This morning, discount retailer Big Lots (NYSE: BIG) announced that same-store sales dropped 2.4% during the second quarter. The company's sales were pulled lower by weakness in its home and furniture categories, but still fell in range of its earlier forecast for a decline of 1% to 3%.

While furniture and home acted as an anchor on sales, the company's consumables, hardlines, and seasonal categories performed well. Total retail sales for the quarter fell 2.3% to $1.07 billion while year-to-date same-store sales fell $2.2 billion.

Sears Holding (NASDAQ: SHLD) is recently trading at $62.10 in pre-open trading, above its close of $50.19. SHLD secured a new $2.4 billion line of credit to help finance purchases through 2012. SHLD reported Q1 of $10.1 billion, versus $11.1 billion in the same quarter a year ago. SHLD June call option volatility is at 64, puts is are at 77 verses its 26-week average of 64, according to Track Data. SHLD puts are priced higher than calls because SHLD is difficult to borrow.

Big Lots (NYSE: BIG) closed at $24.14. BIG is scheduled to report Q1 EPS on May 28. BIG June option implied volatility is at 58; October is at 56; below its 26-week average of 72, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Discount retailer Big Lots Inc. (NYSE: BIG) saw its shares surge higher in Wednesday trading after it posted a fourth-quarter profit from continuing operations that came in ahead of analysts expectations and offered a better-than-expected outlook.

Clearly, investors view BIG as a recession stock to own.

Earnings from continuing operations totaled a dollar per share, ahead of the 93 cents per share analysts were expecting, and 3 cents higher than the year-ago quarter. Revenue fell to $1.37 billion from $1.41 billion last year, but beat expectations of $1.36 billion. Same-store sales fell a mild 3.2%, as sales of discretionary items, such as furniture and toys, were challenging.

I grew up in the 1970s and recall fondly watching the TV series "Dallas" with my family on Friday nights. Everything on the culturally sensational show was big, including its storylines.

Of course, one of my favorites was "who shot J.R.?" But another favorite was the return of Bobby Ewing after a supposed death that was resolved by stating the entire season was a dream.

I like to use the dream analogy for stocks that have made a round trip journey in a short period of time. If a stock goes up only to return to the level previously, it is as if the investor woke from a dream and the stock never actually moved up.

Such is the story of closeout retailer Big Lots (NYSE: BIG).

Shares started the year around $15 per share. Enthusiasm over profits and performance as consumers in a struggling economy sought lower-priced options fueled a gain in BIG.

Shares more than doubled in value, but hit a roadblock in late August. At that time, earnings that beat estimates were not enough to keep the momentum going. I wrote about the company at that time and suggested that investors in BIG should take money off the table.

When the Bureau of Economic Research declared that the recession had officially begun in December 2007, the entire retail sector shrugged its shoulders and said, "No kidding."

Shares of companies that deal directly with the consumer, except for the deep discount retailers, have known for some time that the economy was struggling. Sales have been declining steadily and, with the deteriorating operating environment, shares of the retail stocks have been absolutely crushed.

The entire retail group is one of the biggest losers in the market this year, with some stocks down 80% to 90%.

That said, those retailers that offer big discounts, including Wal-Mart (NYSE: WMT) and Big Lots (NYSE: BIG), are doing much better on a relative basis.

With the end of the year fast approaching, it's time to start putting together "best of" and "worst of" lists for 2008. This entry is a little bit of both, but it's admittedly heavy on the "worst of." Among the current members of the S&P 500 Index (SPX), just 11 were sitting on a year-to-date gain as of the close of trading on Monday, November 24. Since Big Lots (NYSE: BIG) is unchanged, that means we have a whopping 488 securities sitting on a loss for the year.

Let's start with the bad news first. Among the worst-performing stocks on the SPX, the six top spots are claimed by stocks in the Insurance and Real Estate sectors. General Growth Properties (NYSE: GGP) has the dubious honor of dropping nearly 98% on the year, and -- not surprisingly -- American International Group (NYSE: AIG) isn't far behind.

