By James Ledbetter

If this is a recession, it’s a bizarre one. Everybody was all gloomy about the phone business on Wednesday, figuring that buying fancy new phones is one of those luxuries that the cash-strapped consumer can easily kick into the next quarter or longer. But today comes news that Nike (NKE) - in some people’s minds the quintessential purveyor of unnecessarily expensive item - has seen a third-quarter net income leap of 32% over last year. The stock got such a pop that it had to suspend trading for a bit.

A closer reading of the numbers reveals something very intriguing, both about the Nike brand and the state of the world economy. U.S. sales were up a respectable but modest 5%, and orders for delivery between March and July up a meager 1%. But sales in Europe were up 23% and in Asia 27%, indicating that Nike has skillfully parlayed the Beijing Olympics this summer into sales. (Nike doesn’t always sponsor the Olympics directly, but spends heavily to associate itself with individual athletes, which in China seems to work.) Sure, when the dollar is tanking it’s especially helpful to be selling shoes abroad, but there’s more than currency fluctuation at work here. Even if Nike shoes aren’t manufactured in America any more, we’re still good at manufacturing brands, and it’s a lovely paradox that in an economic downturn, we’re still remarkably good at convincing the rest of the world that they want to dress like Americans. 

Disney (DIS) shares rose 5% Wednesday, a day after the giant media and theme-park company blew away Wall Street’s fiscal first-quarter earnings expectations. One eye-opener in Disney’s report was the strong performance of its theme park business. Revenue there rose 11% from a year ago, and operating income surged 25%, as guests continued to flood through the gates of the Disney resorts around the globe.

If a slowing economy and high energy prices are forcing U.S. consumers to be stingier, how can theme park results be so strong? Clark Dodsworth, a San Francisco entertainment and technology consultant, sees many answers. He says Disney’s theme parks do a strong repeat business because the company continually rolls out new attractions. He adds that when recessionary conditions cause some consumers to cut back on travel, people who live near the company’s parks in California and Florida become more apt to visit. And don’t forget, a weak dollar is boosting foreign tourism as well, he says.

Dodsworth points to one other factor behind Disney’s success: the company’s years of experience in branding, combined with growing efforts to harness the power of new technology. He cites Disney’s Pal Mickey, a stuffed-mouse toy that “will let you in on insider park tips, give you parade and showtime reminders, tell you when your favorite characters are nearby, and let you know about short waits at your favorite attractions,” Disney’s web site advises. Even if that sounds like too much information, Dodsworth says Pal Mickey reinforces an important point about the company. “Disney knows how to get your attention,” he says.

McDonald’s (MCD) sank 8 percent in heavy trading Monday after the burger chain became the latest company to warn that sales slowed sharply in December. McDonald’s posted a strong fourth quarter, as operating income rose 22 percent from a year ago to $1.35 billion and sales climbed 6 percent to $5.75 billion. But sales in established U.S. stores were flat with year-earlier levels in December - in keeping with slowing trends reported at retailers such as Williams-Sonoma (WSM) and Macy’s (M). McDonald’s chief Jim Skinner said he is “optimistic about McDonald’s outlook for 2008,” but with recession talk in the air the remark is falling on deaf ears.

Caterpillar (CAT) says overseas economies are still growing fast enough to enable the company to overcome “recessionary” conditions in the U.S. The Peoria, Ill., tractor maker posted a fourth-quarter profit of $975 million, or $1.50 a share, up from the year-ago $882 million, or $1.32 a share. Sales rose 10 percent from a year ago to $12.1 billion. CEO Jim Owens said the company continues to grow according to its plan despite a sharp drop in demand domestically. For 2007, for instance, Caterpillar said engine sales increased 6 percent - despite a 59 percent decline in North American on-highway truck engine sales. Because of solid overseas demand, Owens said Caterpillar continues to expect to post profit growth of 5 percent to 15 percent for 2008, on sales growth of 5 percent to 10 percent. “While we expect anemic growth in the U.S. economy,” Owens said, “we continue to see positive conditions for our sales in most of the rest of the world.” That’s optimistic enough to drive the stock, which has dropped around 10 percent so far this year, up modestly in pre-market trading Friday.

U.S. stocks could swoon when the market reopens this morning after the three-day holiday weekend. Futures prices point to a 5 percent decline in the S&P 500, Bloomberg reports. The slide would be the biggest since the tech bubble popped in the spring of 2000 and would come on the heels of sharp selloffs overseas Monday.

