(Repeats SCHEDULED COLUMN originally published on Nov 22, no

changes)

By Lewis Krauskopf

NEW YORK, Nov 22 (Reuters) - The health of the U.S.

consumer and the retail sector will be in focus in the coming

week, as Black Friday kicks off a holiday shopping season that

could shed light on how buyers are grappling with higher prices.

The benchmark S&P 500 rose 1.7% in the past week and

approached all-time highs as investors digested the end of a

solid third-quarter corporate reporting season. Earnings are on

pace to have climbed about 9% from a year earlier.

But recent earnings from two high-profile retailers yielded

sharply different prospects: Walmart ( WMT ) on Tuesday raised

its annual sales and profit forecast for the third consecutive

time, while Target ( TGT ) shares tumbled after it forecast

holiday-quarter comparable sales and profit below estimates on

Wednesday.

The holiday shopping season could give further insight on

consumer spending, which accounts for more than two-thirds of

U.S. economic activity. Even though inflation rates have

moderated from 40-year peaks hit two years ago, higher prices

are still challenging consumers, said Abby Roach, portfolio

analyst at Allspring Global Investments.

"It's easy to be excited about inflation coming down year

over year, but...consumers are really still under pressure, and

I think that's the biggest pain point," Roach said. "Consumers

are continuing to feel like their dollars don't go as far as

they did."

Robust spending into year end could bolster a recent run of

data that has shown a stronger-than-expected economy. While

investors have welcomed signs of economic health, worries remain

over a potential inflationary rebound, crimping expectations for

how deeply the Federal Reserve will be able to cut interest

rates in coming months.

As it stands, Americans have a more upbeat outlook for

holiday shopping than in the prior two years, according to a

Morgan Stanley survey of about 2,000 consumers published earlier

this month, with about 35% saying they expect to spend more this

season than a year ago.

"Companies could see a little more holiday cheer this year

but spending isn't likely to increase across all categories as

consumers remain selective," the Morgan Stanley analysts said in

the report.

The holiday shopping season will also be a test for shares

of retailers, which have diverged in 2024.

Among the industry's largest players by market value,

Walmart ( WMT ) is up over 70%, warehouse retailer Costco Wholesale ( COST )

has jumped 46%, while online giant Amazon ( AMZN ),

which has a diversified business that includes cloud computing,

has climbed 30%.

Other stocks have struggled. Discounters Dollar General ( DG )

and Dollar Tree ( DLTR ) are down over 40% and 50%,

respectively, in 2024, as analysts point to inflation

particularly hitting the companies' lower-income consumer base.

Shares of Target ( TGT ), whose weak forecast came as value-conscious

consumers shopped for low-priced essentials at rival retailers,

are down 12% on the year.

"Target ( TGT ) is really struggling to find a unique identity in

retail right now," said Chuck Carlson, chief executive officer

at Horizon Investment Services.

The two S&P 500 sectors that include most retailers, the

consumer discretionary and consumer staples sectors, are up 23%

and 16%, respectively, in 2024, against a 25% rise for the

overall index.

Another batch of retail earnings are due in the coming week,

including reports from Best Buy ( BBY ), Macy's, Nordstrom ( JWN )

and Urban Outfitters ( URBN ).

Investors will also get a fresh view of inflation, with the

Nov 27 release of the monthly Personal Consumption Expenditures

Price Index, which is closely followed by the Fed. The inflation

gauge is expected to have climbed 2.3% in October on an annual

basis, according to Reuters data.

"The economy is in a good spot. It's just more about trying

to process several years of high inflation," said Michael

O'Rourke, chief market strategist at JonesTrading. "From a

retailer perspective, a lot of it's about making sure they're

protecting their margins while trying to provide that value

that's going to attract the consumer."