The Federal Reserve meets this afternoon, and the market is once again clinging to the hope that interest rate cuts are just around the corner. It’s a familiar script: weaker job openings, slightly cooler inflation data, a market desperate for dovish language.
But the Fed is navigating a far more complicated picture—one where the inflation battle is not over, and the American consumer, the so-called backbone of this economy, is starting to crack.
Despite all the talk of a “soft landing,” the data under the surface looks anything but smooth.
The consumer’s balance sheet is eroding, and so is the confidence that they can keep spending at the rate they have for the past three years.
For markets, this raises serious concerns—not just about retail earnings or discretionary demand, but about the trajectory of the broader economy heading into the second half of 2025.
Let’s look at the numbers:
These aren’t isolated data points. Taken together, they form a clear technical pattern—one that suggests exhaustion in the consumer trend. The market may be looking for a Fed pivot, but what it needs to watch is a consumer pivot. And that’s already happening.
If it walks like a duck, quacks like a duck, and flies like a duck, then it’s probably a duck.
That’s what can be said about our economy right now, particularly the consumer-driven part of it.
For decades, the Homebuilders and related retail segments have acted as early indicators of economic health. It’s not just about buying the house—it’s what happens after. New homeowners spend aggressively: appliances, tools, paint, furniture. This post-sale boom helped build Home Depot (HD), Lowe’s (LOW), and Target (TGT) into household names. But take a look at those names now.
Home Depot is one of the biggest beneficiaries of strong housing demand and bullish consumer sentiment. This is its peak season—when homeowners rush to complete projects before summer vacations begin. Yet the stock is down nearly 20% from its January highs, and has shed 10% in just the past three weeks.
Technically, shares are hanging on to the $350 level, which has acted as near-term support. A break below it would open the door to another leg down toward the $300 price target, where more significant support exists. This is not the price action of a healthy consumer market.
Lowe’s mirrors Home Depot’s trend. Shares are teetering just above $210, the same level that acted as support during April’s “Tariff Tantrum.” If that floor gives out, the next support sits closer to $190, a level not seen since late 2023. The technical structure suggests distribution, not accumulation.
Target, the final member of what could be called the Retail Trinity, is even worse off. Shares have been consolidating at their 2025 lows near $95, down 30% year-to-date. Unlike HD or LOW, this isn’t just a consumer story, it’s a confluence of weakening discretionary demand, controversy over corporate policy shifts, and margin pressure from renewed tariffs.
The chart says it all. TGT has failed to break above its declining 50-day moving average for weeks, and momentum indicators remain deeply bearish. If it loses support at $95, the next stop could be closer to $80, a multi-year low.
These aren’t isolated cases—they’re a window into what’s coming for the broader market. Consumer discretionary stocks have underperformed in 2025, and credit-sensitive sectors like autos, regional banks, and small-cap retail are flashing similar warnings.
The Russell 2000 - a more accurate reflection of domestic economic health than the S&P 500 - is still below key technical levels. Recent rallies have failed to reclaim the 200-day moving average of this key index, suggesting that the breadth of the market rally is too thin to translate into a “healthy” bull trend.
Meanwhile, bond yields are refusing to break down, suggesting inflation, or the fear of it, is still on the Fed’s radar.
The good news is that the earnings season is right around the corner.
The first two weeks of July are historically strong for stocks
Over the last month, investors have been surprised by the market’s climb higher.
Technology and speculative stocks have led the S&P 500 and Nasdaq 100 back towards their Q1 highs after turning in one of the best first quarter performances in years.
The short-term bullish conditions have started to draw many investors back into the market quickly, but now is the time to start mapping out the market’s path for the next three month’s.
The technical breakdown across key consumer stocks mirrors patterns seen in late 2007 and again in early 2020, just before sharp downturns.
If you're managing risk, this is the time to rotate toward defensives: utilities, staples, healthcare, and discount retailers like Costco (COST) or Dollar General (DG), which tend to benefit when the consumer gets squeezed or concerned about inflation.
The market may still be betting on a Fed rescue. But traders and long-term investors alike should pay closer attention to the data behind the sentiment. The consumer doesn’t lie, and right now, the consumer is quietly signaling trouble ahead.
