Strong November retail sales lifted U.S. stocks on Tuesday on optimism about consumer spending, even as weak sales from electronics bellwether Best Buy showed some specialty retailers could be struggling.
Shares in Best Buy Co Inc , a top electronics retailer, lost 15 percent, denting sentiment boosted by the spending data. While major stock indexes were up, the S&P retail index <.RLX> dropped 0.35 percent.
Sales at U.S. retailers rose more than expected in November, up for a fifth straight month and pointing to a firm recovery from recession. Consumer spending accounts for roughly two-thirds of the U.S. economy.
Retail sales was a positive, fueling a rally based on a consumer being a little stronger than people thought a few months ago, said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
He said other recent data points including inventories and some job market numbers continue to show signs the economic recovery is on track, energizing bullish investors.
The Dow Jones industrial average <.DJI> added 69.63 points, or 0.61 percent, to 11,498.19. The Standard & Poor's 500 <.SPX> rose 4.94 points, or 0.40 percent, to 1,245.40. The Nasdaq Composite <.IXIC> gained 9.08 points, or 0.35 percent, to 2,633.99.
The Federal Reserve's monetary policy committee is meeting on Tuesday, and the group's statement later in the day is expected to leave interest rates unchanged and evaluate the central bank's recent massive bond-buying program to support the economy.
The Fed may revise its economic outlook to reflect stronger growth after the White House and congressional Republicans agreed to extend tax breaks and provide a payroll tax cut, effectively delivering fresh stimulus.
The Fed statement is due around 2:15 p.m. (1915 GMT).
Best Buy fell 15.3 percent to $35.32 after posting a drop in quarterly sales at existing stores and lower-than-expected earnings on tepid demand for televisions and entertainment hardware and software.
When (competitor) Circuit City went bankrupt it created a period of time when Best Buy had the market to itself, North Star's Kuby said.
Others identified the vacuum in electronics and what you're seeing is competition from other retailers.
But others say the slide in Best Buy may point to broader weakness in the electronic segment.
Sony Corp <6758.T>, maker of the PlayStation video game platform as well as flat-screen TVs, saw its U.S.-listed shares fall 0.4 percent to $35.73. Video game retailer GameStop Corp fell 0.9 percent to $21.72.
If retail sales are well and some of these stocks are going down, maybe valuations are overstretched, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. You can't just look at (Best Buy) and brush it off, he said.
Healthcare stocks were boosted by company news. Medical device maker C.R. Bard Inc rose 4.6 percent to $90.06 after saying it expects 14 percent yearly earnings growth in 2011, while brokerages gave bullish marks to companies including Amgen and Mylan Inc . Amgen rose 4 percent to $56.29 and Mylan added 4 percent to $20.64.
The S&P health care sector <.GSPA> rose 1.1 percent.
Separate data showed U.S. producer prices rose more than expected in November as energy prices spiked, but underlying inflation pressures remained subdued.
(Reporting by Rodrigo Campos, Editing by Chizu Nomiyama)