By Kate Gibson
The U.S. stock market is keeping close tabs this week on results
from major retailers, the final large market group to report
quarterly earnings, with a recent rally in the sector setting the
expectations bar high.
"The recent price action of many large retailers suggests
expectations for good news from these companies is high, thus any
slight disappointment could translate into a quick pullback in
these names which spills more broadly across the market," Fred
Dickson, chief market strategist, Davidson Companies, wrote
Wednesday in a note.
On Wednesday, consumer discretionary shares, which account for
9.3% of the S&P 500 Index's (SPX) market capitalization, were
among those advancing as the major indexes rallied more than
1%.
The Dow Jones Industrial Average (DJI) added 115.78 points, or
1.3%, to 9,357.23. The S&P 500 Index gained 11.42 points, or
1.2%, to 1,005.77, while the Nasdaq Composite (RIXF) rose 29.82
points, or 1.5%, to 1,999.55.
"The retailers have had a near 40% rally off the lows and these
reports could be the fuel to drive stocks higher, or pull them
back," Dan Greenhaus, recently named chief economic strategist at
Miller Tabak, wrote Wednesday in a research note.
"Attention should be paid to the likes of Macy's Inc. and Ethan
Allen Interiors Inc. (ETH) among others to see if any progress is
expected with respect to consumer behavior," said Greenhaus.
"Over the next couple of days we will get a better picture of
the health of the nation's retailers as several big ones report
second quarter earnings, including Wal-Mart Stores Inc., Kohl's
Corp. and Nordstrom Inc. ," said Jacob Meyer, an equity analyst at
D.A. Davidson & Co.
"We expect to see these retailers meet or beat analysts'
earnings estimates as a result of cost cutting," Meyer added.