Retail and apparel stocks posted gains for a second day in a row following a slump last week as investors gambled that consumers have a lot of pent-up spending to unleash.
The sector was also up on strong quarterly results from PVH Corp. and Dollar General. As a result, the S&P Retailing 500 Industry Group index closed up 0.4 percent to 1,140 while the broader S&P 500 finished the day down 0.1 percent to 2,109. The Dow Jones Industrial Average closed down 0.2 percent to 18,011.
The strength of the U.S. retail sector was not enough to offset declines in the WWD Global Stock Tracker, which fell 0.2 percent to 113.32. Issues in the WWD tracker from Asia and Japan were sharply down due to global economic concerns and some profit taking.
At the bell, PVH Corp. gained 7.1 percent to $112.10. Other strong gainers included Guess Inc., up 6.2 percent to $18.65, and Vera Bradley Inc., which rose 6.8 percent to $14.14. In after market trading, shares of G-III Apparel Group Ltd. were up 4.3 percent to $62.70. Its stock closed the day with a 3.3 percent gain. Most of the gainers in the sector posted increases of between 1.5 and 3 percent.
Last week, share prices varied as investors were worried over the ongoing negative impact of a strong dollar as well as soft retail sales. On Monday, the Commerce Department’s Bureau of Economic Analysis said consumer spending had waned, but added that Americans are earning and saving more money compared to prior months.
Economists and analysts are expecting consumer spending to bounce back in the second half. But Lael Brainard, governor of the Federal Reserve and a voting member of the Federal Open Market Committee said Tuesday that the headwinds from a strong dollar as well as several changes in consumer behavior are creating a challenging environment.
In a speech at the Center for Strategic and International Studies in Washington, D.C., Brainard said “at a time when a lot of the growth burden is riding on U.S. consumers, consumers appear to be disinclined to spend much of the gains from cheaper prices at the pump, preferring, it seems, to strengthen household balance sheets instead.”
“Relative to expectations predicated on the boost to real income from lower gas prices, consumer spending so far this year has been undeniably weak, especially given a backdrop of improving labor market prospects, solid consumer sentiment and improving credit availability,” Brainard added.