MOST NOTEWORTHY: The Department store sector, SanDisk and CNET Networks were today's noteworthy downgrades:
Goldman downgraded the department store sector to Neutral from Attractive after raising its 2008 oil forecast to $149 from $115, as it believes higher gas prices will impact consumer discretionary spend and sentiment. Goldman downgraded JC Penney (NYSE: JCP) and Nordstrom (NYSE: JWN) to Neutral and also removed Kohl's (NYSE: KSS) from its Conviction Buy List.
JMP Securities downgraded SanDisk (NASDAQ: SNDK) to Underperform from Market Perform based on increased competition in NAND, a potential decline in royalty income, valuation, and lack of catalysts from flash-based solid state drives.
CNET Networks (NASDAQ: CNET) was cut to Neutral from Buy at Banc of America following the tender offer from CBS (NYSE: CBS).
Retail giant JC Penney (NYSE: JCP) reported its first quarter numbers this morning, and reported that the current economic environment led to a pretty hefty 50% drop in its net income.
The company stated that the cut back in consumer spending was to blame for the drop in net income, and predicted that the tough times were far from over. In its earnings report, the company estimated that the difficult times could easily last for the remainder of the year.
Despite the 50% drop in income, and poor business outlook for the rest of the year, the stock is actually in the green today, as traders have pushed shares of the retailer up 1.7% to $45.01, up $0.76. The reason... the company was able to beat Wall Street estimates.
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
Analysts surveyed by Thomson Financial expect earnings growth, compared to the same period in the previous year, from Urban Outfitters (NASDAQ: URBN) to be 22.7% to 22 cents per share, from Wal-Mart Stores (NYSE: WMT) to be 9.3% to 75 cents per share, and from TJX Companies (NYSE: TJX) to be 7.5% to 40 cents per share.
Analysts expect earnings declines from the previous year from JC Penney (NYSE: JCP) by 52.9% to 49 cents per share, from Kohl's (NYSE: KSS) by 34.4% to 42 cents per share, and from Nordstrom (NYSE: JWN) by 18.3% to 49 cents per share.
In the case of Abercrombie & Fitch (NYSE: ANF), analysts expect earnings to remain flat, year over year, at 65 cents per share.
And then there's Macy's (NYSE: M), which is expected to swing to a loss of 2 cents per share, compared to a profit of 16 cents a year ago.
The sample size may be too small to define any significant trends, but the numbers do suggest that analysts expect profit declines to be deeper than profit growth, and that consumers may be more likely, given the current state of the economy, to buy clothes at Wal-Mart or TJ Maxx than at Nordstrom or Abercrombie.
The coming results will reveal if those expectations are correct.
What's a tell-tale sign of a recession, and conversely, an indicator investors/readers should monitor to spot when the recovery has started? Retail sales -- particularly at department stores.
Most retailers will report March 2008 same-store sales this week, and Wall Street is bracing for the worst. In January 2008 and February 2008, same-store sales declined at nearly every major department store, including JC Penney (NYSE: JCP), Macy's (NYSE: M), Kohl's (NYSE: KSS), Dillard's (NYSE: DDS) and Nordstrom (NYSE: JWN).
Further, investors should watch Nordstrom's same-store sales carefully. The reason? Upscale retailer Nordstrom is a type of quick-reference, or an economic-barometer-in-a-snapshot, of the depth of a recession. If retail sales decline at broader-demographic retailers for several consecutive months, that points to a recession. But if sales decline at upscale retailer Nordstrom, that's a sign that even those with higher incomes and substantial assets are cutting back, which is a bad sign for the economy.
Nordtstrom's customers include professionals, executives and business owners -- including people who make hiring decisions. If they're cutting back, that may indicate they will not be hiring in the period ahead, which is never good news for the economy. Invariably, it means the recession's end is not near.
In Q4 2007, Nordstrom's sales fell 4.4% and earnings per share fell for the first time in more than five years to 92 cents per share. If Nordstrom's same-store sales decline again in March, that's a sign of continued belt-tightening by upper-middle and upper-income adults, and a sign that an economic recovery is not near.
MOST NOTEWORTHY: Quiksilver, Omniture and Crown Holdings were today's noteworthy upgrades:
B. Riley upgraded shares of Quiksilver (NYSE: ZQK) to Buy from Neutral on valuation and to reflect the EPS catalyst and debt reduction associated with divesting Rossignol.
Friedman Billings upgraded shares of Omniture (NASDAQ: OMTR) to Outperform from Market Perform following the recent pullback, as they believe the company is in its best competitive position ever, which should drive increasing win rates and help restore pricing power.
Banc of America upgraded shares of Crown Holdings (NYSE: CCK) to Buy from Neutral to reflect the company's international exposure and believes metal packaging companies should be better able to manage input inflation.
TheStreet.com's Jim Cramer says the number of things that went wrong in one day is astounding, and is led by the woes of Fannie Mae and Freddie Mac.
There aren't many days like yesterday. Or let's hope there won't be. Let me refresh all of the things that went wrong so we have the context of how treacherous this market really is.
