Retail sales totaled $710 million in the first two months of 2010, up slightly from a year ago, according to the Commerce Dept. Despite a stubborn unemployment rate, analysts at Standard & Poor's (MHP) Equity Research wrote on Mar. 15 that many retailers "may be poised for significant growth." Such companies as Advance Auto Parts (AAP), Wal-Mart Stores (WMT), and Dollar General (DG) may have "benefitted from a change in consumer behavior brought on by the recession"—such as repairing cars instead of trading them in for new ones. Wall Street analysts upped earnings forecasts for more than 100 U.S. retail stocks in the past month, including J. Crew Group (JCG), according to Bloomberg data. For fund investors interested in retail, S&P recommends Fidelity Select Consumer Discretionary (FSCPX) and Rydex Retailing (RYRIX).
Mutual Fund Cash Buying Spree
U.S. stock mutual funds are putting money to work: Cash made up 3.6% of the average portfolio's holdings in January, the lowest reading since September 2007. A year earlier, the average was 5.7%. The fact that so much money has already gone into the market could signal slowing market momentum. "It's not a red light," says Parnassus Investments President Jerome Dodson. "But it's a flashing yellow light that the strongest part of the rally is probably over." At 1160 on Mar. 19, the S&P 500 is up about 72% since its March 2009 low. Dodson estimates it will rise 6% to 9% this year, to the 1186 to 1225 range.
One argument for a continued really is the $3 trillion in money market funds. In the week ended Mar. 16, investors yanked $75.6 billion out of money markets, the third-largest one-week withdrawal ever, according to iMoneyNet. While a lot of cash has been poured into bonds, investors could start focusing on stocks instead.
Good Day at BlackRock
On Mar. 17 shares of BlackRock (BLK), the world's biggest asset manager, rose 4.9% after Credit Suisse Group (CS) analysts raised their rating on the stock to outperform, from neutral. The analysts expect increased investments in the firm's exchange-traded funds and bigger sales outside the U.S. to drive earnings. As a result, they reckon shares could rise to 280, from 224, over the next 12 months.