Market Overview

American Spending Is Great News For ETFs

American Spending Is Great News For ETFs

The S&P 500 is virtually flat on the year, but with the large index there are sectors on the move. The consumer discretionary sector is the second-best performing sector in the index, with a gain of 3.7 percent this year, trailing only the healthcare stocks.

The numbers suggest Americans are not spending a large amount of the money they are saving at the gas pump. The savings rate has been moving in an upward trend as the yearly change in gas prices have been moving straight down. That being said, the performance of the consumer-related companies suggests there is money making its way into their pockets.

Related Link: Consumer Spending Not Hurting Retail ETFs

Sail Me Away

A niche area within the consumer discretionary sector that has done particularly well of late is the cruise liners industry. Carnival Corp (NYSE: CCL), Royal Caribbean Cruises Ltd (NYSE: RCL) and Norwegian Cruise Line Holdings Ltd (NASDAQ: NCLH) have been able to benefit from low gas prices on both sides of the coin.

On one side they have increased sales due to more people using extra savings to go on cruises, and on the other side they save on fuel costs for running their massive cruise ships. It's a win-win for the industry.

Related Link: Wedbush Puts Norwegian Cruise Line On Top

Carnival announced first-quarter earnings on Friday, posting earnings per share of $0.20, beating estimates by $0.10. Even though the revenue number of $3.53 billion missed estimates by $40 million, the stock rallied on the news. The positive earnings report rippled across the industry, sending Royal Caribbean Cruises and Norwegian Cruise Line higher.

Highlighted below are two ETFs that are benefiting from increased consumer spending and have the cruise liners in their portfolios.

Consumer Discretionary Select Sector SPDR ETF

The Consumer Discretionary SPDR (ETF) (NYSE: XLY) tracks 87 stocks across 12 sub-sectors within the consumer discretionary sector. Media at 28 percent and specialty retail at 20 percent are the top weighted sectors.

The top individual holdings include:

  • Walt Disney Co (NYSE: DIS) making up 7.2 percent
  • Home Depot Inc (NYSE: HD) with a 6.5 percent holding
  • Comcast Corporation (NASDAQ: CMCSA) at 6.2 percent

The ETF is up 17 percent over the last 12 months and 11 percent over the last six months. XLY has an expense ratio of 0.15 percent.

First Trust Consumer Discretionary AlphaDEX ETF

The First Trust Cnsmer Disry Alpha Fnd (ETF) (NYSE: FXD) is made up of 131 stocks that show the best balance of both growth and value. The ETF is distributed across ten sectors with specialty retail at 31 percent and hotels, restaurant and leisure at 11 percent.

The top individual holdings include:

  • Graham Holdings Co (NYSE: GHC) at 1.5 percent
  • Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ: ULTA) making up 1.5 percent
  • Dollar Tree, Inc. (NASDAQ: DLTR) coming in at 1.4 percent

The ETF is up 25 percent over the last 12 months and up 3 percent over the last six months. FXD has an expense ratio of 0.70 percent.


Related Articles (FXD + XLY)

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