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Holiday shopping season to give read on health of consumer

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Wavering stock market could weigh on shopping

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Delayed US retail sales report due on Tuesday

By Lewis Krauskopf

NEW YORK, Nov 21 (Reuters) - With U.S. stocks in the

midst of a grim month, investors will look in the coming week

for signs of strength in the U.S. consumer with Black Friday

putting the spotlight on the holiday shopping season.

The rally in stocks has stalled in November, with the benchmark

S&P 500 declining more than 4% so far during the month.

Strong quarterly results from semiconductor giant Nvidia Corp ( NVDA )

failed on Thursday to calm markets, which have been

rattled by concerns about elevated valuations and questions

about returns on massive corporate investments in artificial

intelligence infrastructure.

Consumer spending, which accounts for more than two-thirds

of U.S. economic activity, will now come under Wall Street's

microscope.

The trading week will be interrupted by the Thanksgiving

holiday on Thursday, followed by Black Friday, known for

ushering in discounts, then Cyber Monday and holiday shopping

promotions heading into year end.

Recent readings have shown a slump in consumer sentiment, while

other data has been missing due to the government shutdown. This

could make any signals about holiday spending more significant

than usual.

"From a sentiment standpoint, the early reads we get on

Black Friday and Cyber Monday, due to the lack of data we have,

will be important," said Chris Fasciano, chief market strategist

at Commonwealth Financial Network.

"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."

While the S&P 500 remains up 11% year-to-date, it has declined

just over 5% from its late October all-time high. The Cboe

Volatility index on Thursday posted its highest closing

level since April.

Stock market performance could factor into how consumers

spend over the holidays, particularly those with higher incomes

who are more invested in equities. Despite the recent wobble,

the S&P 500 has soared over 80% since its latest bull market

began just over three years ago.

"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,"

said Doug Beath, global equity strategist at the Wells Fargo

Investment Institute.

This month, the National Retail Federation said it expected

U.S. holiday sales to surpass $1 trillion for the first time.

Still, that November-December forecast equated to growth of

between 3.7% and 4.2% from the year-earlier period, slower than

the 4.3% growth in 2024.

Household balance sheets are "in a very strong place," yet

slowing employment growth could pressure holiday spending, said

Michael Pearce, deputy chief U.S. economist at Oxford Economics.

"The most important factor for consumer spending is the

health of the labor market," Pearce said.

Data from the delayed monthly employment report released on

Thursday showed U.S. job growth accelerated in September. But

the unemployment rate increased to a four-year high of 4.4%.

Persistently firm inflation, with import tariffs

contributing to higher prices, also could weigh on spending,

Pearce said.

Holiday shopping is critical for retailers. Walmart ( WMT ) on

Thursday raised its annual forecasts in a signal of confidence

heading into year end. Reports from other retailers during the

week were mixed.

Another read on the consumer will come with Tuesday's

release of U.S. retail sales for September. That report has been

delayed along with other government releases because of the

43-day federal shutdown that ended earlier this month.

The influx of pent-up data in the coming weeks could further

ramp up volatility for investors as they assess the economy's

health and prospects that the Federal Reserve will cut interest

rates at its December 9-10 meeting.

Following the September jobs report, which will be the last

monthly employment release before the next Fed meeting, Fed

funds futures late on Thursday reflected a 67% chance the

central bank would hold rates steady in December after

quarter-point cuts in each of the prior two meetings.

Morgan Stanley economists said on Thursday they no longer

expected the Fed to ease in December but they project three cuts

in 2026.

"The policy rate path remains highly data-dependent," the

Morgan Stanley economists said in a note. "In our view, a mixed

report means the committee will want to see more data before

taking another step."