Consumer Staples Capitulate

After holding up better than other sectors in 2008, Consumer Staples stocks have skidded since the beginning of the year and are now falling below November levels on the way to five year lows.

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The Consumer Staples Select Sector SPDR Fund (Ticker: XLP) closed today at $20.75, below the November 21 intra-day low of $21.40 and at its lowest level since 2004.

At 17% of the portfolio, the largest component of XLP is Procter & Gamble.  Consumer product makers, and P&G in particular, have come under pressure as the companies have had to lower sales and earnings outlooks due to consumer belt-tightening and inventory reductions on the part of retailers.

P&G and another consumer giant, Johnson & Johnson, were also negatively affected by the recent disclosure that Warren Buffet’s Berkshire Hathaway was selling the consumer stocks in the most recent quarter.

According to AP reports, P&G is countering the impact on earnings from the downturn in the economy by pushing through price increases to retailers while emphasizing value to consumers.

Other significant holdings in the XLP portfolio include Wal-Mart (13%), Phillip Morris Int’l (8%) and Coca-Cola (6%).

For more, see the ETF Directory for a complete listing of Sector ETFs.