There's a chill in the air and a slight up-tick in confidence. Holiday discounts are coming a bit earlier, too. For retailers, this has been a great combination, leading to the second consecutive month in which retail sales increased.

This follows more than a year of drops. Consumers aren't going crazy, but they are loosening their wallets a little bit. Consumer spending accounts for 70% of the U.S. economy, and the coming holiday season is where the action is -- for the retail sector and, consequently, for everyone else.

We saw the first signs of the "Obama effect" with the hype of her inauguration gown. The designer of that stunning dress was Jason Wu.

I can imagine that many women looking to wear a stunning dress to their own special occasion might head to Nordstrom (NYSE: JWN) -- which carries Wu's collection.

In this recession, department stores need all the help they can get, and selling a hot designer is a great leg up on the competition.

We all know the impact that celebrities have on businesses. One of the most obvious instances of this phenomenon comes from the Oprah Winfrey Show. For example, when a title makes it into her book club, millions of loyal followers immediately take action, and sales follow.

These days, Michelle Obama is giving Oprah a run for her money. The First Lady is being closely watched by millions, and she too has a loyal following. She also appears to have a fashion sense that resonates with consumers around the globe. We all saw the number of stories and speculation about her gown during the inauguration.

Things aren't looking so luxurious for the shareholders of Nordstrom, Inc. (NYSE: JWN) and Saks Inc. (NYSE: SKS) today. Shares of both of these upscale department-store chains are seeing red today following negative words from Wall Street.

As Eric Buscemi noted this morning, JWN was cut to "underperform" from "neutral" at Banc of America/Merrill Lynch. Nordstrom was also sliced to "neutral" from "outperform" at Credit Suisse, citing valuation and concerns about the environment for mall anchors. Credit Suisse did maintain its price target of $22.

Analyst upgrades:

• Goldman upgraded SanDisk (NASDAQ: SNDK) to Buy from Neutral and raised their target to $22 from $16 citing the renegotiated royalty agreement with Samsung.
• Goldman also upgraded Starwood Hotels (NYSE: HOT) to Buy from Sell and raised their target to $27 from $11 citing strong operating leverage as RevPAR recovers.
• KeyBanc upgraded Werner Enterprises (NASDAQ: WERN) to Hold from Underweight citing a recent improvement in freight demand.
• J.C. Penney (NYSE: JCP) was upgraded to buy from Underperform at Banc of America/Merrill.
• Savvis (NASDAQ: SVVS) was raised to Outperform from Perform at Oppenheimer.
• Sanofi-Aventis (NYSE: SNY) was upgraded at Citigroup to Buy from Hold.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Abercrombie & Fitch Co. (NYSE: ANF) reported dismal Q1 numbers as same-store sales plunged.
• Applied Materials Inc. (NASDAQ: AMAT) dismal Q2 results were in line with analysts' expectations.
• Bankrate Inc. (NASDAQ: RATE) reported lower earnings and revenue for Q1 and offered no guidance.
• Blockbuster Inc. (NYSE: BBI) earnings, revenue, and same-store sales all fell in the first quarter.
• Dr Pepper Snapple Group (NYSE: DPS) Q1 earnings declined but still topped analysts' expectations.

Nordstrom (NYSE: JWN - option chain) shares are rising today after the company reported earnings last night, posting a first-quarter profit of $81 million, or 37 cents per share.

Excluding one-time items, JWN earned 31 cents per share, topping analysts' forecasts of 26 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JWN.

JWN opened this morning at $21.64. So far today the stock has hit a low of $21.41 and a high of $23.05. As of 11:40, JWN is trading at $22.68 up 1.73 (8.3%). The chart for JWN looks bearish and S&P gives JWN a negative 2 STARS (out of 5) sell ranking.

TheStreet.com's Jim Cramer is seeing signs of a coming boom, but he's still being cautious here.

If you had to define the early cycle, if you had to outline what stocks should be soaring coming out of a recession into a boom and which ones should be faltering, you would have to say the action in this market in the last month is the quintessential behavioral pattern.

