Wall St The Week Ahead: US consumer discretionary stocks low

SHARES of specialty retailers and apparel makers helped lead the charge off the market’s bottom in March 2009 but have unraveled this year, leaving consumer discretionary stocks as the sole sector to still be lower through the 2014’s first half.

Whether these stocks can snap out of that slump may hinge on what a clutch of high-profile names in the sector has to say about the health of consumer spending.

The S&P 500 consumer discretionary sector index is down 1.1 per cent since the end of 2013, the worst performance of any of the 10 macro sectors this year, while the benchmark index is up 6.2 per cent.

Profit estimates for the sector have dropped as well, shrinking by the most of any sector other than materials since 1 January. Earnings are expected to have risen 8.7 per cent for the year, compared with 13.5 per cent at the start of the year.

As profit estimates have fallen faster than stock prices in the sector, price-to-earnings multiples have shot higher, making the group the priciest in the S&P 500 at 18.6 times estimated earnings.

This week brings results from a couple of the bull market’s big performers: Bed Bath and Beyond on the retail front and Nike in sports apparel. Investors will also see earnings from Carnival.

Reports on consumption and consumer confidence are due this week. US consumer spending is forecast to have rebounded 0.4 per cent in May after dipping 0.1 per cent in April.

The US Consumer Confidence Index is expected to edge up to 83.5 in June from 83 in May.