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No bad news is good news.

Terrific Tuesday
The rare retail rally

Retail shares rose Tuesday after a

bevy of earnings reports revealed few of the nasty surprises that investors have lately come to expect from the sector.

What was so great about

Wal-Mart

(WMT) - Get Walmart Inc. Report

? Third-quarter earnings

in line with expectations and no massive shifts in fourth-quarter estimates (between 46 and 48 cents a share, compared to

First Call/Thomson Financial's

consensus of 48 cents), that's what. CEO Lee Scott sounded relieved to be done with what he called "one of the most difficult quarters in recent retail history."

While higher oil prices and the lower stock market have likely made consumers nervous, Scott said that minimal inflation and still-low rates of unemployment mean consumers still have plenty of money to spend. (So no excuses! Get shopping!) "We're looking for a good Christmas," he said on a recorded call for investors, reiterating his estimate of 3% to 5% growth in sales at stores open at least a year. Wal-Mart shares rose $2.69, or 5.9%, to $48.

Target

(TGT) - Get Target Corporation Report

posted third-quarter earnings a penny above expectations (expectations it lowered earlier this year), and made no changes to its estimates for the fourth quarter. Chairman and CEO Robert Ulrich also made noises about the "more difficult retail sales environment" but said the company's holiday season looked good. Target shares rose $1.31, or 5%, to $27.50.

Free Fall
2000 selloff in Home Depot, Wal-Mart

TheStreet Recommends

Both companies sounded "cautiously optimistic," said Emme Kozloff, analyst with

Sanford Bernstein

. (She rates Wal-Mart shares outperform and Target shares market perform, and her firm doesn't do underwriting.)

Shares in

Home Depot

(HD) - Get Home Depot, Inc. Report

, which last month shocked the Street with an earnings warning, moved higher as the company met its reduced earnings targets and repeated its reduced expectations for the fourth quarter. Its shares rose $2.56, or 6.9%, to $39.94. And shares in

J.C. Penney

(JCP) - Get J. C. Penney Company, Inc. Report

, which posted a narrower-than-expected loss, rose 43 cents, or 4.1%, to $11.06.

Of course, part of the new enthusiasm for retailers comes as tech-sick investors rotate back into a sector that has become pretty cheap. Wal-Mart shares are 32% below their 52-week highs, while Target and Home Depot are both off 43%. Penney's shares have fallen 55%. It's hard to separate out the fundamentals from the rush to find something -- anything! -- to replace tech stocks in portfolios.

And not everyone was sweetness and light. The major exception to Tuesday's retail rally was

Staples

(SPLS)

, which missed third-quarter estimates by 2 cents and warned that the fourth quarter, too, will fall short of analysts' expectations. Its shares fell 63 cents, or 5.5%, to $10.75.

Kozloff said even Wal-Mart and Target, despite their tempered holiday optimism, aren't out of the woods yet. "I'm not bullish," said Kozloff. She's keeping a close eye on Target's growth in inventories (which the company explained as early shipment of holiday goods) to make sure they don't build up. As the fourth quarter progresses, "We'll have to go week-to-week on sales ... to see how easily they can achieve their earnings guidance," she said.