Wal-Mart

(WMT) - Get Report

, the nation's largest retailer, said in a conference call early Tuesday that it believes consumer spending won't fall further and could be spurred higher by lower interest rates and a tax cut.

The positive comments, closely watched by analysts and investors for hints on the direction of consumer spending habits, came as the company released its quarterly earnings report, beating estimates by a penny. Coming as they do amid growing worries that a recession is at hand, the comments should reassure retail investors that things could get better by the year's second half, as most economists expect.

"This is a difficult economy to read, thus making predictions is tricky," said Lee Scott, Wal-Mart's president and chief executive, in the conference call. "But we do not see any indication that spending will slow further from its current level." Scott said that falling interest rates, a possible tax cut and lower gasoline prices could result in a "reacceleration of spending."

Because of its size and presence in all 50 states, what Wal-Mart says reverberates throughout the entire retail sector. Indeed, analysts have such confidence in the company's predictions that they are viewed with much the same importance as the government's economic data tracking consumer behavior.

Upbeat

In addition,

Home Depot

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, another of the nation's top retailers, released its quarterly report Tuesday and also gave investors something positive to grasp at: It said it was comfortable with current Wall Street earnings estimates for the first quarter. Ordinarily, this would not be significant, but because it comes at a time of jitters and following a recent profit warning by the company, the comments can only be viewed as positive.

Now to the numbers: Wal-Mart said it had earned 45 cents a share in the fourth quarter, a penny more than Wall Street estimates, according to

First Call/Thomson Financial

, and up 4.7% from the same period in 1999. Net income for the quarter was slightly over $2 billion, up from $1.9 billion in the same period last year. Total sales were $56.6 billion, up 10% from a year ago.

"It was a good year but a year that was not quite up to our high Wal-Mart expectations," said Scott, citing the "challenging retail environment." The company had hoped to post earnings growth that exceeded its sales growth, Scott said in the conference call.

At Home Depot, sales rose 14% in the fourth quarter to $10.5 billion. It earned 20 cents a share, a decline of 20% from the same period a year ago, but in line with lowered expectations.

"The uncertainty of the current economy continues to put tremendous pressure on consumer spending," said Robert Nardelli, president and chief executive of Home Depot, in a statement. Despite the slowdown, he said the company will continue with its capital spending plans: "We are confident of our ability to control operation expenses while rolling out major innovative merchandising and customer service programs and opening 200 new stores during the coming year."

Wal-Mart closed Friday trading at $52.36, up 36 cents, while Home Depot finished the week at $43, down $1.61.