After the downdraft earlier this week in the markets, stocks began climbing their way back up again, led by some of the most recently battered groups, such as retail, financials, and even the woebegone homebuilders. Kohl’s, Inc., (NYSE: KSS) is one retailer which got a bounce back this week. Kohl’s had earlier descended as low as 37.31 a share for a twelve-month low, off from its twelve-month high of 79.55. This whopping 53 percent drop happened due to the slowing of earnings growth, along with the expected further slowdown of consumer spending due to recession fears. Kohl’s still has a fairly healthy earnings picture, though, as most analysts see a slight increase ahead for 2008, despite the troubled retail waters.
Sears Holding, Inc. (NYSE: SHLD), another retailer previously discussed, has already begun to make its way off the bottom, benefiting not only from the hoped-for tailwind of Fed rate cuts, but the prospects of a re-organization of its business operations. Meanwhile, Target (NYSE: TGT), has already come back 25% from its lows, as it had crossed over the $50 a share mark on the positive side, after hitting a low of $42 per share in the selloff. Collective Brands (NYSE: PSS), holding company for discount shoe retailer Payless, after falling 160% last year despite showing near-flat earnings growth, has begun to claw back from its bottom of 14 to over 16 this week. Most of the retailers are behaving similarly.
The recession fears already seem to have been priced in on the downside with these stocks, so unless there is a prolonged recession even in the face of Fed easing, as was the case in 1991-92, professional investors may be betting the worst is over. Then again, if the latest rally this week is merely a positive burst, a surge as prelude to another market drop, then traders and investors both have to watch out so they’re not whipsawed in the process. Even so, homebuilder Pulte Homes (NYSE: PHM) has risen from nearly 8 to 12 this week, so the homebuilding stocks are making money for someone.
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