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Retail Spurs Stock Market Rally

A retail rally helped spur broad gains in U.S. stock markets Thursday after stores turned in June comps results that bested low expectations

A retail rally helped spur broad gains in U.S. stock markets Thursday after stores turned in June comps results that bested low expectations.

Wal-Mart, a component of the Dow Jones Industrial Average, posted better-than-expected same-store sales for the first time since March and reiterated its second-quarter earnings guidance range. The company said surveys showed consumers continued to struggle financially and higher gas prices were their greatest concern.

“We remain in a challenging environment, but still believe the earnings guidance for the quarter is attainable,” said Thomas Schoewe, chief financial officer.

Wal-Mart expects earnings between 75 cents and 79 cents a share for its fiscal 2008 second quarter. Consensus analyst estimates call for second-quarter earnings of 77 cents a share, according to Yahoo! Finance.

The retailer’s stock closed up 2.4 percent, to $48.83.

Wal-Mart rival Target Corp. jumped almost 7 percent after a Bloomberg News report that activist investor William Ackman had taken a more than 5 percent stake in the firm. Target closed at $70.04.

The DJIA closed up 2.1 percent, to a record 13,861.73, while the New York Stock Exchange rose 1.8 percent, to 10,197.69; the S&P 500 added 1.9 percent, to a record 1,547.70, and Nasdaq increased 1.9 percent, to 2,701.73.

The S&P Retail Index closed up 2.4 percent, to 526.99.

Macy’s Inc. cut its second-quarter earnings forecast to a range of 20 cents to 30 cents, down from prior guidance of 35 cents to 45 cents on lower-than-expected sales levels. Analysts expect the company to post second-quarter earnings of 41 cents a share.

Shares of Macy’s closed down 2.9 percent, to $39.25.

“The magnitude of the quarter’s downward revision signals a more intense cadence of markdowns, particularly in the women’s and men’s apparel categories, than initially thought, as management works to clear inventory to ready floors for fresh back-to-school receipts,” Goldman Sachs analyst Adrianne Shapira said in a note.

Lazard Capital analyst Todd Slater said retail stocks moved higher Thursday by “beating the expectation game more than anything else” after several days of selling on low June comps expectations. Slater also pointed to several retailers that made upward revisions to guidance despite housing, inflation and gas pressures that are expected to affect consumer spending in 2007’s second half.

After market Wednesday, teen retailer American Eagle Outfitters Inc. narrowed its second-quarter earnings guidance to a range of 35 cents to 36 cents a share, from its previous forecast of 34 cents to 36 cents a share. Consensus estimates are for second-quarter earnings of 36 cents a share.

AEO said spring and summer sell-through rates were strong and that the company was pleased with its inventory position heading into the b-t-s season. Shares of AEO closed up 6.5 percent, to $27.71.

J.C. Penney Co. Inc. reiterated its second-quarter earnings guidance of 77 cents a share, which matches Wall Street estimates, after posting June same-store sales that fell year-over-year but still beat expectations, thanks to strong initial response to the company’s b-t-s merchandise.

Shares of J.C. Penney closed up 6 percent, to $75.46.