There's a chill in the air and a slight up-tick in confidence. Holiday discounts are coming a bit earlier, too. For retailers, this has been a great combination, leading to the second consecutive month in which retail sales increased.

This follows more than a year of drops. Consumers aren't going crazy, but they are loosening their wallets a little bit. Consumer spending accounts for 70% of the U.S. economy, and the coming holiday season is where the action is -- for the retail sector and, consequently, for everyone else.

Consumer spending had its largest fall this year, thanks to the end of the "Cash for Clunkers" program. And, incomes were flat. No change to the money coming in and a drop in the cash going out translates to an impediment to economic recovery.

In September, consumer spending fell 0.5%, the first decline in five months and the worst in nine. Wages and salaries dropped 0.2%, effectively offsetting the 0.2% up-tick in August. The economy did grow in the third quarter of 2009, hinting that the worst recession in 70 years may be coming to a close, but the tough September suggests we still have some work in front of us.

Halloween, though not the blockbuster holiday that Christmas is, still results in some additional spending on the part of consumers as they stock up on candy and costumes, and maybe take in a scary movie or two. With those treats in mind here are some stocks that may give investors sweet dreams -- and hopefully not nightmares.

As is well known, candy is all the rage at Halloween, and among the largest candy stocks are Hershey Co. (NYSE: HSY) and Cadbury PLC (NYSE: CBY). Last week, Hershey reported third-quarter earnings rose 30% despite weaker volumes affected by higher prices for its sweets. Last year's numbers also included special charges. Still the company said it expects full-year earnings to be ahead of Wall Street forecasts. In 2010, the Pennsylvania company said it expects earnings excluding items to rise 6% to 8%. The stock has a forward-looking price-to-earnings ratio of 16 and a current dividend yield of 3.1%.

There has been real concern about this year's e-commerce numbers. comScore has online spending up about 18%. The data for the period from November 1 through December 14 show sales of $22.67 billion.

But, these numbers are down from a growth rate of 26% for the same period last year. Part of that may be due to big percentages being harder to hit as the base grows. That explanation may not be acceptable to Wall Street. Online revenue is still only about 5% of total retail sales. A drop-off in the numbers must have some other explanation.

It turns out that there is reason, and it is an unpleasant one. comScore's data show that people in households with incomes under $50,000 have only increased their spending 10% so far this holiday season. Shoppers in households with incomes over $100,000 are spending 28% more.

What is evident is that people with modest incomes are feeling pinched. It's no wonder with fuel prices high and home prices low. These essentials usually make up a larger portion of the budgets of those who are not in the affluent tiers of the population.

Who gets hurt by the numbers? Discount retailers which cater to the middle and lower classes such as Wal-Mart.com (NYSE: WMT).

Douglas A. McIntyre is an editor at 247wallst.com.

Consumer sentiment fell to its lowest level in two years in November, according to the Reuters/University of Michigan Surveys of Consumers.

The figure was 76.1, above the 75 expected by economists but below October's 80.9 level, according to a Reuters report. What a shock.

This holiday season, many consumers aren't feeling that thankful for the worst housing market in 16 years -- according to the National Association of Realtors, housing prices fell in one-third of U.S. cities. Gas prices reaching $4 per gallon is further spooking people already nervous about the volatile stock market and the weak dollar. Oh, let's not forget about the prospect of $100 oil.

"We're facing extreme price increases in energy, and it's clear the consumer is becoming more aware of the pressures being put on them,'' Lindsey Piegza, an analyst at FTN Financial, told Bloomberg News. "I don't expect a collapse in spending, but it will be very weak for the holidays.''

MasterCard Advisors says that holiday spending is growing at about half of last year's 8% increase. The news is not exactly a bright spot for companies like Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), or Federated. They need a sharp uptick to drive earnings. Wal-Mart especially needs a jolt.

Online sales growth is also slowing. The rate of increase has been over 20% in years past but Reuters quotes a SpendingPulse executive as saying "this year they're in the teens." This would seem to contradict data from ComScore that shows online spending up about 25% for the holidays.

If the MasterCard data is right, a lot of retailers are going to have rough fourth quarters.

Douglas A. McIntyre is a partner at 24/7 Wall St.