and Abercrombie & Fitch were on the rise Friday as investors found glimmers of hope, even in the face of dismal sales and an uncertain holiday season.

That was a turnaround from earlier in the week, when Macy's and Kohl's disappointed analysts with their fourth-quarter outlooks, and took one-day losses of 1.5% and 3%, respectively. Today, in spite of dramatic falloffs in year-over-year profit 78% for J.C. Penney and 39% for Abercrombie in the recent quarter investors were enthusiastic. Why? Things weren t as bad as Wall Street analysts predicted. Or at least they weren t worse.

After focusing on the big picture for most of the year, investors are turning to performance vs. expectations and what s happening right now, says Thomas Weisel analyst Liz Dunn. Companies seem to be getting punished pretty severely for misses on guidance or current numbers, she says. But these were two cases where they came in-line to better, and there was nothing too terribly negative to grab on to.

J.C. Penney reported profit and revenue roughly in line with expectations, but upped its full year outlook and said it is selling more merchandise at full price. They re being smart about what they need to do given their inventory position and various sales levers as they see the economy strengthening, says Dunn. She adds that after last year s aggressive across-the-board discounts, retailers for 2009 are delaying markdowns until later in the year. Moreover, sales have been in line with expectations and investors want to see some improvement -- they may be hinting that sales could be on the verge of turning, she says.

Abercrombie, for its part, beat profit expectations on an adjusted basis by 10 cents a share. The picture isn t exactly pretty, though, as sales at company-owned stores open at least a year during the quarter dropped 22%. Two encouraging things the teen retailer reported were that direct-to-consumer sales, including web sales, increased 11%, and that it expects the closing of its high-end Ruehl stores to cost $5 million less than originally estimated.

Also, perhaps a sign that it expects better things in the future, the retailer is opening more doors abroad as it exits Ruehl. "During the quarter, we made advances in our international strategy with the opening of a flagship location in Italy as well as additional Hollister mall-based stores in the United Kingdom, said Mike Jeffries, CEO of Abercrombie & Fitch. He called the enthusiasm for those stores passionate, and said the company would be aggressive in foreign markets.

Still, the overall optimism in retail may be misplaced, says Emanuel Weintraub, CEO of apparel consulting group, Emanuel Weintraub Associates. There s an inadequate number of people with free cash, he says. People want to fight the numbers, but you have 15 million unemployed 85% of Americans will spend money, they just won t spend it how they used to.