Wall Street higher after retail sales, Home Depot

NEW YORK (Reuters) - Wall Street advanced on Tuesday after retail sales data suggested a return of consumer spending may lift economic growth and the world's largest home improvement chain Home Depot raised its profit forecast for the year.

The data, which showed retail sales rose for the first time in four months and dovetailed with strong earnings reports from niche retailers like Estee Lauder , comes after recent improvement in housing and jobs numbers raised hopes that an earlier slowdown in the economy may be only temporary.

However, gains were slight with the S&P 500 up for seven of the last eight session and the perception of risk from Europe's debt crisis still high on the agenda.

"Definitely Wall Street will applaud this data," said Todd Schoenberger, managing principal at the BlackBay Group in New York. "Retail sales were strong, showing how smart retailers were with their back-to-school promotions."

Home Depot Inc gained 2.3 percent to $54.04 as the top boost to the Dow after the company reported a higher-than-expected quarterly profit and kept a tight lid on costs to offset weakness in sales.

The Dow Jones industrial average <.DJI> gained 13.74 points, or 0.10 percent, to 13,183.17. The Standard & Poor's 500 Index <.SPX> gained 1.50 points, or 0.11 percent, to 1,405.61. The Nasdaq Composite Index <.IXIC> gained 2.55 points, or 0.08 percent, to 3,025.07.

The S&P 500 is up 12 percent this year after rallying 10 percent from yearly lows reached in June. The rally, which has brought the index to within a stone's throw of new four-year highs, has also left investors looking for new catalysts to move the market higher.

Michael Kors Holdings Ltd surged 13.4 percent to $48.05 after the apparel company reported higher-than-expected quarterly profit and raised its full-year profit forecast.

Estee Lauder jumped 8.2 percent to $59.54 after the cosmetics and fragrance maker reported a higher-than-expected quarterly profit and forecast more sales growth this year.

Saks Inc reported a narrower than expected second quarter loss on Tuesday, as sales gains defied what the luxury retailer said was a tough economy, and the retailer stuck to its sales forecast for the second half of the fiscal year. Shares climbed 5.4 percent to $11.44.

Retail sales rose 0.8 percent in July, the biggest increase since February. Economists polled by Reuters had expected a 0.3 percent increase. The S&P retail index <.RLX> gained 0.9 percent.

"The retail sales is good, and it just continues the trend right now for the S&P to go higher," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

"It keeps us going for now. I didn't see anything here that said sell your longs or get out; if anything, it said buy."

Separately, producer prices rose in July at the fastest pace in five months on higher costs for light trucks, pharmaceutical drugs and cigarettes, although falling energy prices pointed to muted inflation pressures.

Groupon Inc tumbled 23.5 percent to $5.77 after the world's largest online daily deals provider missed quarterly revenue expectations and gave a cautious profit outlook.

Discount retailer TJX Cos Inc , owner of the Marshalls and T.J. Maxx chains, raised its full-year profit forecast on a rise in its second-quarter sales, and shares edged up 0.1 percent to $44.28.

(Additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

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