Byline: Thomas J. Ryan / With contributions from Vicki M. Young

NEW YORK — Gucci Group shares rebounded 9 9/16 to 82 13/16 Monday to join in the rally in the broader market, but most retailers remained in Wall Street’s doghouse.
Wall Street pundits said the overall weakness among retail issues reflects continued worries over the downturn in consumer spending. Among the notable decliners were American Eagle Outfitters, 2 11/16 to 23 1/16; Bebe, 1 3/8 to 9; Federated Department Stores, 1 1/4 to 36 7/16; Nordstrom, 1 9/16 to 27 15/16; Kohl’s, 1 1/16 to 90 9/16, and Saks Inc., 7/8 to 11 3/4.
Despite its huge gain, Gucci failed to recover all of Friday’s 14-point decline and financial observers said investors still seem to be concerned that recent weakness in the equity market will hamper sales of luxury items.
“People had a feeling of a huge windfall over the past few months with all the money made in the market, but now it’s much different,” said Faye Landes, an analyst at Thomas Weisel Partners. “No matter what the market does, people won’t spend as freely.”
Luxury firms were among the hardest hit sectors on Friday, and some joined Gucci and recovered slightly Monday, including LVMH Moet Hennessey Louis Vuitton, which rose 1 15/16 to 80 following a 4 15/16 slide Friday. Tiffany & Co. picked up 1 15/16 to 65 1/2 following a 9 7/16 drop, and Zale, was up 1/2 to 41 1/2 after 3 11/16 slide.
Dorothy Lackner at CIBC Oppenheimer said Monday’s mini-recovery in luxury issues could mean that some investors believe that “if the market stabilizes, we’ll be OK.” But she also noted that luxury firms have been downtrending since the year’s start as investors’ concerns over the the loss of “wealth effect” — or the benefit to luxury items of stock market gains — have mounted For example, at the year’s start, Gucci was trading at 114 1/2 and Tiffany closed at 89 1/4.
On Monday, the Dow Jones Industrial Average rose 276.74, or 2.7 percent, to 10,582.51, following Friday’s 618-point drop, while the NASDAQ gained 217.87, or 6.6 percent, to 3529.16 after dropping 356 points Friday.
Technology firms paced Monday’s rally, but market watchers said investors are clearly favoring larger market leaders and passing on second and third-tier names and startups. As expected, many smaller dot-coms took huge hits Monday, including Alloy Online, down 1 5/16 to 10 1/16; Bluefly, 1 1/2 to 3 3/4; Global Sports, 1 1/2 to 6 5/8;, 1 13/16 to 6 1/8; The Knot, 1 to 3 7/8;, 1 1/4 to 5 5/8, and, 35/64 to 2 5/16.
One gainer was, up 5/8 to 7, after it said launched its new Health & Beauty link and provided a direct gateway to Amazon was up 3/16 to 47 1/16.
Retailers continued to get hurt by fears that greater-than-expected rate hikes by the Federal Reserve, initiated to slow the economy, would cripple consumer spending. Friday’s selloff was sparked by a higher-than-expected inflation report. On Monday, the Standard & Poor’s retail index dropped 1.2 percent.
Market watchers said the weakness among retail shares more clearly reflects the future economic slowdown rather than immediate stock market losses.
“If people become worried about losing their jobs or worried about losing their source of income, that’s a lot different from feeling like they have a little bit less money in their pocket,” said Lackner.
She noted that the still-strong economy and low unemployment has so far kept consumer confidence high, but the potential for layoffs in a slower economy would change that. Joseph Teklits, analyst at Ferris Baker Watts, observed: “Unfortunately for retail stocks, the perception on Wall Street always leads actual results. The stock market right now reflects a lower consumer sentiment and consumer spending in the second half of the year. But that could change. Next week, the market could be on a roll and people will forget about that.”
Among other retail decliners were Abercrombie & Fitch, 15/16 to 10 11/16; Ross Stores, 1 to 21 5/8; Hot Topic, 1 5/8 to 38 5/8; Claire’s Stores, 1/2 to 20 5/8, and Family Dollar Stores, 1 11/16 to 18 1/2.
On the up side, gainers included Ann Taylor Stores, 1 7/8 to 23 13/16; Pacific Sunwear, 1 3/16 to 33 9/16, and Gadzooks, 15/16 to 17 1/4. Intimate Brands climbed 1 5/8 to 38 5/8; but its parent, Limited Inc., fell 1 1/4 to 42 15/16;
Vendors were mixed and many barely moved. Notable gainers included Avon Products, 1 1/16 to 34 1/16; International Flavors & Fragrances, 1 1/2 to 36 7/16; Estee Lauder, 1 3/8 to 48 3/8, and Fossil, 1 1/4 to 22 1/8. Decliners included Tag Heuer, 1/2 to 12 1/4; Nike, 5/8 to 42, and Polo Ralph Lauren, 5/16 to 15 11/16.
Bill Nygren, portfolio manager of the The Oakmark Fund and the Oakmark Select Fund, which owns positions in Liz Claiborne and Jones Apparel Group, said the recent market weakness might be good for apparel companies, many of which have been trading at low historic valuations as investors have been fixated on growth and technology companies.
“A lot of the traditional companies have growth that’s more mundane than many of these tech companies, but they have a nice levels of earnings and they haven’t really participated in the bull market,” Nygren said.
Liz Armstrong, senior equity research analyst at Invesco, said many retailers have already bounced back since February as investors have shifted from the increasingly risky technology sector to consumer cyclicals.
One group that should be largely unaffected by the gyrations of the markets and the so-called “wealth effect” are retailers and brands focusing on younger consumers.
“Generation Y shoppers have different concerns. They have their allowances, which they are spending,” Teklits noted.
In Europe, many fashion stocks declined, but a few had good gains, including L’Oreal, which bounced back 24 to 710 euros, after easing 8.50 Friday. Pinault Printemps Redoute added 1.10 to 201 euros, after easing 0.90 Friday. Other gainers Monday included Hermes, up 3.70 to 145.90 euros, and Adidas-Salomon AG, up 0.65 to 64.15.