The stock plunge is putting pressure on commodity prices: Oil dropped more than $3 a barrel to a six-week low just above $87, and the prices of corn, soybeans and wheat dropped by their daily limit. Lehman Brothers says the U.S. economy is just one shock away from a recession, and economics blogger Michael Shedlock believes the commodity boom is over. But commodities trader Alan Kluis tells Bloomberg television that the commodity selloff is “just about the flow of money” and will make for a buying opportunity in coming weeks. 

The economy’s recessionary turn hasn’t been fun for Williams-Sonoma (WSM). The operator of the Pottery Barn and Williams-Sonoma chains trimmed its profit targets Tuesday after saying sales in established stores fell 0.4 percent from a year ago last month. The news comes as government’s measure of monthly retail sales posted its biggest drop in six months, signaling that everyone in the retail business is being tested.

CEO Howard Lester said the company had expected customer traffic to slow in December, but “traffic slowed even further than we anticipated, particularly in our home furnishings businesses.” The company now expects to make between $1.11 and $1.14 a share, down from its previous forecast of $1.19 to $1.25. Making matters worse, Williams-Sonoma said it now expects sales and 2008 profits to fall from year-ago levels, as the “macro retail environment is going to be increasingly challenging.”

One bright spot is that the company isn’t planning to increase catalog circulation this year - so there may be a limit on the number of Pottery Barn Kids glossies in your mailbox. Even so, that isn’t going to make the 15 percent drop in Williams-Sonoma’s stock Tuesday morning any less painful for shareholders.

What’s in the American consumer’s wallet? Not much, judging by poor numbers released Thursday by credit card lender Capital One (COF) and retailers led by Macy’s (M). Capital One shares dropped to a new low in morning trading after the company warned in a midnight press release that its 2007 earnings will fall 20 percent short of the bank’s previous forecast. The announcement prompted the company to counsel Wall Street that it “remains well-positioned with respect to funding as a result of its more robust access to deposits, reduced reliance on wholesale funding markets, and strategy of holding significant liquidity.” That is, Capital One doesn’t have to expect to raise money in the markets this year, which is a good thing considering investors’ aversion to lending money to all but the safest borrowers. Meanwhile, Macy’s said sales in established stores dropped almost 8 percent last month, prompting CEO Terry Lundgren to muse that “macroeconomic trends led customers to spend cautiously for the holiday.” And beyond: Macy’s expects to see January same-store sales drop about 5 percent from a year ago. The retrenchment is on.

The Federal Reserve is back in the hot seat Tuesday afternoon as investors await its latest interest-rate move. Economists expect the Fed to trim its fed funds overnight lending target by 25 basis points, to 4.25%, in a bid to ease problems in the credit markets. Some people are talking about a steeper cut in the name of keeping the economy rolling, while others warn that rate cuts risk stirring up inflation.

But this time around, a rate cut seems a near certainty, given the rising chorus of recession calls. On Monday, Morgan Stanley predicted U.S. gross domestic product will be flat for the year ending September 2008 as domestic demand over the next three quarters contracts 1 percent. The firm stresses that it believes strong global growth will keep the recession brief, though it notes that there are risks of a deeper decline. “Dramatically slower growth in domestic demand leaves it vulnerable to shocks,” economists Richard Berner and David Greenlaw wrote. “Insufficient Fed action could again threaten a deeper economic slowdown.” Don’t expect the Fed to stand pat with talk like that.

Three big-name economists have a distinctly gloomy view of the world this morning. In the Financial Times, former Treasury Secretary Larry Summers joins the crowd predicting the United States will tumble into recession under the weight of a spreading credit crunch. He says the Fed should ease rates further to stave off a deepening credit crisis, as “levels of the Fed funds rate that were neutral when the financial system was working normally are quite contractionary today.”

In the New York Times, Yale economics professor Robert Shiller warns the housing crisis is deepening. He calls for a fundamentally new approach to staving off foreclosures and keeping Americans in their homes, including changes to bankruptcy law and a rethinking of the role of institutions such as Fannie Mae (FNM). He calls the official response to the housing bust and related credit issues “anemic.”

And not to be outdone, NYU economics professor Nouriel Roubini says on his website that the 3.5% decline in American consumers’ average Black Friday spending shows that a U.S. hard landing and global slowdown are inevitable. He even calls for a stock market crash, saying, “Once the evidence of an economic hard landing is clear even to stock market investors – it is certainly clear to bond markets and to credit markets by now – you can expect a sharp fall in stock prices, a process that has already started in financial stocks, discretionary consumer stocks, retail stocks and housing related stocks.” Nothing like starting the week off on an upbeat note.