With about 35% of S&P500 (
SPY) firms having reported Q2 2010 results, it appears as if overall sales will be up about 10.6% year-on-year. However, stripping out sales from the commodity price-driven Energy (
XLE) and Materials (
XLB) sectors, sales would only be up about 7.1%. Decent, but hardly impressive coming out of such a deep recession.
This week's chart shows both the increase in sales by sector and the contribution of each sector to overall index sales growth. Indeed, Energy (
XLE) is by far the largest contributor. with an estimated $79 billion increase in sales. Meanwhile the Financial sector (
XLF)--the biggest contributor to index
earnings growth in Q2--is actually detracting from the top line, as trading revenue dried up and the yield curve flattened during the quarter.
Cyclical sectors such as Consumer Discretionary (
XLY) and Industrals (
XLI) aren't posting particularly impressive sales growth; XLY is the subject of this week's Fund Focus. However one sector that stands out is Technology (
XLK), which in the ETF includes Telecom stocks. Sales growth for XLK is the second largest contributor to index sales growth at about $40 billion, a 16% increase over last year. Stripping out Telecom the growth rate would be an impressive 21.7%.
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