Federal Reserve chairman Ben Bernanke told House lawmakers Wednesday that the pace of the economic contraction might be slowing, but his optimism didn’t lift Wall Street’s spirits.
Much, he noted, depends on consumers, who are vulnerable to the labor market, declines in household wealth and limited access to credit.
“We continue to expect overall economic activity to bottom out, and then to turn up later this year,” said Bernanke, basing the forecast in part on a stabilization in consumer spending.
Investors will get a fresh look at consumer activity today, when many retailers report May comparable-store sales, and another on Friday, when the Labor Department weighs in on last month’s employment numbers.
The S&P Retail Index slumped 1.3 percent, or 4.57 points, to 339.10 Wednesday, as the Dow Jones Industrial Average retreated 0.8 percent, or 65.63 points, to 8,675.24. The retail index’s pullback was the first after three consecutive upward sessions that had lifted it 8.8 percent.
Retail decliners included Macy’s Inc., down 4 percent to $13.32; Sears Holdings Corp., 2.6 percent to $65.58; J.C. Penney Co. Inc., 2.5 percent to $30.09; Target Corp., 0.8 percent to $40.97, and Kohl’s Corp., 0.8 percent to $46.65. Wal-Mart Stores Inc., a Dow component that last month said it would discontinue reporting monthly sales, rose 1.9 percent to $50.88.
Shares of The Talbots Inc. also swam against the tide, rising 15.8 percent to $4.85 after Lazard Capital Markets analyst Todd Slater upgraded the stock to “buy” from “hold” and said the sale of the J. Jill unit “could occur sooner rather than later.”
Slater said this would be a transition year for the company as it streamlines its sourcing platform, increases its fashion quotient, upgrades its financial management and disposes of J. Jill.
Analysts expect the company to post first-quarter losses of 50 cents a share on Tuesday.
“While most of the heavy lifting is behind it, J. Jill still looms as a distraction, and product enhancements are masked by the macroenvironment,” Slater said.
A sale of J. Jill, which the company is actively working on, would eliminate $314 million in contractual obligations and a drag on earnings for Talbots, the analyst said. Talbots purchased J. Jill in early 2006 for about $517 million in cash and put it on the sales block in November.
Deals have been few and far between, but a report this week showed U.S. private equity firms have plenty of money on the sidelines. And they are continuing to drum up funds.
Private equity firms raised $45.74 billion in capital through April this year, but spent only $24.03 billion, according to a report from The Alliance of Merger & Acquisition Advisors and PitchBook Data Inc.
Private equity has a total kitty of $400 billion — or enough to buy all the outstanding shares and debts of Wal-Mart, Target, Kohl’s, Macy’s, Sears and J.C. Penney with more than $70 billion left over.
Just how attractive retail and fashion will be when this money comes into play remains to be seen, especially since the market is saturated with stores and consumer spending remains a question mark. Investors, already edgy about the Labor Department’s monthly jobs report due on Friday, were clearly disturbed by the ADP National Employment Report Wednesday estimating that a higher-than-expected 532,000 private sector jobs were lost during May.
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye