Traders Dump Hedges on U.S. Retailers in Sign of Profit Optimism
By Joseph Ciolli
Traders are backing away from bearish bets on U.S. consumer stocks just before a big batch of earnings reports, unconvinced that stagnant retail sales spell doom for the industry.
Demand for options that protect against losses in an exchange-traded fund tracking retailers and suppliers of other nonessential consumer goods in the Standard & Poor?s 500 Index fell to the lowest level in more than a year relative to bullish ones, according to data compiled by Bloomberg. Short interest on the ETF is four percentage points below its five-year average.
Even though U.S. retail sales barely budged in April and first-quarter growth in household consumption slowed, betting against retail stocks has been a losing proposition all year. A gauge of 30 stocks in the sector has rallied 9.7 percent in 2015, the most of 24 industries in the S&P 500, and is up almost twice as much as the full gauge since 2011.
?The consumer didn?t get as big of a kick from crude oil prices as many expected, and investors are thinking now is the time for them to finally loosen their wallets,? Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. ?The effect has been deferred, but there?s still some pent-up demand.?
The S&P 500 climbed 0.4 percent at 9:45 a.m. in New York.