Stimulus may help retailers, but buyers beware

By Brad Dorfman -Analysis

CHICAGO (Reuters) - Talk in Washington of economic stimulus helped boost retail stocks this week, but those stocks could turn south if consumers do not spend the money they get.

President George W. Bush on Friday called for a package of tax cuts and other measures totaling 1 percent of gross domestic product -- roughly $140 billion -- to help shore up a U.S. economy battered by a deteriorating housing market, a credit crisis and surging oil prices.

"We've already seen a positive impact from the speculation that we might get some stimulus package passed," said Janna Sampson, co-chief investment officer at OakBrook Investments, which manages about $1.125 billion in assets, including Home Depot Inc and Wal-Mart Stores Inc.

The measures being considered by lawmakers include tax rebates, incentives for businesses and extending unemployment benefits, but specific details have not been hashed out yet.

Expectations a stimulus was on the way helped send the Standard & Poor's Retail index up almost 2 percent this week, outperforming the broader Standard & Poor's 500, which is down almost 6 percent.

The retailers that have been the most beaten up during the past year as consumer confidence faded are up even more. Home Depot, for example, is up more than 6 percent, as is department store operator Macy's Inc.

But those gains could be reversed if the Congress and the White House cannot agree on the kind of stimulus to enact in an election year.

And investors on the sidelines likely missed the initial bump in shares this week.