Big Lots (NYSE: BIG - option chain) shares are diving today despite reporting an 11% increase in second-quarter profit. The company posted earnings of 32 cents per share on sales of $1.1 billion, while analysts expected 27 cents per share on revenue of $1.1 billion. However, it warned that same store sales may not grow too much in the 3rd and 4th quarters. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BIG.

This morning, BIG opened at $32.56. So far today the stock has hit a low of $30.21 and a high of $32.60. As of 12:45, BIG is trading at $31.69, down $1.37 (-4.1%). The chart for BIG looks neutral and S&P gives BIG a neutral 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $35 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in 4 weeks as long as BIG is below $35 at September expiration. Big Lots would have to rise by more than 11% before we would start to lose money. Learn more about this type of trade here.

Big Lots (NYSE: BIG) is the largest broadline closeout retailer in the United States. Stores offer such staples as food, health and beauty products, plastics, furniture, toys, lawn tools, electronics, apparel and small appliances. The goods are generally products that have been overproduced, or discontinued, and are typically offered at 20-40 percent below discounters' prices. The company currently operates 1,354 stores in 47 states. Wholesale operations are conducted through Big Lots Wholesale outlets.

The firm pleased investors last week, when it reported Q1 EPS of 42 cents and revenues of $1.15 billion. Analysts had been expecting 36 cents and $1.14 billion. Management also guided Q2 EPS to 21-25 cents (23 cent consensus) and FY08 EPS to $1.80-$1.90 ($1.78 consensus). Wedbush Morgan subsequently reiterated its "strong buy" rating on the shares and Piper Jaffray upped its recommendation to "buy".

Today's stock market rally may be more of a relief run than anything, but the end of day strength of late has been hard to ignore. Today we saw a huge drop of almost 9 million barrels of oil that caught traders off guard, but interestingly enough the oil markets dropped considerably. Combine that with a slightly higher revision to Q1 US GDP to +0.9% and all of a sudden the recession isn't looking so serious. These are the major US index closing levels:

• DJIA 12,642.47 (+48.20)
• S&P500 1,398.03 (+7.19)
• NASDAQ 2,508.32 (+21.62)
• 52-WEEK LOWS
• Top 10 Analyst Calls (ALU, CHS, LONG, IFX, JNPR, MAR, MFA, NSC, SNDA, VVUS)

Big Lots Inc. (NYSE: BIG) beat earnings and raised certain parts of guidance, and shares were up over 9% at $31.21 in the final minutes of trading.

It has been a rocky year for Wall Street, but even amid the uncertain market conditions there are some companies that are playing with a lot of cash. In addition, they know how to wisely use their funds, which makes them strong enough to beat any challenge.

One important factor that determines the stability of a company is its corporate cash flow. CNNMoney is looking at stocks with both healthy cash flow and a surplus of cash, which helps them avoid tough situations where they may need to raise their capital (check out its slideshow of these five picks). Another element that CNNMoney takes into account when picking companies is their ability to reinvest cash in ways that assure them a nice profitability.

Let's look at some of the companies that CNNMoney likes:

MOST NOTEWORTHY: Credit Suisse, Masimo and Marvell Tech were today's noteworthy upgrades:

• Bear upgraded Credit Suisse Group (NYSE: CS) to Peer Perform from Underperform as they believe the company's balance sheet will stabilize and the company's Private Banking business is holding up well in difficult conditions. Goldman, which raised shares to Neutral from Sell, believes the worst is over regarding the market downturn.
• Citigroup upgraded Masimo Corporation (NASDAQ: MASI) to Buy from Hold citing expectations of a strong Q1 report, expected FDA approval for hemoglobin monitoring in 2H08, and valuation.
• Marvell Technology Group Ltd (NASDAQ: MRVL) was raised at Friedman Billings to Outperform from Market Perform based on valuation and improved business conditions.

