Retailers' shares rise after strong sales report

Shares of several retailers rose in trading Tuesday following a strong retail sales report from the government helped assuage worries about weak spending around the holidays.

U.S. consumers increased their spending in December by 0.5 percent from November, according to the Commerce Department's report, the best showing since September. They bought more autos, furniture and clothing. When factoring out a drop in gas prices, spending rose 0.8 percent.

November and December are critical months for retailers, as they can make up to 40 percent of their annual revenue during those months.

Investors were eager for a bit of good news after most reports pointed to a disappointing holiday shopping period. The National Retail Federation said Tuesday that retail sales for November and December combined totaled $579.8 billion, up 3 percent. The trade organization had expected a bigger gain, of 4.1 percent.

And consumers' spending could drop in 2013. In a Jan. 1 deal on government cuts and tax increases that averted the "fiscal cliff," lawmakers allowed a two-year reduction in Social Security payroll taxes to lapse. That means most Americans will start seeing less money in their paychecks this month, which could hurt spending at stores.

Consumers may spend less, but Citi analyst Steven Wieting predicted that they'll also cut back on how much they save.

Retail was the biggest sector gainer on the S&P 500 by afternoon as the broader market dipped.

Here's a glance at some activity by company:

Gap Inc.: Shares jumped $1.02, or more than 3 percent, to $32.41

Ross Stores Inc.: Shares increased $1.35, more than 2 percent, to $57.60

Abercrombie & Fitch Co.: Shares gained $1.72, nearly 4 percent, to $49.80

AutoZone Inc.: Shares increased nearly 2 percent to $350.35

Dollar General Corp.: Shares jumped $1.23, nearly 3 percent, to $44.25

Kohl's Corp.: Shares increased 67 cents, nearly 2 percent, to $42.66

Big Lots Inc.: Shares gained 76 cents, nearly 3 percent, to $29.51

J.C. Penney Company Inc.: Shares increased 39 cents, more than 2 percent, to $18.48

Nordstrom Inc.: Shares gained 79 cents, about 1.5 percent, to $54.62

Target Corp.: Shares increased 60 cents, less than 1 percent, to $60.99