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(Bloomberg)

Retailers rise to three-year high after advice to buy

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U.S. retail stocks rallied to a three-year high after analysts said that companies whose prospects are most tied to growth will gain.

Target Corp., Macy's Inc., J.C. Penney Co. and Family Dollar Stores Inc. advanced today after Citigroup Inc. recommended the shares as the economy continues to improve.

Staples Inc. jumped to the highest price since May after Janney Montgomery Scott LLC advised buying the world's largest office-supply retailer. The Standard & Poor's 500 Retailing Index climbed 1.1 percent to the highest level since July 2007.

"There are hopeful signs in the employment outlook as non- farm jobs ramped up in recent months, and business confidence is improving," David Strasser, an analyst at Janney in New York, wrote in a report today.

Retail stocks in the S&P 500 have climbed 26 percent, the second-biggest gain among 24 industries after autos and auto parts, since the September 2008 collapse of Lehman Brothers Holdings Inc.

U.S. retailers' 2010 holiday sales surged the most in five years as shoppers snapped up clothing and jewelry, according to MasterCard Advisors' SpendingPulse, which measures retail sales by all payment forms.

Deborah L. Weinswig, a retail analyst at Citigroup, said Target, the second-largest U.S. discount retailer, and the other companies will gain as "tailwinds will outweigh headwinds and translate to modest growth in spending."

Target rose 1.1 percent today to $60.77, the highest price since October 2007. Macy's increased 0.6 percent to $25.44. J.C. Penney rose 2.5 percent to $33.10. Family Dollar rose 1.2 percent to $50.28.

Staples rose 2.6 percent to $23.35 after it was raised to "buy" from "neutral" by Strasser, who said that the retailer may gain market share as the industry consolidates because of buyouts. Staples may rally 19 percent after lagging behind the S&P 500 last year as the economy recovers, he said.