Discount Chains and Heavyweights Lift Consumer Staples

On Tuesday, October 6, 78.8% of the stocks graded in Consumer Staples finished higher, pointing to widespread participation across the group. Cap-weighted performance for the sector stood at +1.1%, outpacing the equal-weighted return of +0.9% and showing that the largest names in the index contributed proportionally more to the session's advance. The exchange-traded fund tracking the sector, the Consumer Staples Select Sector SPDR Fund (XLP), closed +0.9%. The sector's gains took place during a broad market rally in which 10 of the 11 sectors rose, supported by falling Treasury yields and retreating crude oil prices.

Discount retailers and food distributors set the pace for the sector. Dollar General Corporation closed +3.4%, while Dollar Tree Inc finished +2.7%. Retail-focused consumer businesses found support as weekly chain store sales showed steady consumer demand heading into early autumn promotional events. Supermarkets also saw individual operational updates, including Kroger resolving a supplier dispute to bring popular branded deli meats back to store shelves. Selling pressure across the sector was subdued, with Hormel Foods Corporation trailing the group at -0.9%.

As a vehicle for the sector, the fund provides exposure to the group at an expense ratio of 0.08% across $14.5 billion in assets, with quality distributed across peer-graded holdings. EasyAlpha grades each company against its industry peers to measure relative quality. In this portfolio, 45.0% of the graded weight sits in companies graded A or B. Historically, companies graded A or B have exhibited stronger fundamentals and a lower risk of large drawdowns than companies graded D or E.

The day's advance comes after a relatively quiet period for the defensive group. Over the past 100 sessions, the fund is -3.8%. Over the trailing twelve months, however, the fund remains +5.6%, with the shares finishing Tuesday at $81.78.