NEW YORK — Amid a year-end rally for the major stock indices, spurred partly by a decline in oil prices, the WWD Composite Stock Index ended the shortened holiday week up 0.7 percent at 1,151.42 from 1,142.87 the previous week.
On Thursday, the S&P 500 closed at its highest level since Aug. 3, 2001, helping it to end the week up 1.3 percent at 1,210.13 from its close of 1,194.22 the prior week. The S&P and Dow Jones Industrial Average returned to pre-9/11 levels. The New York Stock Exchange was closed on Friday, Christmas Eve.
The S&P Retail Index finished the week up 1 percent at 454.46 from 450.10 last week.
A slew of economic reports contributed to the week’s stock gains. Tuesday’s final reading of gross domestic product showed the economy expanded at a 4 percent annualized rate in the third quarter, up from 3.9 percent in the second quarter. A report on Thursday showed a 1.6 percent increase in November durable goods orders, which compared with a 0.9 percent drop in October.
A Thursday reading of consumer sentiment, as measured by the University of Michigan, rose to 97.1 in December from 92.8 in November. But November consumer spending came in with a weaker-than-expected 0.2 percent rise on Thursday, versus the 0.3 percent increase economists were anticipating, and softer than October’s 0.8 percent rise.
Meanwhile, in a slight snag to the merger of Kmart Holding Corp. and Sears, Roebuck Corp., the two companies said late Wednesday that they voluntarily agreed to withdraw the Hart-Scott-Rodino Notification and Report forms —notifications mandated by the government for acquisitions of public companies — previously filed with the Federal Trade Commission.
The companies said in a statement that the FTC requested more time because of the holiday season to complete its review of their merger. Kmart and Sears plan to refile the forms by Dec. 28, pushing the FTC review period expiration into January, but the merger transaction is still expected to close in March.
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Kmart shares closed the week essentially flat, closing the day at $100.29 compared with $100.28 last week, while shares in Sears ended gaining 0.6 percent, closing at $51.50 from a prior-week close of $51.20.
An upgrade of Ross Stores Inc. on Wednesday by Merrill Lynch helped the company close the week up 1.7 percent at $27.95 from $27.47 last week. Analyst Marni Shapiro raised her rating to “buy” from “neutral,” saying in a report that the off-price retailer “is coming off its worst year in a decade due to systems issues and to a lesser degree a distribution center roof collapse.”
Shapiro expects earnings to accelerate in 2005 and lifted her earnings estimate on the year to $1.60 a share from $1.40. Ross Stores “remains a key player and second only to TJX Cos. in [the] off price [sector],” Shapiro said.
In a research note released on Monday, Bernard Sands retail analyst Richard Hastings dismissed the notion of reading Wal-Mart’s less-than-stellar holiday sales results as an indication of the weakening spending power of U.S. consumers.
“Weakness in U.S. sales growth at Wal-Mart, after a year of negative press and lawsuits, might be explained by many things besides economics,” noted Hastings.
Wal-Mart domestic sales will account for about 6.3 percent of total retail sales in the U.S. this year, said Hastings. He estimates that one-third of total U.S. sales stem from households where economic pressures are forcing reduced spending. “In this scenario, a bunch of loyal Wal-Mart shoppers are looking for deeper discounts than Wal-Mart has been providing,” wrote Hastings. “There is only so much that you can do with the EDLP system (everyday low prices) until shoppers step back and wait for LEDLP…lower everyday low prices. Wal-Mart, until late November, was hesitant to do this.”
Hastings also noted that since Halloween, consumers have spent money on technology items such as computers, video game systems, digital cameras and flat-screen televisions. “There is a degree of spent up, spent out attitudes this holiday season after a year of purchasing new autos and upgrading home electronics — all of them big-ticket expenditures.”
Wal-Mart shares closed the just-completed week up 1 percent at $52.55 from $52.02 last week.
The National Retail Federation remained upbeat in its outlook after a holiday survey found that the average consumer had completed 81.9 percent of their holiday shopping as of Dec. 19, leaving hope that the remaining 20 percent of holiday sales would occur during the week before Christmas.
