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In a tough economic environment, where meeting expectations is often just as good as beating them, investors gobbled up retail shares, sending the S&P Retail Index to 407.49, a 2 percent increase. The Dow Jones Industrial Average gained 1.7 percent to 12,604.45, and the broader S&P 500 grew 2 percent to close at 1,404.05.
"The [retail] stocks are all performing very well today, but I think it's more of a short covering than general buying interest," said Kimberly Greenberger, retail analyst at Citigroup.
The biggest gainer among retailers was Hot Topic Inc., which surged 16.9 percent to $6.16 a share after reporting a 0.2 percent decline in comps. Analysts on average expected comps to fall 2.2 percent. Not far behind, Caché Inc. jumped 14.9 percent to $14.59 on 5 percent comp growth, beating consensus estimates of a 4.4 percent drop.
"The best news, although it is still early, is that no retailers reduced second-quarter earnings guidance," said Todd Slater, retail analyst at Lazard Capital Markets.
While overall May results beat cautious projections, they would by no means be considered impressive in comparison with most years, said Eric Beder, retail analyst at Brean Murray, Carret & Co.
"The comp and earnings 'misses and guide-downs' that were rampant during the second half of last year appear to have been replaced, in general, with companies delivering on reduced expectations," said Howard Tubin, retail analyst at RBC Capital Markets. "While business is far from great, the stock could still work should this trend continue."
Analysts were expecting a gloomy month, with consumers filling up gas tanks and grocery carts instead of their closets, but rebate spending proved to be the wild card for some retailers, especially in the discount sector.
"The rebate checks are skewed toward the moderate-income consumer, and as a result are more likely to benefit the off-pricers, like TJX or Ross Stores, and discounters," said Richard Jaffe, retail analyst at Stifel Nicolaus.