What are the components of the early cycle? First, it's the homebuilders. As is typical coming out of a recession, the stocks precede the bottom of housing. That's exactly what's happening with the lowest permits and highest affordability and best mortgage rates and massive inventory. Everywhere, except on Wall Street reporting, the bottom is bursting out. When you read the lead story in the Sunday Philadelphia Inquirer, and it is all about the thousands of prospective homebuyers heading south to pick up condos and homes for half of what they were worth two years ago -- or even less -- and you know that virtually no one has broken ground in the Sunshine State in a year, you can bet that the bottom's actually behind us. This housing market has wiped out all but the most stable private builders and even the public ones are merging as we know from Pulte (NYSE: PHM) (Cramer's Take) and Centex (NYSE: CTX) (Cramer's Take). So, in the next cycle, you can see some profitability developing year over year even though the new homes don't have much margin because the foreclosed homes next door are going for a song. And don't believe this won't change the dynamic of future foreclosures. In most areas, rent is higher than the interest on mortgages, so you will find that second or third job needed to stay in your home. The incentive structure's radically different than a year ago.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Campbell Soup Co. (NYSE: CPB) reported solid Q2 numbers despite competition from store brands.
• DreamWorks Animation SKG Inc. (NYSE: DWA) missed Q4 expectations, sending shares lower.
• First Solar Inc. (NASDAQ: FSLR) said Q4 profit more than doubled due to strong demand.
• Garmin Ltd. (NASDAQ: GRMN) posted a lower-than-expected profit on soft sales and lower margins.
• Heidrick & Struggles International Inc. (NASDAQ: HSII) earnings and revenue declined in Q4.
• Home Depot Inc. (NYSE: HD) earnings beat low expectations even as revenue continued to decline.

Nordstrom (NYSE: JWN - option chain) shares are sharply higher today after the company reported a fourth-quarter profit of $68 million, or 31 cents per share, beating analysts' estimates of 30 cents per share. This earnings report shows slowing sales like almost all retailers, but management claims it is keeping inventories at reasonable levels and controlling costs. It seems to me that the upper crust of retailers are hanging in better than the mid-range stores. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JWN.

JWN opened this morning at $12.55. So far today the stock has hit a low of $12.41 and a high of $13.38. As of 11:40, JWN is trading at $12.86, up 1.53 (13.5%). The chart for JWN looks bearish and S&P gives JWN a negative 2 STARS (out of 5) sell ranking.

If you made a bet on the specialty retailers leading up to the first $600 taxpayer rebate stimulus package, you got hammered.

Talk about a government plan backfiring big time.

That $300 billion in checks that fell out of the sky from government helicopters back in the March to May timeframe didn't find its way to the malls at all.

Instead, people paid down credit card debt, and tuition, medical and other bills, leaving little for spending on non-essentials.

The result was a litany of store closings nationwide, with several old-line, brand-name retailers going out of business.

It's game over for names like Circuit City (OTC: CCTYQ), Cache (NASDAQ: CACH), Talbots (NYSE: TLB), J. Jill, Wickes Furniture, Levitz, Bombay, Linens 'n Things, Movie Gallery, Wilson Leather, KB Toys and The Sharper Image.

Traders that leveraged into darling names, like hedge fund idol Eddie Lampert's Sears Holdings Corp. (NASDAQ: SHLD), got smoked. Shares of SHLD were trading at $105 when the checks when out. Today the stock is around $40.

Even Costco (NASDAQ: COST) -- the obvious slam dunk, aside from Wal-Mart (NYSE: WMT) -- got slammed, falling from $75 to $45 following the so-called stimulus package.

The chain that once dubbed itself "where America shops" is increasingly a place shoppers avoid. Despite its much-publicized recovery efforts, investors should consider steering clear, too. Sears Holdings Corporation (NYSE: SHLD) has been in the news a great deal lately, announcing awful sales results and planning yet another stock buyback to prop up its flailing price.

The recent store changes have not worked, and neither will the financial engineering. This company is on its way down, and a visit to a local store showed me why.

Sears used to be the General Motors (NYSE: GM) of retailers -- an apt analogy when both were all-American giants, and just as apt today as both struggle. Sears had completely lost its way when vulture investor, Eddie Lampert, bought the company in late 2004 and combined it with Kmart. Wall Street analysts went nuts, pushing the stock price to $192 a share.

