There is a bill making rounds on Capitol Hill that would provide a tax break for up to $3,500 for pet expenses. Does Fido really deserve a tax deduction? Do we really need to subsidize pet ownership in this country?

The recession has been extra hard on pets as people have abandoned pets at shelters they are no longer able to properly care for them. Pet can be very expensive between food, visits to the vet and increased rent. Those of you who think dog food is expensive should try to feed a horse sometime!

PetSmart (NASDAQ: PETM - option chain) shares are rising today after the company boosted its quarterly dividend to 10 cents per share from 3 cents per share. PetSmart also announced it is planning a $350 million stock buyback. 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 PETM.

PETM opened this morning at $21.11. So far today the stock has hit a low of $20.41 and a high of $21.19. As of 11:20, PETM is trading at $20.72 up 0.74 (3.7%). The chart for PETM looks bullish and S&P gives PETM a positive 4 STARS (out of 5) buy ranking.

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

• Aeropostale Inc. (NYSE: ARO) beat profit expectations as revenue and same-store sales both increased.
• Aruba Networks Inc. (NASDAQ: ARUN) received an analyst's upgrade following its Q3 report.
• Buckle Inc. (NYSE: BKE) reported better-than-expected Q1 expectations as revenue surged.
• Campbell Soup Co. (NYSE: CPB) higher Q2 earnings beat expectations and sent shares upward.
• Deere & Co. (NYSE: DE) reported better-than-expected Q3 earnings, sending shares higher.

Today was a day marked by selling, partly on economic news and partly on a call from S&P. S&P put the credit bias of the United Kingdom at "negative" from "stable" giving the notion that the nation's Triple-A ranking is possibly at risk to be cut. Then came the implications from Bill Gross and others that the U.S. could ultimately see the same fate. To show how bad the trend and bias was, long-dated Treasuries saw their yields rise as much as 15 basis points today.

A slightly less-bad jobs report failed to catch any attention today. In short, if you are a market bear you are getting more feathers in your cap now that earnings are basically finished. Here are today's unofficial closing bell levels:

Dow 8,291.82 -130.22 (-1.55%)
S&P 500 888.23 -15.24 (-1.69%)
Nasdaq 1,695.25 -32.59 (-1.89%)

Top Analyst Calls

Analyst upgrades:

• UBS upgraded Target (NYSE: TGT) to Buy from Neutral and raised its price target to $52 from $45 citing reduced inventories, some credit stability, and an improved back-to-school period.
• Credit Suisse said concerns regarding Safeway's (NYSE: SWY) price position are overblown and that earnings risk is limited. The firm upgraded shares to Outperform from Neutral and raised the target price to $25 from $22.
• Oppenheimer upgraded Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform as it believes the story is underappreciated following the recent sector rally. The firm has a $14 price target on the stock.
• CME Group (NASDAQ: CME) was upgraded to buy from Neutral at Goldman.
• Freeport McMoRan (NYSE: FCX) was upgraded to Overweight from Neutral at JP Morgan.
• Gilead Sciences (NASDAQ: GILD) was upgraded to Buy from Neutral at FTN Equity.

After the closing bell yesterday, PetSmart (NASDAQ: PETM) announced that its first-quarter profit increased 12%. The results were driven by higher merchandise and service sales.

PETM earned $46.3 million, or 37 cents per share -- a nickel better than last year's same-quarter results. The firm also topped Wall Street's expectations, which called for earnings of 30 cents per share. Quarterly revenue increased 9% to $1.33 billion, which fell short of the consensus estimate of revenue of $1.35 billion.

The company's merchandise sales increased 9% to $1.18 billion, with pet service sales increasing 10% to $142.8 million.

While the release of economic data doesn't stop next week (see economic schedule highlights below), the earnings season does wind down dramatically. Most of the S&P 500 companies already have reported on the past quarter, which means dismal earnings news is largely behind us, at least for a while. About the only companies of note expected by analysts surveyed by Thomson Reuters to report falling earnings this week are Costco Wholesale Corp. (NASDAQ: COST), Wendy's/Arby's Group Inc. (NYSE: WEN), Foot Locker Inc. (NYSE: FL), Bank of Montreal (NYSE: BMO), and Steinway Musical Instruments Inc. (NYSE: LVB).

While PetSmart Inc. (NASDAQ: PETM) and Big Lots Inc. (NYSE: BIG) quarterly profits are expected to be about the same as a year ago, Liz Claiborne Inc. (NYSE: LIZ), Kenneth Cole Productions Inc. (NYSE: KCP), Ciena Corp. (NASDAQ: CIEN), and Trina Solar Ltd. (NYSE: TSL) are expected to have swung to losses in the most recent quarter.

