NEW YORK — Thursday’s trading on Wall Street was a roller coaster as major indices plunged in the morning on speculation that possible interest rate hikes would curb corporate profits. But the market rallied in the afternoon as investors snatched up bargains across several sectors, including retail.

As a result, the Dow Jones Industrial Average closed the day up 0.07 percent to 10,938.82 after shedding more than 170 points earlier in the day. Through Wednesday, the index had lost more than 300 points. The S&P 500 gained 0.14 percent to 1,257.93 while the S&P Retail Index rose 0.7 percent to 453.60.

The S&P Retail Index is off about 4.6 percent since the beginning of May.

Dana Telsey, analyst and founder of the Telsey Group, said retail stocks have been pressured by a “seasonal, second-quarter depression.” But the sector also is feeling pressure from consumer fears of inflation, rising interest rates and higher energy prices. “The macro factors this year are taking more of a toll than usual,” she said.

Telsey expects the macroeconomic factors will continue to influence stock performance, but retail sales trends also will be important. Retailers are better managed today than they used to be, particularly in terms of managing inventory growth in relation to the rate of sales growth, which should help mitigate negative factors, she predicted.

“Watching the consumer [and] consumer patterns is key, but the [retail] companies are better managed today than they have been in the past,” Telsey said.

Walter Loeb, former Wall Street analyst, consultant and founder of Loeb Associates, described Thurs­day’s morning session where retail stocks plunged between 4 and 5 percent as “a wasteland.”

“It is my feeling that consumer spending is not going to be very strong from now on,” Loeb predicted. The high-fashion sector is still good, he said, but disappointing same-store sales results at the lower-end retail companies, such as Wal-Mart Stores, show that consumers are feeling anxious about the economy, which is impacting how investors are trading in the sector.

“The consumer is cutting back and reexamining how to make ends meet,” Loeb said.

This story first appeared in the June 9, 2006 issue of WWD. Subscribe Today.

Loeb said a minimal deterioration of stocks wasn’t unexpected. “Stocks are due for a slight setback. I would not be surprised if they were to go 10 percent below current levels.”

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