Markets took a debt downgrade for Italy in stride and generally perked up today as investors looked toward the U.S. Federal Reserve for support and hoped that Europe will be able to sort out its debt crisis.
The Fed, led by chairman Ben S. Bernanke, is expected to weigh in on monetary policy Wednesday following a two-day meeting.
The S&P Retail Index, which spent much of the day in positive territory, dipped just before the closing bell and was down 1.1 percent, or 5.89 points, to 526.36 as trading settled. The Dow Jones Industrial Average ended the day up 7.65 points to 11,408.66.
Although the financial headlines have been dominated by Europe’s debt troubles and weakness in the U.S., that uncertainty has been driving investors toward bets on well-established companies, pushing shares of both Ralph Lauren Corp. and The TJX Cos. Inc. to all-time highs earlier in the day.
Lauren’s stock, which was first offered to the public in 1997, peaked at $154.62 in morning trading, up 2.7 percent from Monday’s close. And TJX, the industry’s dominate offprice retailer, traded as high as $59.72, up 4.1 percent.
The companies’ gains also illustrate the recent move towards the poles of fashion, which has helped upper end names and their bargain-based cousins thrive as the middle searches for its footing.
In Europe, macro economic concerns that are holding sway.
Late Monday, Standard & Poor’s cut Italy’s credit rating to “A” from “A-plus,” noting the country still has high GDP per capita, but weakening growth prospects.
Despite the downgrade, the FTSE MIB rose 1.9 percent in Milan, as the DAX rose 2.9 percent in Frankfurt and the FTSE 100 increased 2 percent in London.
The political climate in Italy weighed on the country’s rating—as was the case in the U.S., which the rating agency downgraded last month.
“Even under pressure, Italian political institutions, incumbent monopolies, public-sector workers, and public- and private-sector unions impede the government’s ability to respond decisively to challenging economic conditions,” S&P said.
The more immediate concerns in Europe center around a bailout for Greece and whether the country will ultimately make good on its debt. Fears of a Greek default that could ripple across the Euro zone and impact the U.S. have been holding markets back in recent months.