NEW YORK – Shares of many types of retailers — from discounter Kohl's Corp. to consumer electronics seller Best Buy Co. Inc. — rocketed on Thursday, boosted by hopes the Federal Reserve's surprise interest rate cut would spur consumer spending.
The Standard & Poor's retail index rose 6 percent and was up 52.62 at 880.77. Earlier, the index climbed to the highest level since February 2, a few days after the Federal Reserve also cut interest rates on January 31.
Retail stocks typically climb after interest rate cuts on the idea that lower mortgage and credit card interest rates will put more spending money in consumer's pockets.
Since the last rate cut, the index has drifted lower as many retailers reported weak monthly sales data and warned of first-quarter profit shortfalls as results were hurt by cold spring weather in March and the slowing U.S. economy.
Trends have improved somewhat in April, analysts said.
``The retailers have been doing better in April with the weather improving and the interest rate cuts will help the consumer as well,'' Steve Paspal, vice president and senior research analyst at Sovereign Asset Management, a unit of John Hancock Funds.
``A 50-point cut is pretty good and retail should be one of the sectors that responds more strongly than others,'' he said.
Earlier on Thursday, the Fed cut key short-term interest rates by a half-percentage point. The move came ahead of its next policy-setting Federal Open Market Committee meeting, which is scheduled for May 15.
Consumer electronics stocks posted some of the largest gains because products like DVD players and digital cameras are typically purchased when shoppers have more disposable income.
Shares of Best Buy were up nearly 17 percent, climbing $8.02 to $55.52, while rival Circuit City Stores' shares were up $1.50 at $13.51 in afternoon trade on the New York Stock Exchange.
Discounters like Kohl's and Wal-Mart Stores Inc., the world's largest retailer, also benefited from the rate cut. Kohl's shares rose 8 percent and were up $4.80 at $60.15, while Wal-Mart's stock was up $3.46 at $52.70.
The promise of lower mortgage rates also gave shares of home improvement retailers a boost.
``Lower rates mean increasing refinance activity,'' said Daniel Binder of Buckingham Research Group. He added that historically, greater refinancing tends to spur remodeling projects, which aids home-improvement chains.
Shares of Home Depot Inc. rose 9 percent and were up $3.87 at $45.78, while rival Lowe's Cos. Inc. shares rose $6.30 to 59.03, up nearly 12 percent.