Amazon reported surprisingly strong financial results late Thursday afternoon.
Daniel Leal-OlivasAFP via Getty ImagesThe stock market is falling, but at first glance, the consumer-discretionary sector seems to be rising. That is a head fake. Thank Amazon.com.
In early afternoon, all three major U.S. indexes were solidly in the red, with a loss of 0.6% for the S&P 500. Although the economy and corporate profits are looking strong, stocks have reflected much of the good news. The S&P 500 is up 11% year to date, but it has been flat since the middle of April. Some technical analysts have said stocks were due to slide.
The consumer-discretionary sector, though, looked like a bright spot on Friday. The Consumer Discretionary Select Sector SPDR Fund (ticker: XLY) was up almost 0.5%. The fund has stocks in consumer retail and e-commerce, and the electric-vehicle innovator Tesla (TSLA), among its holdings, making it sensitive to changes in consumer spending.
But it was almost exclusively a gain in shares of Amazon that made it look as if the sector was having a strong day. Amazon stock (AMZN) was up just under 1% after the company posted better-than-expected earnings.
The key is that with its unusually large market capitalization of $1.7 trillion, Amazon represents 24% of the consumer-discretionary exchange-traded fund. The ETF is weighted according to market capitalization, so movements of stocks like Amazon have an outsize impact on how it moves.
Another company with a giant market cap is Tesla (TSLA), at $681 billion. Its stock, which represents 14% of the fund, was 4.7% higher.
A look at an equal-weighted consumer discretionary ETF shows that stocks in the sector are having an unspectacular day. The S&P 500 Equal Weight Consumer Discretionary ETF fell 0.36%. Most of its holdings—like most of the stocks in the market cap-weighted fund—were down.
Consumer-discretionary stocks aren’t outperforming, after all.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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May 01, 2021 at 02:01AM
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The Stock Market Is Down. Why Consumer Stocks Are Up. - Barron's
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