OTHER UPGRADES:

• Goldman raised LM Ericsson Telephone Company (NASDAQ: ERIC) to Neutral from Sell.
• JP Morgan upgraded Big Lots Inc (NYSE: BIG) to Overweight from Neutral.
• Petro-Canada (NYSE: PCZ) was upgraded at CIBC to Sector Outperformer from Sector Performer.

Big Lots (NYSE: BIG) is the largest broadline closeout retailer in the United States. Stores offer such staples as food, health and beauty products, plastics, furniture, toys, lawn tools, electronics, apparel and small appliances. The goods are generally products that have been overproduced, or discontinued, and are typically offered at 20-40 percent below discounters' prices. The company currently operates 1,353 stores in 47 states. Wholesale operations are conducted through Big Lots Wholesale, Consolidated International and Wisconsin Toy outlets. Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) are major competitors.

The firm pleased investors last week, when it reported Q4 EPS of 93 cents and revenues of $1.41 billion. Analysts had been looking for 84 cents and $1.41 billion. Management also guided Q1 EPS to 30-35 cents (26 cent consensus) and FY09 EPS to $1.70-$1.80 ($1.53 consensus). Wedbush Morgan and Soleil subsequently declared the issue a "buy" and issued price targets of $26 (W) and $32 (S).

Big Lots (NYSE: BIG), the nation's largest close-out retailer, posted tremendous and record-setting gains for 3Q 2007. Net income for the quarter totaled $14.3 million or $0.14 per diluted share, a staggering improvement over net income of $1.7 million in 3Q 2006. Big Lots struggled throughout 2006 while putting together a supply chain management system that is now beginning to pay off in big contributions to the bottom line. Big Lots posted this huge rise in net income despite the fact that net sales for 3Q dipped almost 2%.

3Q 2007 operating income grew 10X operating income from 3Q 2006, to $22.7 million from $2.3 million. CEO Steve Fishman credits the vast improvement in operating profit to a much more efficient product distribution system and higher gross margin dollars per square foot.

Deep discount retailers may not offer the most extensive selection of merchandise in town, but they usually have what you are going to want before long and the bargains keep you coming back. A leader in the art of finding and offering the good deals is headquartered in Columbus, Ohio.

Big Lots (NYSE: BIG) is the largest broadline closeout retailer in the U.S. Stores offer such staples as food, health and beauty products, plastics, furniture, toys, lawn tools, electronics, apparel and small appliances. The goods are generally products that have been overproduced, or discontinued, and are typically offered at 20-40 percent below discounters' prices. The company currently operates 1,369 stores in 47 states. Wholesale operations are conducted through Big Lots Wholesale, Consolidated International and Wisconsin Toy outlets. Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) are major competitors.

MOST NOTEWORTHY: Taser Int'l (TASR), Motorola (MOT), Advantest (ATE), STMicroelectronics (STM) and Joy Global (JOYG) were today's noteworthy upgrades:

• Merriman upgraded shares of Taser Int'l (NASDAQ: TASR) to Buy from Hold on valuation following the 25% decline in price since late July, accelerating law enforcement demand and upside potential from the recently launched personal TASER C2.

• Lehman upgraded shares of Motorola (NYSE: MOT) to Overweight from Equal Weight as they believe increased production and opex progress in Q3 could signal a turnaround at the company's phone unit.

• Jefferies upgraded Advantest (NYSE: ATE) to Hold from Underperform on valuation.

• STMicroelectronics (NYSE: STM) was upgraded to Market Perform from Underperform on valuation at Bernstein.

• Stifel upgraded shares of Joy Global (NASDAQ: JOYG) to Buy from Hold following the in line Q3 report as they believe bad news is reflected in valuation...

OTHER UPGRADES:

• Idacorp (NYSE: IDA) was upgraded to Market Perform from Under Perform at Wachovia.

• UBS upgraded TDK Corp (NYSE: TDK) to Neutral from Sell.

• Wedbush raised Big Lots (NYSE: BIG) to Buy from Hold, with a $35 target, and DSW Inc. (NYSE: DSW) to Hold from Sell, with a $29 target.

• LabCorp (NYSE: LH) was upgraded to Outperform from Neutral at Cowen.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).