By  on December 22, 2009

Investors looked past the snow that blanketed the East Coast and pushed up retail stocks 1.7 percent Monday, the sector’s second-strongest showing this month.

Although stores in Washington, Philadelphia and New York were hurt by the season’s first big snowstorm, specialty retailers still appear to be playing it relatively close to the vest from a pricing perspective.

“While retailers are still running promotions, inventories seemed very much under control, so most did not seem to be resorting to steep markdowns — a positive for [fourth-quarter] gross margins,” said Credit Suisse analyst Paul Lejuez in a research note.

Eric Beder, an analyst at Brean Murray, Carret & Co., added, “The teen segment remains the most aggressive, as Abercrombie [& Fitch Co.] continues to flail with give-back coupons, while Aéropostale [Inc.] has been consistently 50 percent off the store and American Eagle [Outfitters Inc.] has taken a middle path, which we believe will drive, at best, middling results.”

The S&P Retail Index advanced 6.88 points to 413.96. Leading the charge among U.S. retailers was Zale Corp. with a 30.8 percent jump to $2.72.

Zale’s shares fell 17.8 percent Friday following reports that it was canceling orders in light of weak demand. The company responded by saying it was in the process of “reviewing and canceling certain orders” and that some payments had been delayed as it evaluated its plans.

Also gaining, although not as dramatically, were J. Crew Group Inc., up 2.5 percent to $44.57; American Eagle Outfitters, 2.3 percent to $16.64; Aéropostale, 2.1 percent to $33.07; Dillard’s Inc., 2 percent to $19.21, and Abercrombie & Fitch, 1.5 percent to $32.25.

Debt watchdog Standard & Poor’s gave Dillard’s a nod of approval and put the firm’s credit ratings on review for possible upgrade. The department store is currently rated “B-minus.”

“We believe the company has enough liquidity to operate for at least the next two years, even if sales trends in the moderate department store sector remain weak,” S&P said.

Stock markets generally predict the economic climate six months ahead, and investors are latching onto most any reason for corporate optimism. On Monday, it was acquisitions in the health care and mining sectors.

The Dow Jones Industrial Average rose 0.8 percent, or 85.25 points, to 10,414.14.

French drug maker Sanofi-Aventis agreed Monday to buy health care products firm Chattem Inc. for about $1.9 billion, and Bucyrus International Inc. inked a deal to acquire Terex Corp.’s mining equipment business for $1.3 billion.

The two cash deals lent encouragement to investors searching for signs that companies are looking beyond the current weakness and readying themselves for better times ahead.

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