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Higher wages to lift spending. What to buy

Target employees at the checkout registers at a Target store in Torrance, California.
Patrick T. Fallon | Bloomberg | Getty Images

Pay raises and cheap gasoline make low-end retailers like Wal-Mart and Kohl's better buys than those at the high end, several analysts said.

The increase in spending from higher salaries will outweigh the short-term cost of the wage hikes for companies, according to analysts and investors.

Wage gain is "one of the biggest catalysts for retail stocks," said Art Hogan, chief market strategist at Wunderlich Securities. "That's a driver of consumption. You have more disposable income."