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Target Issues Warning as Wall Street Rebounds

The market gained ground as the economy comes into focus, although not everyone was bouncing back.

By
with contributions from Julia Neel
financial/news

Wall Street rebounded Tuesday as investors shifted their attention back toward the economy and Boston began to pick up the pieces after the deadly bombings at the Boston Marathon.

The S&P 500 Retailing Industry Group rose 0.9 percent, or 6.43 points, to 742.64, as the Dow Jones Industrial Average rebounded 1.1 percent, or 157.58 points, to 14,756.78.

Investors were encouraged by an unexpected gain in March housing starts, which rose 7 percent. Monday’s attack at the marathon pushed retail stocks down 2.3 percent as the Dow fell 1.8 percent.

Among the strongest performers was J.C. Penney Co. Inc., which rose 5.6 percent to $15.19 as investors were cheered by the notion that the ailing retailer might squeeze some extra funds out of its real estate. Also gaining ground were Abercrombie & Fitch Co., up 2.8 percent to $47.87; Fifth & Pacific Cos. Inc., 2.6 percent to $20.98; Gap Inc., 2.3 percent to $37.78, and VF Corp., 2.1 percent to $169.77.

Not everyone was bouncing back. A profit warning hit Target Corp.’s stock and European markets were in retreat after a dour economic reading from the International Monetary Fund.

Target’s stock fell 0.2 percent to $68.38 after the discounter said first-quarter, comparable-store sales would be flat and that earnings per share would be “slightly below” the bottom of the firm’s prior guidance. Target had been looking for adjusted earnings of $1.10 to $1.20 a share.

The economic outlook has been somewhat muddled lately. Despite a few encouraging signs in the U.S., some retailers appear to have had a tough go of it in the first quarter.

The IMF in its World Economic Outlook Tuesday said the U.S. economy would grow 1.9 percent this year and 3 percent next year. But the group noted, “Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The IMF projected that the euro zone’s economy would contract by 0.3 percent this year and rebound 1.1 percent next year. “The forecast for negative growth in the euro area reflects not only weakness in the periphery but also some weakness in the core,” the group said. “Germany’s growth is strengthening but is still forecast to be less than 1 percent in 2013. France’s growth is forecast to be negative in 2013, reflecting a combination of fiscal consolidation, poor export performance and low confidence. This may call into question the ability of the core to help the periphery, if and when needed. Most euro area periphery countries, notably Italy and Spain, are expected to have substantial contractions in 2013.”

Paris’ CAC 40 fell 0.7 percent to 3,685.79, as London’s FTSE 100 and Milan’s FTSE MIB both fell 0.6 percent, to 6,304.58 and 15,533.04, respectively. Frankfurt’s DAX slipped 0.4 percent to 7,682.58.

Retail and luxury stocks were also mainly down. LVMH Moët Hennessy Louis Vuitton’s stock fell 3.8 percent to 126.25 euros after the company said first-quarter revenues rose 5.5 percent, a sharp deceleration from the 25 percent growth logged a year earlier.

Also losing ground were Mulberry, down 3 percent to 9.45 pounds; Hermès, 2.5 percent to 254.95 euros, and Inditex, 2.2 percent to 98.51 euros.