New sales data confirm that retailers are poised to show their best holiday season in three years, but investors seemed unimpressed as concerns mount that shoppers will pull back in the new year.
Retail sales rose 4.8 percent for the week ending with Christmas Day, December 25, compared with the year-earlier period, according to data released on Tuesday by the International Council of Shopping Centers and Goldman Sachs.
That puts retail sales for November and December on track to rise 4 percent compared with a year ago, and hit the high end of a holiday forecast range that ICSC and Goldman had already raised two weeks ago on the strength of November sales.
Separately, MasterCard's SpendingPulse said retail and services sales were up 5.5 percent for the period between November 5 and December 24, led by a surge in spending on clothing and jewelry. That compares with a 4.1 percent increase in 2009.
A more detailed picture of how store chains from Target Corp to Macy's Inc fared during the holiday season is expected on January 6, when many retailers report comparable store sales results for December.
Shoppers might be spending more freely this year, but they remain worried about the job market with unemployment hovering near the 10 percent mark.
In the latest snapshot of consumer attitudes released on Tuesday, consumer confidence deteriorated unexpectedly last month, while prices of U.S. single-family homes fell almost double the expected pace in October.
The Standard & Poor's Retail Index was down 0.2 percent on Tuesday, while the broader S&P 500 was up 0.15 percent. The S&P Retail Index hit a 3-1/2 year high, but analysts question whether store chains can keep their hot streak going.
The stocks have had great runs going into end of the year, said Nomura Securities analyst Paul Lejuez. Any negative point provides investors a reason to take some money off the table, such as the consumer confidence data.
Shoppers themselves have signaled they will cut back after the holidays, and a fierce blizzard on the U.S. East Coast just after Christmas may have already dampened their appetite for extra spending.
ICSC chief economist Michael Niemira told Reuters the snowstorm could lower the December sales growth rate by half of one percentage point, though some purchases may show up in January.
Analysts also predict that consumers will balk at the higher prices expected in 2011 for merchandise such as clothing because of this year's doubling in cotton prices, among other surging commodities costs.
(Reporting by Phil Wahba, editing by Dave Zimmerman and Gunna Dickson)