Feb. 5 (Bloomberg) -- Macy’s Inc., J.C. Penney Co. and four other department-store chains may have their debt ratings cut by Standard & Poor’s as the U.S. recession worsens.

Macy’s and J.C. Penney face being cut to non-investment grade, or junk, by S&P. Dillard’s Inc., Neiman Marcus Group Inc., Sears Holdings Corp. and Nordstrom Inc. also might be downgraded, the firm said today in a statement.

The S&P decisions “reflect our deepening concern about the impact of the U.S. recession on the increasingly troubled department store sector,” analyst Diane Shand said in the statement. Higher unemployment, the housing market and ongoing financial-market turmoil make it likely that the recession will get worse through the first half of the year, S&P said.

The department stores are reeling from steep sales declines as consumers reduce purchases of the discretionary goods they specialize in, including women’s apparel and cosmetics. Retailers reported January sales declines today.

Even as the chains adjust to weak consumer demand by scaling back growth, inventory and marketing, in some cases their declining profitability will result in lower ratings, S&P said.

Macy’s rose 43 cents, or 5.2 percent, to $8.75 at 4:15 p.m. in New York Stock Exchange composite trading. The Standard & Poor’s Retailing Index rose 3.3 percent.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

Last Updated: February 5, 2009 20:31 EST