Thursday, March 4, 2010

Consumer-Stock Rally May Help S&P 500 Rise: Technical Analysis

The rally in U.S. consumer stocks indicates the Standard & Poor’s 500 Index has the momentum needed to surpass the 15-month high it reached in January, Oppenheimer & Co.’s Carter Worth said.

The Consumer Discretionary Select Sector SPDR Fund, an exchange-traded fund tracking 80 stocks such as Nike Inc. and Gap Inc., rose 1.6 percent on March 1 to $31, a level last seen in September 2008. The ratio between the ETF and another that tracks the entire S&P 500 climbed to 0.277, the highest since January 2007. When the ratio rises, it means consumer shares are outperforming.

Gains by companies reliant on consumer spending, which accounts for about 70 percent of the U.S. economy, show the market can overcome speculation that the recovery is slowing, Worth said. After the biggest rally since the Great Depression, the S&P 500 lost as much as 8.1 percent during the past six weeks as investors bet that the labor market isn’t improving fast enough and that European budget deficits will slow growth. (more)

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