Get Report), while it does hold rivals Target (TGT - Get Report) and Lowe's (LOW - Get Report). 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VCR $124.43 -0.98%
XLP $52.80 -0.19%
XLY $79.57 -0.92%
IYC $145.27 -0.68%
CMCSA $60.95 -0.46%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs