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Retail Stocks Retreat for Week

The S&P Retail Index declined 0.95 points, Dow rose 16.45 points.

Retail stocks dipped 0.2 percent Friday and fell modestly for the week as investors mostly treaded water, waiting for a sign to buy or sell.

This story first appeared in the June 21, 2010 issue of WWD.  Subscribe Today.

The S&P Retail Index declined 0.95 points to 431.79, making for a 0.5 percent drop for the week. The Dow Jones Industrial Average rose 0.2 percent, or 16.47 points, to 10,450.64 for the day and was up 2.4 percent for the week.

Decliners Friday included Destination Maternity Corp., down 8 percent to $27.05; American Apparel Inc., 7 percent to $1.73; The Talbots Inc., 4.2 percent to $12.13; J.C. Penney Co. Inc., 1.5 percent to $26.16, and Macy’s Inc., 1 percent to $21.46.

Of 172 equities tracked by WWD, 108 were up for the week, 53 were down and 11 were unchanged.

Retail stocks generally took their hardest hit on Thursday last week, when word came that consumer prices fell for the second straight month in May. The pricing weakness, which could hurt retail margins, spurred some fears of deflation. But investors also saw it as further proof that the Federal Reserve’s open market committee would not back away from its policy of low interest rates when it meets this week.

“U.S. economic news on net had a positive spin,” said IHS Global Insights U.S. economists Brian Bethune and Nigel Gault in a weekly wrap-up. “Tame inflation numbers continued to push U.S. treasury note and bond prices up, while selling pressure on the euro eased and commodity prices recovered.”

The lingering European sovereign credit problems remain a wild card, but sentiment has been improving and the euro rose to nearly $1.24 Friday, recovering from the four-year lows below $1.19 seen earlier in the month.

Markets in Europe and Asia also strengthened last week. The CAC 40 rose 3.7 percent to 3,687.21 in Paris, as the DAX increased 2.8 percent to 6,216.98 in Frankfurt and the FTSE 100 advanced 1.7 percent to 5,250.84 in London. The Nikkei 225 increased 3 percent to 9,995.02 in Tokyo and the Hang Seng Index rose 2.1 percent to 20,286.71 in Hong Kong.

This week, meanwhile, observers will be watching for any currency fallout over China’s announcement Saturday that it will move toward a more flexible exchange rate to bolster the global economic recovery that is under way. The announcement by China’s central bank came a week before the G-20 summit of world leaders in Toronto and on the heels of increasing pressure from President Obama and U.S. lawmakers, prodding the Chinese to allow it currency to appreciate. Critics of China’s currency policies argue that its currency is undervalued by as much as 40 percent, which makes China’s exports cheaper and puts U.S. produced goods at a competitive disadvantage.

Investors also will be waiting for a recalculation of first-quarter gross domestic product and a fresh reading on consumer sentiment, both on Friday.