Investors are looking for a reason to believe the best days are still ahead, but retail might be ready for a breather.

This story first appeared in the February 28, 2012 issue of WWD. Subscribe Today.

Wall Street’s recovered from the flare-up of Europe’s debt crisis last year and is now flirting with levels not seen since mid-2008. The Dow Jones Industrial Average topped 13,000 for the sixth-consecutive trading day Monday, but still wasn’t able to close above the mark.

Andrew Fitzpatrick, director of investments at Hinsdale Associates, said shareholders are trying to get comfortable with the new level and that there was room for stocks to move higher still as investors pour more money into stocks that pay dividends and interest rates remain low.

“It’s a psychological level more than anything,” said Fitzpatrick of the Dow’s 13,000 mark. “Markets do tend to straddle the line of significant numbers, it’s not that unusual to see it bounce back and forth. Even though it’s hard to predict, there is a certain element of that milestone creating more of a pause than anything, and eventually we’ll see the market digest and move forward.”

That might be starting. The broader S&P 500 closed at a high not seen since before Lehman Bros. went bankrupt in 2008. And the S&P Retail Index has repeatedly set all-time highs this year.

“There is a sense that the economy is on a little firmer ground, and the Europe situation, there’s really nothing new there, so markets have sort of digested that,” Fitzpatrick said. “Yes, there’s a lot of debt and a lot of issues, but maybe they’re OK for right now. The sentiment is improving, and this is giving investors confidence.”

Retailers, which historically have led the market, have been on a roll lately, and Fitzpatrick warned the sector could be due for a bit of a pullback.

The S&P Retail Index inched up 0.3 percent, or 1.67 points, to 574.22. The measure of retail stocks is near its high of 577.58 and ahead 9.8 percent so far this year. The Dow ended the day down 1.44 points at 12,981.51 and traded as high as 13,027.37 as the S&P 500 rose 1.85 points to 1,367.59 — a level not seen since June 2008.

Among the retailers perking up were Hot Topic Inc., up 7.7 percent to $9.05; Michael Kors Holdings Ltd., 5.2 percent to $43.66; Joe’s Jeans Inc., 4.7 percent to 67 cents; The Jones Group Inc., 3.2 percent to $9.88, and Gap Inc. 2.2 percent to $23.07.

In Europe, markets closed with a thud. Milan’s FTSE MIB fell 1.1 percent to 16,308.60 as Paris’ CAC 40 sank 0.7 percent to 3,441.45, London’s FTSE 100 dropped 0.3 percent to 5,915.55 and Frankfurt’s DAX dipped 0.2 percent to 6,849.60.

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