The conventional wisdom is that consumer spending is what drives the U.S. economy. And consumer spending arises out of consumer confidence. Unfortunately, the signals along the road to economic recovery are mixed, what with the rising GDP growth and the dismal unemployment numbers. Its enough to leave investors scratching their heads. What barometers of consumer confidence will the coming week bring?

The TIPP Economic Optimism Index for November is scheduled for Tuesday, and the University of Michigan Consumer Sentiment Index for November is due out Friday.

Advance Auto Parts (NYSE: AAP) has pulled-back about $4 since first recommended on May 19, 2009 at a price of $43.38, but view that as a Buy opportunity.

That's because an argument can be made that auto repair represents one of the best sectors over the next one-two years. Here's why:

Last week offered mixed messages about whether an economic recovery is indeed underway. The unemployment figures were not as bad as feared, but July sales numbers were nothing to write home about, despite the wild popularity of the so-called cash-for-clunkers program.

The question is, where has consumer confidence (and consumer spending) been? Retail is a good place to look, and as it turns out, this week several shopping mall and strip mall favorites will be reporting earnings for the most recent quarter.

Analyst upgrades:

• Janney Montgomery upgraded Aqua America (NYSE: WTR) to Buy from Neutral on valuation, viewing the recent weakness as a buying opportunity. The firm has a $19 target on the stock.
• UBS upgraded Gildan Activewear (NYSE: GIL) to Buy from Neutral due to customer Broder's improved liquidity and the improved outlook for margins.
• RBC Capital upgraded State Street (NYSE: STT) to Top Pick from Outperform and raised its target to $55 from $40. The analyst said the $2B capital raise addresses TCE ratio concerns and large unrealized losses in the investment portfolio.
• Sherwin-Williams (NYSE: SHW) was upgraded to Overweight from Neutral at JP Morgan.
• Advance Auto Parts (NYSE: AAP) was upgraded to Buy from Underperform at Banc of America/Merrill.
• M&T Bank (NYSE: MTB) was upgraded to Outperform from Market Perform at Bernstein.

Advance Auto Parts (NYSE: AAP - option chain) shares are dropping today after the company forecast a third-quarter profit of 57 cents per share, coming in way below analysts' estimates of 66 cents per share. 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 AAP.

This morning, AAP opened at $31.96. So far today the stock has hit a low of $27.73 and a high of $32.78. As of 12:05, AAP is trading at $29.71, down $4.66 (-13.6%). The chart for AAP looks neutral and S&P gives AAP a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $40 range.

MOST NOTEWORTHY: Advance Auto Parts Inc (NYSE: AAP), Solectron Corporation (NYSE: SLR), Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd (NYSE: RCL) and were today's noteworthy upgrades:

• JP Morgan upgraded shares of Advance Auto Parts to Neutral from Underweight citing increased confidence in the company's turnaround efforts.
• Solectron was upgraded to Neutral from Underperform at Credit Suisse to reflect the company's acquisition by Flextronics International (NASDAQ: FLEX).
• Carnival was upgraded to Strong Buy from Outperform and Royal Caribbean was upgraded to Outperform from Market Perform at Raymond James.

OTHER UPGRADES:

• BHP Billiton Ltd (NYSE: BHP) was upgraded to Buy from Hold at Citigroup on valuation and their expectations for higher commodity prices.
• Matrix USA upgraded shares of Callaway Golf Company (NYSE: ELY) to Hold from Strong Sell, as the firm believes growing demand for new products is driving positive fundamental trends.
• Lehman upgraded Dow Chemical (NYSE: DOW) to Overweight from Equal Weight, citing the potential for an accretive acquisition of buyback.

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

MOST NOTEWORTHY: Today's most noteworthy downgrades included Armor Holdings, Inc (AH), Alcan Inc (AL), Advance Auto Parts, Inc (AAP) and Reuters Group PLC (RTRSY):

• Armor Holdings Inc (NYSE: AH) was downgraded to Neutral from Overweight at JP Morgan based on the news that the company will be sold to BAE Systems PLC (BAESY) for $88 a share in cash. The firm expects the deal to close with no higher offers. Bear Stearns cut Armor Holdings to Peer Perform from Outperform and Friedman Billings cut shares of the vehicle armorer to Market Perform from Outperform.

• Alcan Inc (NYSE: AL) was cut to Neutral from Buy at Bank of America and DA Davidson following the Alcoa (AA) bid.

• Baird cut Advance Auto Parts (NYSE: AAP) to Neutral from Outperform following CEO Michael Coppola's resignation. Kevin Dann downgraded Advance to Hold from Buy to reflect an increased level of uncertainty following Mr. Coppola's departure.

• Lehman Brothers downgraded Reuters Group (NASDAQ: RTRSY) to Equal Weight from Overweight pending further information on the Thompson Corp (TOC) bid; Credit Suisse cut shares to Neutral from Outperform and Deutsche Bank cut shares to Hold from Buy.

OTHER DOWNGRADES:

• Matrix downgraded UST Inc (NYSE: UST) to Sell from Hold.

• Needham cut Entegris, Inc (NASDAQ: ENTG) to Hold from Buy.

• UBS downgraded shares of Golden Star Resources (AMEX: GSS) to Reduce from Neutral.

• Wachovia cut Rowan Cos (NYSE: RDC) to Market Perform from Outperform.

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