Retailers Surging on Fed Rate Cut

When considering the broader markets declines, retailers are having an extremely good day in the equity markets thanks to the Fed, which cut its key rate, the Federal Funds rate, by 75 basis points to 3.5%. The retail sector often responds extremely well to a Fed rate cut as consumers will have more cash in their pockets which will certainly bode positively for retailers.

Additionally, Sanford Bernstein, an investment research firm, upgraded the entire U.S. retail sector from Market Weight to Overweight, saying the sector has underperformed the broader market for the last three years. The firm noted that it expects sector fundamentals to remain weak in the near-term, but on a long-term basis, Bernstein analyst's feel the sector has been drastically discounted, leaving shares of retail companies looking extremely cheap.

With its sector rating change, the firm also upgraded several specific retailers: Home Depot (NYSE: HD), Kohl's (NYSE: KSS), Macy's (NYSE: M), and Bed Bath & Beyond (Nasdaq: BBBY) from Market Perform to Outperform. Bernstein raised its price targets on Kohl's from $52 to $58, Macy's from $24 to $31 and J.C. Penney (NYSE: JCP) from $57 to $68.

Around the sector, shares of retail companies have surged from the open:
- Target (NYSE: TGT) is up $2.37, or 4.7%, to $52.45
- Kohl's is up $2.97, or 7.6%, to $43.02
- Sears Holdings (Nasdaq: SHLD) is up $10.15, or 11.4%, to $99.58
- Macy's is up $1.12, or 4.9%, to $24.17
- Nordstrom (NYSE: JWN) is up $1.77, or 5.9%, to $31.64
- Abercrombie & Fitch (NYSE: ANF) is up $2.92, or 4.1%, to $73.52
- American Eagle Outfitters (NYSE: AEO) is up $1.51, or 7.7%, to $21.20
- Bed Bath & Beyond is up $2.02, or 7.5%, to $29.07
- Home Depot is up $1.80, or 6.9%, to $28.08
- J.C. Penney is up $2.42, or 5.9%, to $43.35

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