Consumer discretionary ETFs started off Friday on a soft note
following the latest U.S. durable goods data, a departure from
their year-to-date performance that has been nothing short of
The U.S. Commerce Department said Friday that durable goods
orders rose 4.2 percent in July, the biggest jump since December,
thanks mostly to a rise in commercial aircraft orders as well as
demand for autos, MarketWatch reported. However, that headline
number belies less encouraging aspects of the data series.
The transportation segment of the durables good universe is
notoriously volatile, rising and falling dramatically from month to
month, failing to capture what's really going on with consumer
discretionary demand. Typically, strong economic environments see
demand for noncore items rise, while that same demand tends to
dissipate when the market weakens.
Specifically, orders for the so-called core capital goods
actually dropped in July for the second consecutive month, slipping
3.4 percent after declining 2.7 percent in June, according to
As noted, funds that canvass the consumer sector eased on
Friday, while the broader market ticked higher. The Dow Jones
industrial average rose 28.80 points, or 0.22 percent, to
ETFs Taking A Breather
ETFs that tap into the space could bear the brunt of market
action Friday, although these funds have by and large outperformed
the broad stock market so far this year, managing to steer clear of
the jitters surrounding the health of the U.S. economy.
The plain-vanilla market-capitalization-weighted strategies in
the space all have year-to-date returns of at least 15 percent and
have rallied about 5 percent in the past month alone. Those include
- $3.5 billion Consumer Discretionary Select Sector SPDR Fund
- $278.6 million iShares Dow Jones U.S. Consumer Services
Sector Index Fund (NYSEArca:IYC)
- $515.9 million Vanguard Consumer Discretionary
XLY, IYC and VCR all hold names like McDonald's Corp., Home
Depot, Amazon and Walt Disney Co. as their top holdings. Home Depot
stock, for instance, is up 34.6 percent year-to-date, while Amazon
has gained more than 40 percent in the same period.
Even more complex methodologies such as PowerShares' Dynamic
Consumer Discretionary ETF (NYSEArca:PEZ) and the First Trust
Consumer Discretionary AlphaDex Fund (NYSEArca:FXD) have performed
While PEZ is up 13.3 percent year-to-date, FXD climbed nearly
6.5 percent in the past month, and is now up more than 7 percent
since the beginning of the year.
The latest data were, at the very least, putting a temporary
halt to the funds' upward march in price.
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