Holiday Sales Watch: Will Americans Spend Amid Market Uncertainty?

U.S. stocks started a hard week already behind the curve with consumer spending trends as the main topic for investors during the holiday shopping season. The S&P 500 index has suffered a loss of more than 4% throughout the month of November, which has put off the arrival of the profit-making period and the strong earnings from companies like Nvidia among others. Market fear was further fed by high valuations and the inadequacy of returns on corporate investments in AI.

Consumer spending, which is responsible for more than two-thirds of the U.S. economic activity, is the main factor that will determine the blackness or the whiteness of the dollars in the Wall Street. Black Friday and Cyber Monday early sales are the first signals that Wall Street will take notice of closely. Thanksgiving will cause a short break in trading this week, but retail will activate immediately after that, and by this, it will stretch its promotions through December holiday sales. Consumer sentiment correlated indicators have been deflated recently while the federal data discontinuity resulting from the recent government shutdown has rendered real-time spending insights all the more important.

Analysts point to the fact that people’s financial situations are still good, however, the slow down in hiring and the ongoing inflation which is partly due to import tariffs might impact consumer spending. The job market in September saw a remarkable increase in hiring but at the same time the unemployment rate rose to a four-year high of 4.4%. The retail sales data that is usually released weekly but was delayed due to the federal shutdown will be made available this week, thus providing the consumer outlook with more information.

Stock market movements are predicted to have a special impact on holiday spending, especially in case of the high-income households that usually have a lot of equity in their name. Although the November pullback caused the S&P 500 index to lose its upward trend for the past three months, it is still more than 80% above the level it was three years ago when this bull market started. Besides, holiday shopping in the U.S. is expected to be over $1 trillion for the first time in history, although the growth forecasts being only 3.7% to 4.2% are much slower than the 4.3% increase that occurred in 2024.

The Fed's signals are being closely watched by investors as the central bank approaches its December meeting. The latest employment data has resulted in futures implying a 67% chance that there will be no change in interest rates. Economists have lowered their expectations for future rate cuts, which implies that monetary policy decisions will be very much informed by the incoming economic data.

Some retailers are on the precautious side when it comes to optimism, although one of them, Walmart, has already increased its annual sales forecast while others still have mixed results. The situation has not only been made more complex by the delay in economic data but also by the holiday spending which is expected to cause volatility in the market for the next few weeks.