MW Why the stakes for stocks are so high in this short Thanksgiving trading week ahead

By Christine Idzelis

The U.S. stock market just wrapped up a volatile week, with the S&P 500 slumping in November

The S&P 500's consumer-discretionary sector is under pressure so far this month.

The U.S. stock market is heading into a shortened trading week, as investors break for Thanksgiving, with a lot riding on American consumers after a recent tumultuous stretch.

The S&P 500 index SPX ended Friday with a weekly loss that put it on pace for its worst month since March, according to FactSet data. The index has dropped 3.5% so far in November amid heightened market volatility just before Thanksgiving kicks off the holiday season - and the shopping frenzy that typically goes with it.

Potential swings in stock prices risk being amplified in the coming week, as liquidity can become thin in the market as many investors may be taking time off around Thanksgiving.

"I think it's going to be a soft holiday season," said David Kelly, chief global strategist at J.P. Morgan Asset Management, in a phone interview. Tariffs have pushed up the prices of goods, including imported toys, which may be "a problem" for many consumers, he said.

Consumers are closely watched by investors, as their spending helps fuel the economy and corporate profits. Retailers will be hoping their Black Friday deals attract shoppers, but tariffs have raised concerns that consumers with lower incomes may hesitate to spend against a backdrop of elevated inflation.

Kelly expects that lower-income consumers in particular will be "pretty guarded" over the holiday season, while upper-income consumers may "just spend some of their stock-market gains."

This bifurcation among consumers in the U.S. economy is sometimes described as "K-shaped" - which points to wealthier people getting richer from higher asset prices and savings accounts that benefit from higher interest rates, while those with lower incomes are under greater financial pressure.

"The spending of the rich is fine," said Kelly. "It's the spending of everyone else that is pretty weak."

In the upcoming week, investors will finally get a look at retail sales in the U.S., as some government data missed during the shutdown begin to be released. But the delayed retail-sales report, expected on Nov. 25, will cover September, which now seems like "ancient history," said Kelly.

Inflation focus for the holidays

"One thing that I think the market hasn't focused enough on" is the duties paid at U.S. borders, which suggest more "more tariff pain" may be working its way through the supply chain, said Jeffrey Sherman, DoubleLine's deputy chief investment officer, in a phone interview.

He noted that questions remain about how much of those tariffs companies may try to pass on to consumers, and the extent to which the levies may erode retailers' profit margins.

"Dramatic increases in U.S. tariffs have generated very significant revenue, averaging over $29 billion between June and October," according to J.P. Morgan Asset Management's 2026 outlook report. "So far, most of the cost of the tariffs appear to have been absorbed by U.S. retailers."

Target Corp. (TGT) Chief Commercial Officer Rick Gomez said during the retailer's earnings call with analysts Wednesday that "as we approach the holidays, we know consumers remain cautious." He pointed to concerns about "jobs, affordability and tariffs," according to a transcript of the call from FactSet.

Read: As sales keep falling, Target says bigger stores and AI-assisted styles are its path to salvation

The S&P 500's consumer-discretionary sector XX:SP500.25 has slumped more than 7% this month through Friday, on pace for its biggest drop since March, FactSet data show. The sector has been dragged down by large November losses from Big Tech stocks Amazon.com Inc. (AMZN) and Tesla Inc. $(TSLA)$ amid concerns that the artificial-intelligence boom has led to stretched valuations.

The stock market has been all about AI lately, according to J.P. Morgan's Kelly. "There's just so much optimism built into the pricing of all of this that some sort of correction is almost inevitable."

AI bubble fears over the past week led to a big slump in tech stocks XX:SP500.45 that dragged down the S&P 500. That left the stock-market index appearing vulnerable just as it heads into the important holiday season, which typically has investors hopeful for a so-called Santa rally spurred by related consumer spending.

But the S&P 500 is off to a lackluster start to the final three months of the year, posting a 1.3% loss so far in the fourth quarter, according to FactSet data through Friday. Despite November's sharp pullback, the S&P 500 is still up 12.3% this year and just 4.2% below its record closing high booked as recently as Oct. 28, according to Dow Jones Market Data.

"The public in general feels pretty grumpy," said Kelly - although soured consumer sentiment doesn't necessarily lead to less spending.

A report Friday from the University of Michigan showed that a final reading from its index of consumer sentiment fell in November. "Consumers remain frustrated about the persistence of high prices and weakening incomes," said Joanne Hsu, director of the university's Surveys of Consumers, in commentary about the index on the school's website.

Yet there's reason to believe consumers may feel more upbeat early next year, as the One Big Beautiful Bill Act should generate a "bumper crop of income-tax refunds," according to Kelly. That could help offset some recent pressure in the stock market, potentially creating "a consumer boomlet" that gives retailers "exactly the opportunity they're looking for to pass on those higher prices," he said.

The U.S. stock market ended higher Friday, but the S&P 500, Dow Jones Industrial Average DJIA and tech-heavy Nasdaq Composite COMP all saw weekly losses. The market will be closed Thursday, Nov. 27, for the Thanksgiving holiday.

-Christine Idzelis

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November 23, 2025 12:00 ET (17:00 GMT)

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