Dollar Tree Stores (NYSE: DLTR) saw its shares decline Monday after an analyst from JPMorgan (NYSE: JPM) said the stock price for the discount retailer is already too high in light of declining consumer spending.

That's all well and good (and somewhat true), but for a retail store "where everything is a dollar," it's hard to see the core customer contingent of Dollar Tree curbing spending for all those $1 items any time soon. In fact, wouldn't logic say that more people may visit Dollar Tree for all those household goods as all those collective belts are being tightened?

Dollar Tree shares lost over 6% based on the analyst's comment, and they now stand at a little over $37 this morning. The downgrade from Neutral to Underweight caused the shares to close just over $35 on Monday, and have since recovered slightly.

The general reasons were given in the downgrade, including the macro economic environment of the U.S. spending scenario at the moment -- particularly for lower-income households (Dollar Tree's core customer) -- as Dollar Tree was mentioned along with discount retailers Family Dollar Stores (NYSE: FDO) and Wal-Mart (NYSE: WMT). Will Dollar Tree's $1 pricing model really fall under pressure soon due to so many consumer spending issues? With a 25% stock price rise this year alone, perhaps it is time for the shares to cool off a little. I'm just not convinced we'll see a flock of customers abandon $1 products.

MOST NOTEWORTHY: The mortgage finance sector, Applebee's, Fuel-Tech, BHP Billiton, Anglo American and Rio Tinto were today's noteworthy downgrades:

• Lehman downgraded the mortgage finance sector to Negative from Neutral citing the potential of over $100B in losses for the group in the coming years. Washington Mutual (NYSE: WM) was downgraded to Equal Weight from Overweight; IndyMac Bancorp (NYSE: IMB) and Countrywide Financial Corporation (NYSE: CFC) were downgraded to Underweight from Equal Weight.
  
• Applebee's International (NASDAQ: APPB) was downgraded to Underperform from Market Perform at Wachovia, as the firm sees potential downside risk if the company's acquisition of IHOP Corp (NYSE: IHP) does not go through, following mixed reviews from Proxy firms.
  
• Merriman downgraded shares of Fuel-Tech (NASDAQ: FTEK) to Sell from Neutral after channel checks indicated the competitive landscape is much more challenging than commonly perceived for the FUEL CHEM product line. Merriman sees significant risk to shares at current levels.
  
• Citigroup downgraded shares of BHP Billiton (NYSE: BHP), Anglo American (NASDAQ: AAUK) and Rio Tinto (NYSE: RTP) to Hold from Buy on valuation following the recent rally.

OTHER DOWNGRADES:

• Lehman downgraded the specialty finance sector to Neutral from Positive; the firm downgraded American Express Company (NYSE: AXP), Capital One Financial Corporation (NYSE: COF) and Discover Financial Services (NYSE: DFS) to Equal Weight from Overweight.
  
• Lululemon Athletica (NASDAQ: LULU) was downgraded to Neutral from Buy at Goldman Sachs.
  
• JP Morgan downgraded Dollar Tree Stores (NASDAQ: DLTR) to Underweight from Neutral.
  
• Angiotech Pharmaceuticals (NASDAQ: ANPI) was downgraded to Sector Performer from Sector Outperformer at CIBC and to Sector Perform from Outperform at RBC Capital.

With daily reports in the financial press about the collapse of subprime lending, and the precarious position that lower-income Americans are finding themselves in, there's one group of retailers that may be destined to profit: Dollar stores. As people have to scrimp and save more to cover their ballooning mortgage payments, they may look to these discounters for household staples.

In addition, these companies are messing with big box retailers like Wal-Mart Stores, Inc. (NYSE: WMT) with competitive pricing and a smaller, more user friendly store-format.

Demographic trends are also helpful. Incomes at the lower-end are growing slowly and, as the baby boomer population ages, budget constraints may make these discounters more attractive.

These companies also tend to have simple business models, high turnover, and fairly predictable cash flows. While the private equity bull market appears to have waned, attractively valued dollar stores may still be attractive to some firms. KKR recently acquired Dollar General for $7.3 billion.

If you think dollar-stores have a bright future, you have a few investment options.

