Sam Stovall's Sector Watch May 14, 2008, 12:01AM EST

Footwear Stocks: Starting to Stumble?

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S&P Footwear Index vs. S&P 1500

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In S&P's view, many consumers will start to spend an increasing portion of their monthly income on household expenses and debt repayment, leaving fewer dollars to spend at retail. That is not to say, however, that athletic footwear specialty stores will necessarily post losses this year. In the absence of must-have products to drive sales, Asaeda looks for athletic footwear specialty stores to maintain profit margins through conservative planning of inventories and tightly managed expenses.

So there you have it. The group's faltering relative strength, combined with a neutral fundamental outlook, supports S&P's opinion that equity prices will be market performers, at best, in the near term. Of the companies mentioned in this story, Nike carries an S&P investment ranking of 4 STARS (buy), while Timberland is ranked 3 STARS (hold).

Industry Momentum List Update

Here is this week's list of the industries in the S&P 1500 with Relative Strength Rankings of 5 (i.e., price performances in the past 12 months that were among the top 10% of the industries in the S&P 1500), along with a stock that has the highest S&P STARS (tie goes to the issue with the largest market value).

Subindustry	Company	Ticker	S&P STARS Rank	Price (5/9/08)
Agricultural Products	Corn Products	CPO	4	$47
Coal & Consumable Fuels	Peabody Energy	BTU	3	$69
Computer Hardware	IBM	IBM	5	$124
Construction & Engineering	Fluor	FLR	4	$164
Diversified Metals & Mining	Freeport-McMoRan Copper	FCX	3	$114
Fertilizers & Agr. Chem.	Monsanto	MON	4	$120
HyperMarkets & Super Centers	Costco Wholesale	COST	4	$71
Industrial Gases	Airgas	ARG	5	$59
Integrated Oil & Gas	ConocoPhillips	COP	5	$89
Oil & Gas Drilling	Noble	NE	5	$63
Oil & Gas Equip. & Svcs.	Superior Energy	SPN	5	$53
Oil & Gas E&P	Swift Energy	SFY	5	$56
Railroads	CSX	CSX	4	$63
Steel	Allegheny Technologies	ATI	4	$75

Source: Standard & Poor's Equity Research

Stovall is chief investment strategist for Standard & Poor's Equity Research Services .

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