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

• AnnTaylor Stores Corp. (NYSE: ANN) posted dismal Q3 results as same-store sales sank.
• Autodesk Inc. (NASDAQ: ADSK) declined to release an outlook for next year due to the economic turmoil.
• BASF AG (OTC: BASFY) profit warning resulted in analysts' upgrades and downgrades both.
• Dell Inc. (NASDAQ: DELL) handily beat Q3 expectations due in part to share buybacks.
• GameStop Corp. (NYSE: GME) missed Q3 earnings expectations and same-store sales declined.
• Hewlett-Packard Co. (NYSE: HPQ) forecast Q4 results above estimates on cost cutting and global reach.
• Home Depot Inc. (NYSE: HD) reported better-than-expected Q3 results though sales had declined.
• LDK Solar Co. Ltd. (NYSE: LDK) Q3 earnings more than doubled and revenued surged 70%.
• Lowe's Cos. Inc. (NYSE: LOW) posted better-than-expected Q3 results though same-store sales slipped.
• McDonald's Corp. (NYSE: MCD) 2009 earnings prospects resulted in an analyst's upgrade.
• Nokia Corp. (NYSE: NOK) earnings warning resulted in upgrades from a few analysts.
• PetSmart Inc. (NASDAQ: PETM) topped expectations and forecast full-year profits higher than estimates.
• Suntech Power Holdings Co. (NYSE: STP) fell short of earnings expectations and lowered its guidance.
• Trina Solar Ltd. (NYSE: TSL) Q3 earnings quadrupled and revenue more than tripled on increased demand.

International Speedway (NASDAQ: ISCA), a promoter of motor sports entertainment, closed at $25.23 Tuesday. ISCA December option implied volatility of 58 is above its 26-week average of 34 according to Track Data, suggesting larger price movement.

PetsMart (NYSE: PETM), the operator of more than 1,075 pet stores, is scheduled to report Q3 EPS today. PETM closed at $15.06 Tuesday. PETM November 15 straddle is priced at $1.65, PETM December 15 straddle is priced at $3.40. PETM December option implied volatility is at 97: January is at 75; above its 26-week average of 56 according to Track Data, indicating larger near term movement.

First Solar (NYSE-FSLR) is recently down $6.56 to $104 in pre-open trading. Friedman Billings says: "Recent checks suggest that FSLR's new strategy in the U.S. market (entering the distributed, rooftop segment) is already facing headwinds." FSLR overall option implied volatility of 121 is above its 26-week average of 82 according to Track Data, suggesting larger price movement.

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

Last week, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) posted a quarterly loss and lowered its guidance. But as interest in alternative energy continues to grow, analysts polled by Thomson Financial are still looking for good things from solar energy concerns scheduled to report earnings this week.

Strong growth at Trina Solar Ltd. (NYSE: TSL) in the third quarter prompted it to lift its guidance back in October. Analysts expect the Chinese company to post profits that are 76.3% higher than a year ago, or $1.18 per share on revenues of $268.4 million (+225.0%). Though Trina Solar missed estimates in the second quarter, analysts on average recommend buying TSL. Shares are down 81.4% from a year ago and trading near an all-time low.

Earnings of rival LDK Solar Co. Ltd. (NYSE: LDK) are expect to have risen 47.9% to $0.71 per share on revenues of $486.7 million (+206.6%). Also based in China, LDK has not missed estimates in recent quarters; in fact, it blew past expectations in the second quarter. Yet the consensus recommendation is to hold LDK. Like Trina Solar, LDK's shares are trading near an all-time low; the share price has fallen 50.0% in the past year.

Analysts anticipate third-quarter earnings for Canadian Solar Inc. (NASDAQ: CSIQ) to be a whopping 96.3% higher than a year ago, or $0.54 per share on revenues of $248.0 million (+154.5%). The company easily topped estimates in the previous quarter. ReneSola Ltd. (NYSE: SOL) and Suntech Power Holdings Co. Ltd. (NYSE: STP) are also expected to report earnings growth of 29.7% ($0.37 per share) and 23.8% ($0.42 per share), respectively. All three of these stocks reached 52-week lows last week, and all are considered buys.

Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year.

• Solarfun Power Holdings Co. Ltd. (NASDAQ: SOLF): $1.48 EPS (+73.0%) on sales of $1.3 billion (+171.0%)
• Marvell Technology Group Ltd. (NASDAQ: MRVL): $0.21 EPS (+71.4%) on sales of $836.7 million (+27.4%)
• Solera Holdings Inc. (NYSE: SLH): $0.29 EPS (+51.7%) on sales of $137.0 million (+11.8%)
• Applied Signal Technology Inc. (NASDAQ: APSG): $0.14 EPS (+42.9%) on sales of $46.4 million (+17.4%)
• China Finance Online Co. Ltd. (NASDAQ: JRJC): $0.14 EPS (+42.6%) on sales of $13.3 million (+131.5%)
• OSI Systems Inc. (NASDAQ: OSIS): $0.38 EPS (+36.8%) on sales of $162.0 million (+6.0%)
• LaBarge Inc. (AMEX: LB): $0.27 EPS (+33.3%) on sales of $71.6 million (+10.4%)
• Esterline Technologies Corp. (NYSE: ESL): $0.69 EPS (+11.6%) on sales of $374.6 million (+14.8%)
• Dell Inc. (NASDAQ: DELL): $0.36 EPS (+11.1%) on sales of $15.9 billion (+7.8%)
• HEICO Corp. (NYSE: HEI): $0.46 EPS (+13.0%) on sales of $147.1 million (+10.5%)
• Daktronics Inc. (NASDAQ: DAKT): $0.17 EPS (flat) on sales of $141.5 million (+17.0%)
• Novell Inc. (NASDAQ: NOVL): $0.05 EPS (flat) on sales of $241.4 million (-0.7%)
• Omnivision Technologies Inc. (NASDAQ: OVTI): $0.29 EPS (-17.1%) on sales of $172.5 million (-0.4%)
• Sigma Designs Inc. (NASDAQ: SIGM): $0.39 EPS (-18.8%) on sales of $58.7 million (+37.9%)

