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Why Last Week Was Positive for the Consumer Sector

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What happened in the consumer sector: Week of March 5–9

Last week marked the end of earnings season with 99% of companies in the S&P 500 having reported earnings for the fourth quarter of 2017. After an unimpressive performance for the last few weeks, the S&P 500 Index (SPY) revived this week with a gain of 3.5%. This increase was driven by a strong jobs report and better earnings from some consumer stocks last week. All the sectors’ performance also improved this week. The United States added 313,000 jobs last month, outpacing estimates.

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Many consumer staples and discretionary companies reported earnings last week. The consumer staples again reported a gain of 1.6%, driven by the stock increase for Monster Beverage (MNST), Altria Group (MO), Constellation Brands (STZ), Kellogg (K), and Campbell Soup (CPB). However, Kroger (KR), Brown-Forman, and Costco (COST) stocks fell after they reported earnings last week.

The consumer discretionary sector also had a positive week, rising 3.0% despite the stock decline for a few companies after they reported earnings. After the earnings results, Dollar Tree (DLTR) and Target (TGT) stocks fell. Wynn Resorts (WYNN), H & R Block (HRB), Leggett & Platt (LEG), TripAdvisor (TRIP), and BorgWarner (BWA) showed tremendous rises in their stock prices last week. According to March 9’s FactSet report, the earnings growth rate for the S&P 500 stood at 14.8% for 4Q17.

Consumer sector–based ETFs’ performance was impressive as well. The Consumer Discretionary Select Sector SPDR Fund (XLY) rose 3.1% while the Consumer Staples Select Sector SPDR ETF (XLP) and the SPDR S&P Retail ETF (XRT) rose 1.6% and 0.31%, respectively.

For 2018, the S&P 500 Consumer Discretionary Index (7.5%) has outperformed the S&P 500 Index (4.2%) and the S&P 500 Consumer Staples Index (loss of 4.5%) on a year-to-date basis.

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