With Black Friday highlighting the holiday shopping season, investors will be watching for signs of strength in the U.S. consumer in the upcoming week, as U.S. stocks are in the midst of a difficult month.
November's stock market rise has stopped, with the benchmark S&P 500 down more than 4% so far. The chip giant Nvidia Corp.'s impressive quarterly results on Thursday failed to calm markets that have been shaken by worries about high valuations and doubts about the returns on large corporate expenditures in AI technology.
Wall Street will now scrutinise consumer spending, which makes up more than two-thirds of the US economy. The Thanksgiving holiday on Thursday will disrupt the trade week.
Black Friday, which is known for bringing in sales, will come next, followed by Cyber Monday and holiday shopping specials leading up to year end.
While other data has been absent because of the government shutdown, recent readings have indicated a decline in consumer mood. Any indications regarding Christmas expenditures may become more important than normal as a result.
According to Chris Fasciano, chief market strategist at Commonwealth Financial Network, "the early reads we get on Black Friday and Cyber Monday, due to the lack of data we have, will be important."
"The entirety of the holiday shopping period will be an important read for where we are with the consumer and what that means for the economy."
The S&P 500 has dropped slightly more than 5% from its all time high in late October, although still rising 11% year to date. On Thursday, the Cboe Volatility index closed at its highest point since April.
Consumer spending over the holidays may be influenced by stock market performance, especially for individuals with higher incomes who have larger equity investments.
The S&P 500 has risen more than 80% since its most current bull market started a little more than three years ago, notwithstanding the recent hiccup.
Doug Beath, global equities strategist at the Wells Fargo Investment Institute, stated, "If you get a pullback there, a lot of the wealth in the upper income is in the stock market so it will be interesting to see if they spend like they have in the past."
The National Retail Federation predicted this month that holiday sales in the United States will top $1 trillion for the first time.
However, compared to the year earlier period, that November-December prediction indicated growth of 3.7% to 4.2%, which was slower than the 4.3% growth in 2024.
According to Michael Pearce, deputy chief U.S. economist at Oxford Economics, household balance sheets are "in a very strong place," but sluggish employment growth could put pressure on Christmas spending. "The most important factor for consumer spending is the health of the labor market," Pearce stated.
U.S. job growth surged in September, according to data from the delayed monthly employment report that was made public on Thursday. However, the jobless rate rose to 4.4%, a four year high.
According to Pearce, persistently high costs due to import taxes may also have an impact on expenditure. For retailers, holiday shopping is essential.
In an indication of optimism ahead of year end, Walmart increased its annual estimates on Thursday. There were conflicting reports throughout the week from other retailers.
The announcement of U.S. retail sales for September on Tuesday will provide further insight into consumer behavior. Due to the 43 day federal closure that concluded earlier this month, that report and other government releases have been delayed.
As investors evaluate the state of the economy and the likelihood that the Federal Reserve would lower interest rates at its December 9-10 meeting, the flood of pent-up data in the upcoming weeks may increase volatility.
Fed funds futures late on Thursday showed a 67% chance the central bank will keep rates unchanged in December following quarter point reduction in each of the previous two sessions, following the September jobs report, which would be the final monthly employment announcement before the next Fed meeting.
Economists at Morgan Stanley stated on Thursday that while they still anticipate three cuts in 2026, they no longer see the Fed easing in December.
"The policy rate path remains highly data-dependent," the economists at Morgan Stanley wrote in a memo. "In our view, a mixed report means the committee will want to see more data before taking another step."