Today, Wall Street has lowered that price to near $40.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Abercrombie & Fitch Co. (NYSE: ANF) reported lower quarterly profits and cut its full-year outlook.
• Applied Materials Inc. (NASDAQ: AMAT) beat Q4 earnings expectations but revenues tumbled.
• Blackstone Group (NYSE: BX) reported a big loss in Q3, like many other private equity firms.
• Crocs Inc. (NASDAQ: CROX) posted a deeper-than-estimated Q3 net loss due to restructuring costs.
• Cypress Semiconductor Corp. (NYSE: CY) warned that it expects to swing to a net loss in Q4.
• Google Inc. (NASDAQ: GOOG) fell to a three-year-low despite expected growth in profits and revenues.
• Intel Corp. (NASDAQ: INTC) lowered its revenue forecast for Q4, which was bad news for PC makers.
• Kohl's Corp. (NYSE: KSS) beat low earnings expectations by a penny as same-store sales declined.
• Lions Gate Entertainment Corp. (NYSE: LGF) narrowed its net loss in Q2 but fell short of estimates.
• Nordstrom Inc. (NYSE: JWN) said its Q3 profit tumbled as its same-store-sales declined.
• Orbitz Wordlwide Inc. (NYSE: OWW) reported a wider net loss, which led to a analyst's downgrade.
• Procter & Gamble Co. (NYSE: PG) raised its forecasts after finalizing the sale of Folgers brand.
• Sirius XM Radio Inc. (NASDAQ: SIRI) halved its Q3 net loss and revenues and subscriber numbers rose.
• TJX Companies Inc. (NYSE: TJX) reported a Q3 earnings decline and offered a cautious outlook.
• Tyco International Ltd. (NYSE: TYC) posted better-than-expected profits but warned of softness ahead.
• Walmart Stores Inc. (NYSE: WMT) beat analyst estimates for Q3 and warned of a profit squeeze.

Citigroup Inc. (NYSE: C) is planning to cut at least 10,000 jobs in its investment bank and other divisions throughout the world, the Wall Street Journal reported its sources revealed. Managers were instructed to slash their budgets for employee compensation by at least 25%. Meanwhile, CEO Vikram Pandit bought up to 750,000 shares of the company at prices between $8.92 and $9.45 according to SEC filings. Another exec bought 250,000 shares as Citi's stock price fell to lows not seen since the mid-1990s. Citi shares were up 2% in premarket trading (8:03 am). Citi opened much higher, and even traded over $10, but as the market declines so do Citi shares tame their jump. Around 10:10 Citi shares were 3% higher.

Nordstrom Inc. (NYSE: JWN) said Thursday that its third-quarter profit fell by 57% as its same-store-sales declined. It slashed its full-year outlook below analyst expectations. JWN stock was down over 5% in after-hours trading. JWN shares had a volatile half an hour after the open. Around 10:10 they were half a percent higher.

Kohl's Corp. (NYSE: KSS) said profit fell for the fifth quarter in a row, dropping 17%, and reduced its annual profit forecast. KSS shares were down over 4% in after-hours trading. KSS shares were 2.4% higher around 10:12.

• Abercrombie & Fitch Co. (NYSE: ANF) reported lower quarterly profit, but beat estimates. It also cut its full-year outlook. ANF shares were down 7.4% in premarket trading (8:45 am). ANF shares traded over 4% lower at 10:12.
  
• J.C. Penney (NYSE: JCP) also reported lower quarterly profit -- fell by nearly 53% -- but beat estimates by a penny. Sales fell 8.7% in the quarter. JCP gave full year guidance much lower than analysts' expectations. Shares were down 4.6% in premarket trading (8:33 am). JCP traded 2.4% lower 45 minutes after the open.
  
• Agilent Technologies (NYSE: A) -- keeping the same theme, Agilent [reported higher profit], managed to beat estimates but gave outlook below expectations. Shares were 2% lower in premarket trading (8:23 am). Agilent shares traded 3.3% higher 45 minutes after the open.
  

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http://www.businessweek.com/investor/content/nov2008/pi2008116_893947.htm

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