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Homebuilder ETFs To Buy On Upbeat Data

After being stalled in the first quarter, the housing market started to show signs of a spring rebound. This is especially true given that new home construction and building permits rebounded in April, indicating that the U.S. economy is again gaining steam (read: Are Housing ETFs Ready to Ride on Spring Selling Season? ). U.S. housing starts climbed 6.6% to a seasonally adjusted annual rate of 1.17 million homes and much higher than the Reuters expectation of 1.13 million. The uptick in construction activity was broad-based with increases of 3.3% in single-family houses, and 10.7% in multi-family houses, including apartments and condominiums. Meanwhile, new applications for building permits, a construction bellwether for the coming months, rose 3.6% to an annual rate of 1.12 million after declining for three months. The data released early this week showed that homebuilder confidence remained unchanged for the fourth consecutive month in May as indicated by the National Association of Home Builders/Wells Fargo sentiment index. Builders’ outlook for sales over the next six months jumped to the highest level since December. This reflects that the housing market is still strengthening, though the pace of growth has slowed down (read: 5 Sector ETFs to Play Now ). This is because historically low interest rates and ongoing job creation will continue to fuel growth in a recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, slower and gradual rate hikes will not impede the growth prospect of the sector, at least in the near term. Given this, investors might want to look at the three homebuilder ETFs – the iShares U.S. Home Construction ETF (NYSEARCA: ITB ) , the SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) and the PowerShares Dynamic Building & Construction Portfolio ETF (NYSEARCA: PKB ) – for their exposure to the sector. These funds have a solid Zacks ETF Rank of 2 or ‘Buy’ rating, suggesting some outperformance in the months to come. Further, the residential and commercial building industry has a solid Zacks Rank in the top 34%. While the upbeat data failed to garner interest in the sector this week, investors could start piling up these products in their portfolio, especially if the upcoming home sales report due to release on May 24 also shows strength. In particular, PKB is outperforming with gains of 5.8% so far in the year while ITB and XHB have shed 2.5% and 3.5%, respectively. Investors seeking large profits in a short span could also take a look at the leveraged plays – the ProShares Ultra Homebuilders & Supplies ETF (NYSEARCA: HBU ) and the Direxion Daily Homebuilders & Supplies Bull 3x Shares ETF (NYSEARCA: NAIL ) . HBU provides double exposure while NAIL offers triple exposure to the index of ITB. However, the fund is relatively new in the space and has low trading activity, making it a riskier and a high-cost choice. Link to the original post on Zacks.com

Retail Sales Back To Health; ETFs To Watch

Finally, the U.S. economy got a nice economic reading. Overall retail sales expanded 1.3% in April from March, representing the largest gain since March 2015. April retail sales beat economists’ forecast of a 0.8% rise . This came as a nice surprise as weaker-than-expected April’s job data gave investors a gloomy picture on the economic growth momentum a few days back. Sales excluding auto nudged up 0.8%. As per tradingeconomics , sales growth was witnessed in 11 out of the 13 major categories. Sales at motor vehicle and parts (up 3.2%), gasoline stations (2.2%) and non-store retailers (2.1%) were the major growth drivers. Web-based shopping saw a surge in the month as online retailers came up with the strongest sales gain since June 2014 . Moreover, the University of Michigan indicated that its consumer sentiment index rose 6.8 points to 95.8 early May, marking the strongest reading since June. Market Impact However, each of the three retail ETFs – the SPDR S&P Retail ETF (NYSEARCA: XRT ) , the Market Vectors Retail ETF (NYSEARCA: RTH ) and the PowerShares Dynamic Retail Portfolio ETF (NYSEARCA: PMR ) – lost despite the upbeat retail sales data. Following the release of data on May 13, 2016, XRT, RTH and PMR shed about 1.4%, about 1.2% and over 1.3% respectively. XRT gained slightly after hours of May 13. It seems that scars of lackluster retail earnings are prominent in investors’ mind. And thus, investors paid less attention to this reassuring data. Moreover, departmental stores like Nordstrom (NYSE: JWN ) shed big time on May 13 following earnings released on May 12, which took a toll on the retail ETFs. In any case, department stores have been under pressure lately. Macy’s (NYSE: M ) , Kohl’s (NYSE: KSS ) , J.C. Penney (NYSE: JCP ) and many others soured investors’ mood this earnings season. Road Ahead Whatever the case, April retail sales data indicates that the U.S. economy is progressing at a decent clip to end Q2 (given that consumer spending makes up about 70% of the U.S. GDP) and is less likely to stagger like it did in Q1. In the first quarter, the economy grew just 0.5%. Wage gains probably helped in pulling off the April retail sales data to some extent. In the future, a dovish Fed may act as a tailwind as a few more months of a cheap dollar should boost consumers’ purchases as well as the investing world. With this, market watchers may again start wagering on an earlier-than-expected Fed rate hike, though the other economic readings need to come in stronger for that. Investors should note that each of the three retail ETFs are Buy-rated now, with RTH having a Zacks ETF Rank #1 (Strong Buy), and XRT and PMR carrying a Zacks ETF Rank #2 (Buy). Since consumers splurged on restaurants and online shopping, investors can also look at T he Restaurant ETF (NASDAQ: BITE ) and the First Trust Dow Jones Internet Index Fund (NYSEARCA: FDN ) , which focuses on online retailers like Amazon (NASDAQ: AMZN ) and eBay (NASDAQ: EBAY ) . Original Post