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Top Retail ETF to Maintain Momentum

Several retailers are reporting earnings this week and positive sentiment from these companies will continue to fuel the year-to-date rise in the SPDR S&P Retail ETF.
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) -- Several retailers are reporting earnings this week and positive sentiment from these companies will continue to fuel the year-to-date rise in the


(XRT) - Get SPDR S&P Retail ETF Report


XRT rose by 16% in the year through March and this performance was strong enough to earn it a spot on my list of the

best ETFs

after the first quarter of 2010. If retailers continue to report well, this will ensure that the fund's progress will continue.

Ruby Tuesday


, the restaurant chain, reports earnings on Wednesday. A positive report and outlook from this company will show that families and individuals are willing to pay more to eat out as opposed to saving money by cooking at home. This also will show that consumers are more confident about their current and future levels of income and will be able to afford to shop more.

Also reporting this week are two other consumer discretionary companies,

Bed Bath & Beyond

(BBBY) - Get Bed Bath & Beyond Inc. Report


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Pier 1 Imports

(PIR) - Get n.a. Report

. Bed Bath reports on Wednesday; Pier 1 on Thursday.

Both of these companies sell products for the home and a positive outlook from them will indicate that Americans are ready to spend additional money on improving the interiors of their living spaces. Like eating out at Ruby Tuesday, buying home embellishments from BBBY or PIR is a purchase that individuals can put off if they are having financial difficulties.

Therefore, good earnings reports from these companies will show that consumer sentiment is improving and that retailers may benefit from an end to recessionary personal consumption habits.

Throwing an interesting element into the retail outlook this week will be earnings from

Family Dollar Stores


, which reports earnings on Wednesday.

This company is a discount retailer serving lower income markets and sells many products that can generally be classified as consumer staples. Earnings from FDO that are better than expected will have a positive effect on the discount and staples retailers in XRT, since it would indicate that although the economy is still improving some consumers are still maintaining a tight belt.

I'd expect also that XRT will have a strong week after the Labor Department report on Friday, which showed the American economy added 162,000 jobs in March. This was the largest gain for one month in three years.

Job creation and a decrease in unemployment are crucial for retailers to continue their advance, as personal consumption is positively correlated to personal income. Since markets in the United States were closed on Friday, futures contracts rose but common shares didn't have the opportunity to react to the jobs report, meaning the effect on retailers is occurring Monday and will be helped along throughout the week by earnings reports from retail companies.

I would expect that positive sentiment from the companies reporting this week, on top of the stellar jobs report, will allow XRT to continue its push as one of the top-performing ETFs.

--Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion had no positions in the securities mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.