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Updated from 1:29 p.m. EDT

Some shoddy reports trickling in Thursday night threw a wrench into an otherwise uneventful second-quarter earnings season for retailers. Several analysts think it's a harbinger, as consumers get cautious about spending money on anything that isn't dirt cheap or essential.

After Thursday's closing bell,


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(JWN) - Get Nordstrom, Inc. (JWN) Report


Sharper Image



Wet Seal


all dumped cold water on Wall Street.

Investors were prepared for the news from Gap, which said its earnings fell for the first time in the two years since it began turning its business around. The company warned Wall Street earlier this month that it would miss estimates because of a 7% drop in same-store sales in July -- its second-straight month of declining sales.

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Gap shares recently added 47 cents, or 2.3%, to $20.62, despite the news that its earnings fell 7% to 194 million, or 21 cents a share. That's a marked improvement from Aug. 6, the day it lowered estimates, when the stock fell $1.59, or 7.4%, at $19.79.

No such warning came from Nordstrom, which missed estimates and said results for the third quarter and full fiscal year would also fall below the current consensus. Its stock was recently down $3.67, or 9%, to $36.89. Meanwhile, Sharper Image unexpectedly predicted it will lose money in its third quarter, prompting a downgrade from J.P. Morgan (the stock was recently up 56 cents, or 3.3%, to $17.46, despite the disappointment).

Also, Wet Seal weighed on the


, losing 59%, after the company posted a wider-than-expected quarterly loss, warned that third-quarter results would be weaker than expected, and said it is considering strategic alternatives for its business.

All this contrasts with earlier reports from discount giants


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, and home-improvement chains

Home Depot

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(LOW) - Get Lowe's Companies, Inc. (LOW) Report

. All four companies reported second-quarter gains that pleased Wall Street and painted a generally rosy picture going forward, easing concerns that consumers were bailing out. Their reports are widely viewed as having triggered some of the bounce that stabilized the markets this week.

Bob Buchanan, an analyst with A.G. Edwards, said that big discount chains, like Wal-Mart, have been posting "good, strong sales and excellent earnings" despite high gas prices that are undoubtedly eating into their profits. He attributes their success to their low expense ratios and pricing power.

"You just get a better deal at Wal-Mart," Buchanan said. "The department stores and other chains just have lousy value."

Buchanan thinks consumer spending is "drying up" now, as the government's fiscal stimulus fades and oil prices soar, and the retailers who are feeling the initial squeeze are high-end players who feed off more discretionary spending.

"Their customer is more sensitive to the market," he said. "I think we're going to stay in a funk for the next few months, at least. There's nothing to write home about on these stocks."

Andy Graves, an analyst with Pacific Growth Equities, agrees that consumer spending is on the wane. In addition to energy prices, he cited rising healthcare costs, a real inflation rate that he believes is higher than what is reflected in government data, and a credit crunch that was encouraged by the government stimulative monetary policy, now in the process of being reined in.

"There are a lot of little nicks, and when you add them all together, it's not surprising that consumer spending has been a bit lumpy out there," Graves said.

He even said that while some major retailers posted healthy-looking profits, most of the top-line growth logged in the second quarter was disappointing.

"The trend of lightening consumer demand is in place," he said, "even with the reports from last week that were seemingly positive, and the reports this week, which were more obviously dour."

Even if the overall trend is negative, the nature of the retailing business allows for some isolated opportunities for investors, according to Graves. He thinks the prevailing fashions bode well for teen and young adult apparels and accessories that are "a little more dressy, a little more fashionable and colorful," while still being affordable.

Cashing in on strong demand for products like watches, handbags and leather goods, he is bullish on stocks like

American Eagle

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Ralph Lauren

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Pacific Sunwear




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"Those positive trends can overwhelm a more secular negative trend," Graves said. "But our view is that we're going to continue to hear more negative surprises between now and Christmas."

The S&P Retail Index was recently underperforming against the broader market, up 0.5%, while the

S&P 500

was up 0.7%.