Markets Grind Higher as Consumer Spending Cools
U.S. stocks edged higher Tuesday as investors digested weaker-than-expected retail sales, reinforcing the view that economic momentum is slowing and increasing expectations for interest-rate cuts later this year.
The Dow Jones Industrial Average rose roughly 0.4%, extending gains after its latest record close. The S&P 500 added about 0.1%, while the Nasdaq Composite hovered near flat as weakness in large-cap tech offset broader market support.
Shares of Nvidia and Alphabet drifted lower, weighing on the tech-heavy Nasdaq.
Retail Sales Miss Signals Cooling Demand
December retail sales were virtually unchanged from the prior month, a sharp slowdown from November’s 0.6% gain and well below economist expectations.
The flat reading suggests consumer spending lost momentum toward the end of the holiday season — a key signal as markets attempt to gauge whether tighter financial conditions are finally slowing the economy.
That data kicked off a critical week of macro releases, shifting investor focus firmly toward the trajectory of growth and inflation.
Rate-Cut Bets Gain Steam
The softer consumer data quickly translated into higher expectations for Federal Reserve easing.
While most traders still expect the Fed to hold rates steady at upcoming meetings, conviction around that view is weakening. Futures markets now show more than 75% of traders expecting rates to be lower by June, up sharply from earlier in the month.
The retail sales report sets the stage for Wednesday’s closely watched January jobs report, following recent signs that the labor market may be losing some momentum. That will be followed by Consumer Price Index (CPI) data on Friday, offering fresh insight into inflation pressures.
Earnings and Corporate Headlines in Focus
Investors also continued to sift through earnings results, including updates from Coca-Cola and CVS Health. Ford Motor is set to report after the market close.
Coca-Cola shares fell about 2% after the company issued what management described as a “prudent” outlook for 2026. While organic revenue growth beat expectations in the fourth quarter, guidance for next year came in slightly below Wall Street forecasts.
Pressure remains evident in international markets such as China, India, and Mexico, while North American volumes benefited from consumers shifting toward lower-sugar products like Coke Zero and bottled water.
Paramount Raises Stakes in Warner Bros. Bid
Outside of earnings, media-sector drama drew attention after Paramount Skydance sweetened its hostile bid for Warner Bros. Discovery.
The company enhanced its $30-per-share all-cash offer with a $0.25-per-share quarterly “ticking fee”, equating to roughly $650 million per quarter if the deal is not closed after December 2026. Paramount also said it would pay a $2.8 billion termination fee to exit its agreement with Netflix.
The move comes as U.S. regulators examine whether Netflix’s separate Warner-related transaction could raise antitrust concerns.
Gold and Bitcoin Remain Volatile
Alternative assets stayed in focus after last week’s sharp pullback.
Gold slipped slightly after briefly reclaiming the $5,000 level earlier in the week, though strategists remain constructive on bullion amid geopolitical risks and shifting rate expectations.
Bitcoin continued to trade below $69,000 after a volatile stretch that saw sharp liquidations. Analysts pointed to fragile sentiment and what some described as a short-term “crisis of confidence” in digital assets.
WSA Take
Markets aren’t celebrating — they’re recalibrating.
Weak retail sales didn’t spark fear; they shifted the narrative. Slowing consumer demand gives the Federal Reserve room to pivot, and traders are increasingly positioning for that outcome.
With jobs and inflation data still ahead, this week will likely determine whether the market’s next move is driven by relief — or renewed volatility. For now, investors are leaning toward cuts, not crashes.
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