PetSmart (NASDAQ: PETM) shares are trading higher after an analyst at JP Morgan upgraded the stock to "Overweight" from "Neutral" with a $29 price target. As noted by Eric Buscemi, the analyst cited improving margins and strong area relative to other retail outlets. 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 PETM.

After hitting a one-year high of $35.01 in September, the stock hit a one-year low of $18.75 in March. PETM opened this morning at $23.51. So far today the stock has hit a low of $22.57 and a high of $23.62. As of 11:30, PETM is trading at $22.89, up $0.68 (3.1%). The chart for PETM looks bullish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put 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 a 4.2% return in just five weeks as long as PETM is above $20 at July expiration. PetSmart would have to fall by more than 12% before we would start to lose money. Learn more about this type of trade here.

PetSmart (NASDAQ: PETM) issued its Q1 earnings numbers on Wednesday, and the market didn't take too kindly to them. At the time of this writing, the shares were down in after-hours trading by over 3%. I can kind of see why.

Revenues did okay, rising 9% to $1.2 billion. Earnings per share, however, dropped like a rock. Last year, the company booked $0.78 per diluted share; this year, the company did $0.32 per diluted share. However, investors need to realize that there was a gain on an investment in the previous year's quarter that skewed results; backing out the $0.47 per-share benefit gives an earnings number of $0.31 per diluted share in Q1 2007. So, the real earnings growth was rather tepid, and this might explain to some degree why there was a bit of a sell-off after the news, even though, according to Briefing.com, PetSmart beat bottom-line expectations by a penny and did exceed on the top-line as well.

Guidance for Q2 was also an issue, as Briefing.com seemed to indicate that management's growth expectations are not precisely what Wall Street was looking for. For the full year, however, PetSmart is looking to do about what Wall Street wants. If management hits the full-year earnings range of somewhere between $1.51 and $1.59 per share, then the P/E ratio on the stock is around 14. Sure, that isn't expensive, but I don't know if I want to enter a company such as this in the kind of environment we find ourselves in. Yes, pets are important and will be taken care of, but people might cut down on pampering them to excess. Plus, there's a lot of competition out there for your pet dollars. Wal-Mart (NYSE: WMT), Costco (NASDAQ: COST), BJ's (NYSE: BJ), and every supermarket in the country all vie for a slice of the pet market.

Monday, May 19

• Lowe's Companies (NYSE: LOW) to report Q1 earnings; conference call scheduled for 9:00am.
• Campbell Soup Company (NYSE: CPB) to report Q3 earnings; Conference call scheduled for 10:00am.

Tuesday, May 20

• Senate Judiciary Committee Hearing on Global Internet Freedom & Corporate Responsibilty at 10:00am. Appearing: Google, Inc. (NASDAQ: GOOG), Cisco Systems, Inc. (NASDAQ: CSCO) and Yahoo! Inc. (NASDAQ: YHOO).
• Medtronic, Inc. (NYSE: MDT) to report Q4 earnings; conference call scheduled for 8:00am.
• Hewlett-Packard Company (NYSE: HPQ) to report Q2 earnings; conference call scheduled for 5:00pm.

MOST NOTEWORTHY: PetSmart, Marsh & McLennan and Pinnacle Airlines were today's noteworthy upgrades:

• Banc of America upgraded PetSmart (NASDAQ:PETM) to Buy from Neutral on valuation, as they believe the market is overly negative on the company's cyclicality.
  
• Keefe Bruyette upgraded shares of Marsh & McLennan (NYSE:MMC) to Outperform from Market Perform on increased confidence management will be able to improve margins.
  
• JP Morgan upgraded Pinnacle Airlines (NASDAQ:PNCL) to Overweight from Underweight citing the company's FCF and contract certainty.

OTHER UPGRADES:

• Hasbro (NYSE:HAS) was upgraded to Buy from Hold at Needham.
  
• Calyon raised Airtran Holdings (AAI) to Add from Neutral.
  
• Liberty Entertainment (LMDIA) was raised at Merrill to Buy from Neutral.