Shayne Heffernan on XLY The Consumer Discretionary Select Sector SPDR Fund

The Consumer Discretionary Select Sector SPDR Fund, whose members include Home Depot and Lowe’s, fell 1.3 percent at 12:29 p.m. today and has lost 6.4 percent since June 15. The SPDR S&P 500 ETF Trust, which tracks the S&P 500 index, is down 1.9 percent during the same period. At these low prices the stock is worth buying.

Retail numbers have been mixed over the spectrum of the sector, some good some bad, but the market in XLY is trading as if they were all bad.

Masco this week said second-quarter sales to key retailers were unchanged from a year earlier. The Taylor, Michigan-based company also cut its forecast for housing starts in 2010 and said sales since April have slowed from a year ago.

“Expenditures on repair and remodel activity will be challenged in the second half of 2010,” Chief Executive Officer Tim Wadhams said in a statement on July 26. “Big-ticket items will continue to be deferred, in the short-term, until general economic conditions, unemployment, consumer confidence, credit availability and home prices improve.”

Stanley said customer restocking, which lifted second- quarter sales, is not expected to continue in the latter half of the year at the same pace. The New Britain, Connecticut-based company acquired Black & Decker in March this year, combining the two largest U.S. toolmakers.

“Our belief that the rebound within the end markets we serve will be slow and perhaps bumpy remains unchanged,” Donald Allan, chief financial officer, said in a statement on July 21.

The New York-based Conference Board’s consumer confidence index fell to a five-month low this month from 54.3 in June. The report also showed the proportion of Americans who expected their incomes to rise over the next six months dropped 10 percent, the lowest since April 2009.

A more frugal approach to consumer spending also is a concern for Sherwin Williams Co., the biggest U.S. paint retailer. The Cleveland-based company last year got about 86 percent of its sales in the U.S.

“We’ve commented about the skittish consumer in this economy that any little bit of bad news tends to see some bit of a pull back and some of this is discretionary spending,” Chairman and Chief Executive Officer Christopher Connor said on a conference call with analysts on July 22. Business related to commercial construction also is facing “headwinds,” he said.

Shayne Heffernan www.livetradingnews.com

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