1. The Treasury and the President saw fit not to endorse the "implicit" guarantee for Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take) paper. For those of us who have bought and sold this paper for most of our lives, this was the signal that almost everything could be worthless. Their refusal to acknowledge the problems was so in the Hoover playbook that it was shameful.
2. We always figured that you should be able to lever up if you are in the bond market, with nine to one being an acceptable level for rock solid collateral like Fannie Mae mortgage paper, which was presumed to pay off at par with the only question being when. Now, because the question is no longer "when," but "if" that level of leverage is going to be obliterated. Maybe three or four times is all we will get. There have to be trillions of dollars at risk in loans right now because of that loss of implicit guarantees.
J.C. Penney Company, Inc (NYSE: JCP) stock is falling sharply today after the retailer posted a 6.7% decrease in February same-store sales. Analysts had been expecting a 1.9% fall. 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 JCP.
After hitting a one-year high of $84.70 in April, the stock hit a one-year low of $33.27 in January. This morning, JCP opened at $46.66. So far today the stock has hit a low of $43.13 and a high of $46.66. As of 12:20, JCP is trading at $43.24, down $4.87 (-10.1%). The chart for JCP looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a March bear-call credit spread above the $50 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. This particular trade will make a 4.2% return in two weeks as long as JCP is below $50 at March expiration. JC Penney would have to rise by more than 16% before we would start to lose money.
JCP hasn't been above $50 by more than a few cents since November and has shown resistance around $49.50 recently. This trade could be risky if consumer spending shows gains in the next two weeks, but even if that happens, this position could be protected by resistance JCP might find around $50, where it has topped out twice in the past month. Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in JCP.
You know the old adage for success in the stock market -- buy low and sell high. Well unfortunately too many Americans today are doing the exact opposite as they seek coverage from a very volatile stock market. They bought when this market was near the top and are now selling in panic.
I prefer to watch two men who clearly know how to buy low and sell high -- Warren Buffett (also known as the "Oracle of Omaha" and Bill Miller, a very successful fund manager at Legg Mason, who is known for his 15-year winning streak against the Standard & Poor's 500 stock index.
So are they selling or buying? Both are buying and buying big. According to Sunday's Washington Post, Buffett upped his stake in Kraft Foods (NYSE: KFT), Johnson & Johnson (NYSE: JNJ), U.S. Bancorp (NYSE: USB), and Wells Fargo (NYSE: WFC). He also took a new stake in GlaxoSmithKline (NYSE: GSK). Buffett disclosed that he owns 132 million shares in Kraft, which means he owns 8.6% in the maker of Ritz crackers, Philadelphia cream cheese, and Maxwell House coffee.
Struggling retailer J.C. Penney Company, Inc. (NYSE: JCP) has reportedly attracted the interest of renowned bottom-feeder (I mean that as a compliment!) Carl Icahn.
According (subscription required) to the Wall Street Journal, "While the exact size of the stake in the 105-year-old retailer is unclear, one person said it is among Mr. Icahn's top five holdings, which could mean it runs into the hundreds of millions of dollars."
It's unknown whether Icahn will agitate for change at the company -- While he's made his name as a "raider" and activist investor, Icahn frequently buys and holds stocks simply because he thinks they're undervalued.
Earlier this week, Mr. Icahn said that retail stocks were "very cheap" but also sounded a cautious note, saying that he was not bullish on the economy and that retail stocks may well go lower before they go up again. But Icahn has never claimed to be a market timer: he buys stuff when he thinks it's a compelling value, and isn't easily shaken by short-term fluctuations.
Shares of J.C. Penney are up more than 1.5% today.
With a possible coming recession, J.C. Penney Company Inc (NYSE: JCP) CEO Myron "Mike" Ullman is expected to today announce plans to merge the buying and marketing operations for store and online sales and cut up to 200 jobs, the Wall Street Journal reported.
The Wall Street Journal also reported that the warning from UBS AG (NYSE: UBS) that its write downs for 2007 would be $4B higher than forecast is an indicator that other Wall Street banks are still vulnerable to the subprime crisis; Citigroup Incorporated (NYSE: C) and Merrill Lynch & Co Inc (NYSE: MER) may be the most vulnerable to the next wave of write downs.
WEB SITES:
Merck & Co Inc (NYSE: MRK) and Schering-Plough Corporation (NYSE: SGP) perform quite differently, despite jointly marketing Vytorin, Barron's reported. while Merck offers a golden opportunity for bargain hunters, Schering's prospects remain less certain with the company relying on Vytorin for more than one-third of its pretax profits, according to estimates from Lehman Brothers.
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Retail giant 
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
What's a tell-tale sign of a recession, and conversely, an indicator investors/readers should monitor to spot when the recovery has started? Retail sales -- particularly at department stores. 
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You know the old adage for success in the stock market -- buy low and sell high. Well unfortunately too many Americans today are doing the exact opposite as they seek coverage from a very volatile stock market. They bought when this market was near the top and are now selling in panic..gif){kind=logo}
The week in preview: New quarter earnings kick-off
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