Netflix Inc (NASDAQ: NFLX)

Amazing. Amazon.com Inc (NASDAQ: AMZN), that big online retailer, sees the flix for the net. The shares keep rising for the online DVD rental company-up about 15%, highest since January-- even if their discs do come a little scratched. More than that though is while new subscribers are coming on; it's not exactly going gangbusters. Still, 6.8M is a whole lot of subscribers. Will Amazon, or someone else, overpay?

Rackable Systems Inc (NASDAQ: RACK)

Which came first: The ongoing takeover rumors or the higher stock price? Or was it that Dell Inc (NASDAQ: DELL) is said to be after Rackable, a provider of servers and storage products for high density data center deployments. Rack it up.

Feldman Mall Properties Inc (NYSE: FMP)

Word is that this real estate investment trust will look for a sale, combo or merger. They said the venerable firm of Friedman, Billings, Ramsey & Co. will help them "explore strategic alternatives." Then the stock went up.

STILL FLYING AROUND

Trump Entertainment Resorts Inc (NASDAQ: TRMP)

Dennis Gomes, whose name surfaced in March, is a one time gaming exec and regulator. He's signed a confidentiality agreement to have a look see at the firm's Atlantic City casinos. Separately, Las Vegas' Boyd Gaming Corporation (NYSE: BYD) has also been mentioned as a possible contender.

YRC Worldwide Inc (NASDAQ: YRCW)

The CEO of this Kansas-based transportation service provider has been quoted as saying that a takeover is possible. An LBO is likely. This week the shares have actively been trading up.

Dollar Tree Stores Inc (NASDAQ: DLTR)

Imagine a dollar tree where the stock keeps going up, up, up. Well, here it is, once again, a subject of takeover talk.

BUZZ

United States Steel Corporation (NYSE: X): Russia's Severstal may be prowling around...Plains Exploration & Production Company (NYSE: PXP): Takeover candidate's stock is sharply higher... Micron Technology Inc (NYSE: MU): Blackstone has interest...Ameristar Casinos Inc (NASDAQ: ASCA): A hot stock and takeover rumors abound...Nvidia Corporation (NASDAQ: NVDA): Remains an LBO candidate...The First Marblehead Corporation (NYSE: FMD): The student loan business is booming and earnings growth is strong, but who would buy it?...Marriott International Inc (NYSE: MAR): A target? But where's the movement?...Oakley Inc (NYSE: OO) as a target has been around and around, and now some say it will be bought by Luxottica Group (NYSE: LUX).

According to the Wall Street Journal, discount/single-price point stores like Family Dollar Stores Inc. (NYSE: FDO), Dollar Tree Stores Inc. (NASDAQ: DLTR), and the soon to be KKR owned Dollar General Corp. (NYSE: DG) are growing in popularity [subscription required] with consumers, reporting solid same-store sales growth and expanding sales of food products. According to Family Dollar CEO Howard Levine, "The low-income customer is always stressed and always strained. When things like a minimum-wage increase happen, that's a great benefit to them. When gas prices come down, that's a great benefit to them, and conversely when they go the other way, that has a negative impact."

Because of sky-high real estate prices in my area, we have no dollar stores. There used to be one in a local mall but it got replaced by a jeweler. I'm not kidding. However, anytime I'm traveling, I go to a dollar store, not because I'm "always stressed and always strained," but because it's fun. I was recently driving with my brother and we passed a Family Dollar and I practically ordered him to turn the car around. He reluctantly agreed with only this protest: "You are such a loser."

Looks like yet another vague stock downgrade has come from a major ratings house, as analysts at HSBC have downgraded shares of low-price retailer Dollar General Corp. (NYSE:DG) from "neutral" to "underweight" with a target price of $14 per share.

After having looked at the "dollar" landscape recently -- which includes Dollar Tree Stores, Inc., Family Dollar Stores, Inc. and Dollar General -- I was amazed to see that of the 19 items I picked up at a Dollar General store on a research visit were marked much higher than $1 -- the prices ranged from $4 to $19.

Yet, at Dollar Tree, every single item was marked for $1 for all 15 items I picked up to research -- making it a "true" dollar store. Now, the range of goods inside Dollar General were a step above those at Dollar Tree, but some of the bargains were not hat impressive really, although many were. Perhaps "Dollar General" should be "$10 Dollar General."