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Consumer Spending Drives Stock Market to Record Highs

NEW YORK ( TheStreet) -- Cyclical stocks linked to consumer spending are leading the market higher, which bodes well for further gains in U.S. equities.

Consumer Discretionary Select Sector SPDR (XLY) and SPDR S&P Retail (XRT) have hit record highs this week on positive economic data and improved corporate outlooks over the next year.

>>Read More:10 Stocks Carl Icahn Loves in 2014

The consumer-discretionary exchange-traded fund is most heavily weighted by Amazon (AMZN) , Comcast (CMCSA) , Disney (DIS) . Home Depot (HD) and McDonald's (MCD)

The the retail ETF, which is equal weighted, contains CarMax (KMX) , Family Dollar Stores (FDO) , GameStop (GME) , Lands' End (LE) and PetSmart (PETM) .

The chart below shows that both ETFs have outperformed SPDR S&P 500 (SPY) during the past month, signaling that economically sensitive sectors underlie the gains in U.S. equities.

 XLY Chart
XLY data by YCharts

Consumer stocks were aided this week by a report that the U.S. consumer-confidence figure improved unexpectedly, reaching its highest level since October 2007. The Conference Board said on Tuesday that its index of consumer confidence rose to 92.4 in August from a reading of 90.3 in July.

>>Read More: It’s No Coincidence – Stocks and Car Sales Are Both Frothy

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