Retail shares rallied a strong 4.3 percent Thursday as the G-20 meeting of world leaders in London produced signs of at least temporary unity and a Deutsche Bank report said Kohl’s Corp., J.C. Penney Co. Inc., Macy’s Inc., Target Corp. and Wal-Mart Stores Inc. would pick up sales from failing competitors.
President Obama and other leaders of global powerhouses spoke forthrightly about the financial crisis and, to the surprise of some, managed to boost support for the International Monetary Fund by $1.1 trillion to help stabilize the global economy.
“We face the greatest challenge to the world economy in modern times,” said the leaders in a joint communiqué. “A global crisis requires a global solution.”
The S&P Retail Index jumped 12.78 points to 310.43 Thursday, outperforming the Dow Jones Industrial Average’s advance of 2.8 percent, or 216.48 points, to 7,978.08. The Dow revisited the 8,000 mark for the first time since Feb. 13 but was unable to close above it.
Among the retail gainers were the companies singled out by Deutsche Bank analyst Bill Dreher as those likely to pick up sales as other chains shutter doors, file for bankruptcy or liquidate. The group included Macy’s, ahead 12.7 percent to $10.18; Penney’s, 6.9 percent to $21.97; Target, 4.9 percent to $36.06; Kohl’s, 3.5 percent to $45.10, and Wal-Mart, 1.6 percent to $53.64.
Dreher said recently announced store closures would put about $22 billion in sales “up for grabs” and that these companies were the most likely to fill the void.
“These retailers have the balance sheet strength and successful merchandising and marketing strategies to be key beneficiaries of the up-for-grabs market share,” the analyst said. “We expect the share gains to become increasingly evident throughout 2009 and into 2010.”
Dreher also raised his target prices for Penney’s, up to $24 from $18, and Kohl’s, up to $53 from $43.
Retail stocks have risen strongly in recent weeks, coming off of depths that were more or less unimaginable a year ago — a state of affairs that might well be contributing to their comeback as investors reevaluate how retailers should be valued and their chances of survival.
“They’ve priced all these companies down for extinction; they’re not dead yet,” said Bill Rhodes, chief investment strategist at Rhodes Analytics, who noted stocks are bouncing off a bottom, but wouldn’t go as far as to say the markets’ longer-term bottom had been reached.
“The market is at a point where it could very well roll over [and start back down],” he said.
It could also continue upward.
“There’s a lot of cash on the sidelines,” Rhodes said. “It doesn’t take a lot of movement for that cash to come in and move the market higher.”
The recession, which has already claimed nearly 4.4 million jobs in the U.S. and is expected to continue to cut into employment rolls for months to come, has radically changed what counts as reassuring to Wall Street.
“There are at least hints of modestly bad news now, as opposed to horrifically horrible news, and the markets may be attaching to that,” said Andrew Bernard, director of the Center for International Business at the Dartmouth’s Tuck School of Business.
“Consumers and firms have been holding their breath for quite a while and not spending anything,” Bernard said. “There’s at least some sign that the more regular activity’s going to be occurring going forward.”
Economists expect the unemployment rate rose in March from the 8.1 percent registered in February. The Labor Department gives its monthly jobs update today.
In London, the G-20 nations stood behind the principles of a world economy based on market forces, effective regulation, strong global institutions and continued trade. “We are committed to take all necessary actions to restore the normal flow of credit through the financial system and ensure the soundness of systemically important institutions,” the leaders said.