Consumer Stocks Drift Higher Before Events

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Consumer stocks on the rise, just in time for a series of important news events.

Of all the major sector-tracking SPDR ETFs, consumer discretionary (XLY) is closest to its 52-week high. (See RadarScreen® below.) That shows bullish sentiment toward the group and may reflect optimism that upcoming headlines will be positive.

Traders won’t have to wait long to know if they’re right because Walt Disney (DIS), the third-biggest holding in XLY, reports earnings tonight.  It’s been quietly making new highs since late July as investors rethink the Magic Kingdom: Before they fretted about weakness in legacy TV operations like ESPN, but now they’re more optimistic about its purchase of 21st Century Fox’s assets and long-term streaming growth.

RadarScreen® showing sectors with distances from 52-week highs.

Viacom (VIAB) follows with its own results Wednesday morning. Some customers may not realize these media companies are in the same sector as retailers, but it makes sense when you think about it because both are economically sensitive. They also share links to the advertising cycle.

Next week attention will shift to the more traditional consumer story, retail. Here’s a list of items to watch:

  • Tuesday, August 14: Home Depot (HD) reports earnings in the premarket. It’s weighted No. 2 in XLY.
  • Wednesday, August 15: Macy’s (M) reports earnings and the Commerce Department issues retail-sales data for July. Both are due before the opening bell. NAHB’s homebuilder sentiment index is also due. (Yes, they are also in the XLY.)
  • Thursday: Wal-Mart (WMT) and JC Penney (JCP) report earnings before the bell. Housing starts and building permits come out as well.

Bottom line: This isn’t a recommendation and everyone needs to do their own homework. But consumer stocks are pushing highs as investors await key headlines. Is a breakout coming?

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.