Has the consumption winter arrived? Volatility in the U.S. stock market reveals the 'extremes' in the retail industry

Recently, the U.S. stock market has shown intense volatility. This fluctuation has not only affected core sectors such as technology and finance but also had a far-reaching impact on the commercial retail sector.

The volatility in U.S. stocks has directly triggered investors' concerns about the economic outlook, with the retail sector being the first to bear the brunt as a kind of 'release valve' for market sentiment. In February 2026, U.S. December retail sales growth was reported at 0% month-on-month, significantly below the expected 0.4%. Following this data release, Walmart's stock price dropped more than 1% in a single day, while Costco fell by as much as 2%. This chain reaction stems from the fact that retail data is viewed as a 'thermometer' of consumer health — while the manufacturing PMI rebounded to 52.6 (indicating expansion), retail sales stagnation was quickly interpreted by the market as 'insufficient consumer momentum,' prompting funds to accelerate withdrawal from retail stocks and move toward safe-haven assets such as bonds and gold.

What is even more noteworthy is the stark contrast between the volatility of retail stocks and technology stocks. In February 2026, the Dow Jones Index surged past a historic high of 52,200 points, yet retail giants like Walmart and Costco fell due to weak holiday sales. This divergence of 'index hitting new highs while retail stocks decline' reflects the market's pessimistic expectations for the consumer sector: even if overall economic data is positive, pressures from inflation, tariff costs, and fluctuations in consumer confidence could still undermine the profitability of retail companies.

Behind the volatility of U.S. stocks lies a profound shift in consumer behavior. In 2025, the U.S. automotive industry's crisis intensified this shift—Ford suffered a net loss of $8.182 billion due to impairments in its electric vehicle business and tariff costs; Stellantis incurred a $26 billion loss from its electric vehicle strategic restructuring, causing its stock to plunge nearly 30% in a single day. The turmoil in the auto sector directly dragged down automobile retail stocks, with U.S. auto sector shares falling 13.17% over seven days, reflecting the market's pessimistic outlook on durable goods consumption.

This pessimism is spreading from durable goods to everyday consumption. Data showed that spending at U.S. restaurants and bars dropped the most in two years, indicating that consumers are starting to cut back on non-essential spending. More concerningly, a surge in auto loan defaults led to Carmax posting a quarterly loss of $142 million, revealing the reduced purchasing power among middle- and low-income groups. As consumers shift from "revenge spending" to "cautious spending," retail companies face the dual pressures of falling average transaction values and inventory accumulation.

Amid the overall pressure on the retail sector, discount retailers have demonstrated strong risk resilience. Take Costco as an example: its Q2 fiscal 2025 report showed a 6.8% increase in same-store sales, a 21% year-on-year growth in e-commerce sales, and a high membership renewal rate of 93%. This "rock-solid" performance stems from its "low-price + membership" model, which precisely meets consumer needs in an inflationary environment—reducing product prices through bulk purchasing while generating stable revenue through membership fees, creating a moat in the era of "consumption downgrading."

In contrast, traditional retailers face greater challenges. Walmart maintains growth through supply chain optimization, yet its stock is still dragged down by weak retail data; small- and medium-sized retailers, lacking scale advantages, face a further narrowing of survival space under the dual pressures of rising costs and shrinking consumption. This divergence suggests that future competition in the retail industry will focus more on "cost-performance ratio" and "supply chain efficiency," making the discount retail model potentially mainstream.

In this volatility, the "survivors" in the retail industry will share three key traits: strong supply chain management capabilities, precise consumer insights, and flexible digital transformation strategies. For investors, against the backdrop of heightened U.S. stock market volatility, allocating to discount retail stocks and monitoring changes in consumer data could be a wise choice to navigate through the cycle.