Americans keep reaching for their wallets, driving off in pickup trucks even with diesel near record levels and ordering steak despite pricier beef. That resilience sits alongside rising consumer borrowing and a stock market near all-time highs, which is why Wall Street is laser focused on household health as earnings roll in. Big banks will reveal credit card spending trends this week, and retailer guidance into the holidays will be picked over for clues on stamina or strain.
On Friday, the preliminary University of Michigan sentiment gauge fell to a five-month low while inflation expectations inched higher. With oil prices still elevated and Treasury yields climbing, the mood has soured. US Bank's national investment strategist, Tom Hainlin, said, "We're looking for signs of exhaustion." "Is there a point where higher food and gas prices finally fatigue the consumer?"
The worry is straightforward: if spending cools, a core pillar under a near-record market could wobble. Analysts have been cutting profit estimates for consumer-focused companies throughout the year. Initial cuts reflected tariff-fueled inflation and a spike in oil; more recently, borrowing costs climbed as the Fed raised rates and Treasury yields surged, pushing expectations down further.
According to Bloomberg Intelligence, investors now foresee earnings declines in both consumer discretionary and staples - something not seen since late 2024. Those two groups are projected to drag on the S&P 500 Index's expected 30% profit increase in 2026.
Together the sectors make up just 13% of the index by weight, but their health matters well beyond that slice because household spending drives so much of the economy. A notable pullback in holiday big-ticket purchases, like hot tubs that are typically put on credit rather than paid in cash, would be an early warning that overall outlays are cooling. HB Wealth Management's chief market strategist, Gina Martin Adams, said, "The consumer can show such extreme weakness that it does erode confidence in the rest of the economy." She added that initial stress should show up first in interest rate sensitive durable goods: "Anything from a refrigerator, household furniture, autos and housing."
Spending holding up while credit tightens is an unstable combination. Market Briefs covers the consumer economy free every weekday.
On the ground, some signals are already blinking. Accuvest Global Advisors' chief investment officer, Eric Clark, said, "Consumers just can't deal with prices going up forever." "Our wages don't grow as fast as the inflation that we experience most of the time, so that forces consumers to make choices." He called the "damage across Nike, Lululemon, Chipotle" "horrendous." Earnings from Visa, Mastercard, American Express, Bank of America and JPMorgan show consumers are spending, he said, but certain consumer stocks are clearly not capturing it.
Big-ticket demand is cooling. Lowe's cut its full-year outlook last quarter as housing stayed weak, and in July Tractor Supply Co. scrapped its longer-term outlook as shoppers pulled back on hardware. One more wrinkle: headline spending stats look healthy, but retail sales and personal consumption figures are not adjusted for inflation, and company results have been soft. That raises the question of how much is simply higher prices rather than more items in carts. Ameriprise Advisor Services' chief market strategist, Anthony Saglimbene, said, "Anything that goes on a truck is seeing increased prices."
The strain is creeping into smaller checks too. Restaurant stocks are falling as inflation and broader adoption of weight-loss drugs depress foot traffic. Nike and Lululemon have launched turnaround programs to reverse sales declines.
Packaged food makers are feeling it as well, with Conagra Brands Inc. and Campbell's Co. issuing disappointing outlooks last month. At McDonald's Corp., Big Mac sales are declining, and the shares have fallen 23% in 2026, setting the company up for its worst year since 2002.
Money is already moving. Both consumer sectors have lagged the S&P 500 this year, and the biggest US consumer-focused ETF, the State Street Consumer Discretionary Select Sector SPDR, recorded net withdrawals of $638 million in September, the most since January. Thomas Martin, a senior portfolio manager at Globalt Investments, said, "Everybody thought, including us, that the consumer just wouldn't hold up," and added that spending to this point has outpaced his expectations. He is slightly underweight discretionary and staples, favoring companies with steady repeat buyers - such as Costco Wholesale Corp. and Casey's General Stores Inc. - over manufacturers of consumer products.
Index math is masking some of the damage. Amazon's heavy weight props up the consumer discretionary group, but if every company gets the same footing, that slice of the market is roughly 21 percentage points behind the S&P 500 in 2026. Another lens shows the sector, adjusted for Amazon's performance, trailing the broader market by about 20 percentage points since Dec. 31, 2025.
Meanwhile, analysts still pencil in 25% earnings growth for the third quarter, driven by big tech and by the energy sector benefiting from elevated oil prices. That concentration explains the market's narrow leadership. The S&P 500 hit a record last week despite just one-third of its members trading above the 50-day and 100-day moving averages. "Then the market falls."
Analysts watch the gap between the two more than either alone. Join Market Briefs free and follow the data.
