2 retailers in the spotlight after earnings

Both Gap and Ulta Beauty reported encouraging first-quarter results

The retail sector is booming today, with the SPDR S&P Retail ETF (XRT) up 0.5% at last check. Industry stalwarts are the driving force behind profits Gap Inc. (NYSE:GPS) AND Ulta Beauty Inc. (NASDAQ:ULTA)both indexes are rising as investors use their earnings reports to gauge U.S. consumer spending in the face of higher-than-usual inflation.

Gap shares rose 20.5% to $27.03, marking its third straight victory and its best single-session gain since November. The clothing seller The first-quarter report included earnings, revenue and same-store sales that beat all analyst estimates. Moreover, the company raised its outlook for the fiscal year ending in February.

No less than 10 brokerages raised their GPS-based price targets, including the Guggenheim Adjustment to $35 from $25. Options volume is nine times the average intraday volume, with 26,000 calls and 5,055 trades on tape. New positions are opening in the three most popular contracts, led by the weekly strike call on May 31 at 25.50.

Ulta Beauty shares were last trading 0.9% higher at $389.22, having previously traded at $421.21. The cosmetics seller reported that first-quarter earnings topped estimates, although revenues were below par and the company lowered its sales outlook.

At least six analysts lowered their price targets on ULTA following this event, though all still recommend targets of over $500, which represents a 28.5% premium to the stock’s current level. So far, 11,000 calls and 5,035 puts have been sold. The greatest activity occurs during the weekly strike call on May 31, 410.

On the charts, Ulta Beauty stock hit a low of $376 last week, down 34.6% from its March 14 high of $574.76. The stock is currently testing its falling 20-day moving average, a trend line that halted the rally midway through the month. Year-to-date, ULTA is down 19.8%.