Staples Retreat as Casey's Plunges and Yields Rise

On Wednesday, September 9, weak breadth and earnings pressure weighed on the Consumer Staples sector. Only 14.7% of the sector's companies gained ground, leaving the exchange-traded fund Consumer Staples Select Sector SPDR Fund (XLP) at -1.2% to close at $83.04. The fund holds 46.2% of its graded weight in companies graded A or B, but that quality base could not offset steep declines from individual holdings such as Caseys General Stores Inc (-14.2%). Selling broadened across equities as crude oil climbed above $100 a barrel, elevating inflation concerns and lifting Treasury yields ahead of upcoming inflation reports.

Earnings news drove the sharpest losses within the group. Casey's reported first-quarter results that disappointed investors as inside same-store sales growth slowed to 3.2% and fuel gallon volumes contracted 0.3%. The company also reaffirmed its full-year guidance rather than lifting its targets. Elsewhere in the sector, Target announced plans to open eight new stores this fall as part of its scheduled store expansion for the year.

A few agricultural and distribution names resisted the downturn. Archer-Daniels-Midland Company (+2.4%) finished near the top of the sector, while Sysco Corporation (+2.2%) gained ground, though our sources show no reported company-specific driver for the move.

Trading showed a clear divergence between large and mid-sized stocks. The cap-weighted sector finished at -0.9%, while an equal-weighted measure of the same companies recorded -1.5%. Because the equal-weighted basket fell further, smaller and mid-cap constituents bore the brunt of the day's selling relative to mega-cap members. The broader market offered minimal support during the session, as 1 of the 11 sectors rose, leaving XLP at -2.2% over the past month.