Retail stocks fell as much as 2.1 percent Monday, but staged a comeback and followed the broader markets into positive territory as investors looked past Europe’s debt troubles and took the weakness as a buying opportunity.

This story first appeared in the May 18, 2010 issue of WWD. Subscribe Today.

The S&P Retail Index ended with a 0.2 percent, or 0.80 point, rise to 455.67. The Dow Jones Industrial Average fought back from its 1.7 percent slide to post a 0.1 percent, or 5.67 point, gain to 10,625.83.

The euro perked up as the day progressed after hitting a 4-year low of $1.223. The currency’s been losing ground against the greenback as investors move to shield themselves from the European debt crisis. A nearly $1 trillion bailout plan from the European Union and International Monetary Fund has helped keep the crisis, which started in Greece, at bay, but investors are closely watching for signs of instability in the region.

Shares of Macy’s Inc. fell 1 percent to $22.31 despite the day’s rebound and an upgrade from Moody’s Investors Service. The debt watchdog raised its corporate family rating on the department store to “Ba1” from “Ba2,” leaving the rating just one step away from investment grade territory with a stable outlook.

“The upgrade to Ba1 reflects Macy’s material improvement in credit metrics due to very strong first-quarter results and debt repayments,” said Moody’s debt analyst Maggie Taylor. “We believe the improvement in credit metrics is sustainable and expect they will continue to improve over the next 12 months.”

Last week, Standard & Poor’s moved Macy’s rating to “BB-plus” from “BB” — one notch away from investment grade by that rating agency’s scale as well. If Macy’s could get out of “junk” bond territory, it would be cheaper for the company to borrow money. It would also make the stock more attractive to certain large institutional investors who by their charters do not invest in firms with junk ratings.

Retailers gaining ground included Saks Inc., up 2.5 percent to $9.34, and Gap Inc., ahead 1.1 percent to $23.22.

European markets finished the day with mixed results. The FTSE 100 in London was essentially flat, declining less than 0.1 percent to 5,262.54, while the CAC 40 in Paris dropped 0.5 percent to 3,543.55 and Frankfurt’s DAX Composite Index rose 0.2 percent to 6,066.92.

Asian markets weathered sharp declines, including a 5.1 percent drop in the SSE Composite Index in Shanghai to 2,559.93 and pullbacks of 2.2 percent and 2.1 percent, respectively, for the Nikkei 225 in Tokyo, to 10,235.76, and the Hang Seng Index in Hong Kong, to 19,715.20.

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