Wednesday brought good courage within the European luxury brand markets that closed in green for the fifth successive day. In the meantime, the S&P 500 paused near a seven-week high on low volume on Wednesday before the start of revenue reports next week, which investors hoped would provide the catalyst for stocks to advance.
As reported by Reuters, signs of a reinforcement economy plus merger and acquisition activity have pushed the S&P 500 close to 1,344, the highest level since June 2008. A significant breach of that level could lead to a stocks breakout, pushing prices higher. The market is “basically poised and waiting to see if these (earnings) numbers will support the upside,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco. “It’s a consolidation week.”
Crossing the Atlantic and commonly speaking, European stocks rose on Wednesday, adding to their three-week rally as investors looked beyond the European Central Bank’s expected rate growth, brushing aside Portugal’s debt woes and piling into recently-hit banks.
In the UK, some positive news for the UK retail sector emerged from Marks & Spencer, which announced that overall like-for-like sales were up 0.1 percent, although this masked a 3.4 percent drop in non-food sales. The company said it was still experiencing difficult trading conditions, with pressure on disposable incomes combining with higher commodity prices. This will give retailers such as Marks little room for manoeuvre, since it will be unwilling to increase prices to offset higher input costs for fear of losing buyers. Nevertheless, investors were pleased with the overall growth in sales, with poor trading in Ireland and Greece offset by strong increase elsewhere, and the shares were up 4.3 percent at 354.5p.
Marks helped give other retailers a lift, with Next up 2.8 percent to 2087p, Burberry rising 1 percent to 1222p. Nomura keeps its ‘neutral’ rating on luxury brand Burberry, as it thinks that strong momentum is already priced into the shares.
Wall Street analysts expect retailers to beat already lowered expectations when they report March same-store sales on Thursday. In general, the month may likely turn in its first negative sales for the first time after 18 months of straight gains.
On the other hand, American stocks were performing well on Wednesday, led by Urban Outfitters, which shares rose 2.6 percent while Zumiez Inc. was up 3 percent after Piper Jaffray upgraded both stocks to overweight from neutral. In the same vein, Abercrombie & Fitch Co.’s stock was up 2.3 percent, a day after the teen retailer laid out a bullish growth plan that called for sales rising to $7.5 billion by 2015.
Abercrombie “remains our favorite idea in the space as we believe the combination of worldwide development and domestic recovery will drive above-average earnings augmentation for the next several years,” said Weeden & Co. analyst Amy Noblin to MarketWatch.