What happened

Shares of Nordstrom (NYSE:JWN) were sliding for the second day in a row as fear about its third-quarter earnings report, due out after hours on Thursday, continues to drive the stock lower. Department stores  that have reported quarterly earnings thus far, especially Kohl's, have revealed headwinds in the sector. After a three-month run-up in the stock that drove gains of more than 50%, Nordstrom bulls are now bailing, afraid that Thursday's report will be mostly bad news. The stock finished down 4.4% today.

So what

Nordstrom's descent started yesterday as the stock fell 6.7% after Kohl's issued a disappointing quarterly report, with earnings per share down 24%, and the company slashing its full-year EPS guidance from a ranger of $5.15-$5.45 to a new range of $4.75-$4.95. 

A mock-up of the new Nordstrom in Norwalk, Connecticut

Image source: Nordstrom.

As a high-end department store operator with an off-price brand, Nordstrom doesn't have an exact peer on the market, but the stock tends to move according to other department store stocks, especially ahead of earnings.

Today, Target posted a strong earnings report. It's unclear if that had any effect Nordstrom, but it could play into the market's belief that Target is taking market share away from department stores like Nordstrom.

Now what

Though Nordstrom won't report its third-quarter earnings report until tomorrow afternoon, the stock could be volatile in the regular session, as Macy's will deliver its earnings report in the morning. Shares of Macy's have been hammered this year as the company has slashed its guidance and reported declining profits, but the company is still seen as a bellwether for the department store sector and the broader retail industry.

When Nordstrom's report comes out, analysts are expecting revenue to decline from $3.75 billion to $3.67 billion, and for earnings per share of $0.64 compared to $0.67 in the quarter a year ago. Given the stock's recent volatility, expect a big swing after hours as the market picks through the results.