Wall Street tanked Thursday as investors worried over higher interest rates, but retail observers said the economic picture is actually brightening for consumer-based companies.

This story first appeared in the June 21, 2013 issue of WWD. Subscribe Today.

The S&P 500 Retailing Industry Group fell 2.2 percent, or 17 points, to 772.75, as the Dow Jones Industrial Average dropped 2.3 percent, or 353.87 points, to 14,758.32.

Federal Reserve chairman Ben S. Bernanke said the U.S. economy was improving enough for the central bank to consider trimming back its program to buy $85 billion in debt each month. The program helps keep interest rates low, spurring on the stock market.

“If the Fed is taking rates up, that’s a big signal that things are getting better,” said Christine Chen, senior investment analyst for global consumer stocks at Ashfield Capital Partners.

“I wouldn’t say we’re back to the go-go, free-spending days of 2006 and 2007, but I think you’ve seen unemployment rates stabilize….Companies haven’t been laying people off, so if you have a job…you’re reasonably certain that you’re still going to have a job; that drives spending,” Chen said.

And retail stocks have been on a run, rising 18.3 percent so far this year.

“This is a healthy pause,” she said.

Investors have been on the watch for a sharp drop in stocks, which are still relatively near their all-time highs, set in May.

“It’s been kind of overdue,” said Corinna Freedman, an analyst at Wedbush Securities Inc., of the market drop. “These stocks have been sort of on fire and we’re all chasing them. We’re due for a pullback and I find it refreshing. Hopefully it creates opportunities to get more constructive [and buy in] on names where valuations have gotten inflated.”

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