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US consumers are gearing up for their next challenge: holiday shopping


Happy Friday. A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

Retailers are gearing up for the holiday season — and so far, it looks to be a good one. All signs point to healthy spending from Americans, who are expected to load up on gifts and deals despite lingering concerns about the slowing economy and uncertainty surrounding tariffs.

“We’re prepared for a good holiday season,” Walmart CEO Doug McMillon said Thursday when the company reported another quarter of strong sales growth.

That’s good news for bullish investors, my CNN Business colleague Nathaniel Meyersohn notes: Walmart, America’s largest retailer, is a bellwether of consumer health and the retail sector. The company’s upbeat results are a sign American consumers are confident heading into an important stretch.

Walmart shares were flat Thursday after briefly hitting a record high. They’ve rallied nearly 30% this year:

Coming up: US retail data coming Friday could further lift sentiment. Sales are expected to have climbed 0.2% in October, compared to a 0.3% decline logged the previous month.

Why spend so much time focused on US consumers? Well, for economic growth to pick back up again, strong spending is a necessity. And there’s concern that if the United States and China don’t get a meaningful trade deal done, consumers could take a hit.

See here: In its two-year outlook published this week, Moody’s said it expects the US economy to continue decelerating into 2020. The credit rating agency sees the economy growing 2.3% in 2019, down from 2.9% last year. That’s forecast to drop to 1.7% in 2020, before recovering slightly to 1.9% in 2021.

That 2021 bounce back doesn’t happen without shoppers.

“Our expectation of US economic stabilization into 2021 is predicated on consumer spending remaining resilient amid strong labor markets, rising wages and supportive monetary conditions,” Moody’s analysts said.

Alibaba’s Hong Kong listing gets a price

Alibaba’s big secondary listing in Hong Kong now has a price attached.

The Chinese e-commerce giant said Friday that it would begin selling another batch of shares to retail investors for up to 188 Hong Kong dollars ($24) each. The company, which began selling to institutional investors earlier this week, hopes to raise up to $13 billion through the sale.

That would make it the largest listing so far this year. But the move isn’t just about the raise, my CNN Business colleague Laura He points out:

It’s also a savvy political move. While the Chinese company has said it wants to use the money to expand its business, filings show Alibaba doesn’t exactly need the cash.

… What a listing in Hong Kong affords Alibaba is the ability to impress Beijing in a big way. It’s a symbolic homecoming for a company that trades in New York but is one of China’s technological crown jewels. And it’s a shot in the arm for a massive financial hub that is in the throes of a months-long political crisis.

What experts are saying: “The Hong Kong listing isn’t being driven by normal business strategy,” Brock Silvers, managing director for Adamas Asset Management in Hong Kong, told Laura. “Alibaba is being a good corporate citizen — and a shrewd operator — in following Beijing’s dictates.”

Amazon won’t take cloud loss without a fight

The US Department of Defense’s decision last month to award a massive cloud computing contract to Microsoft was a huge loss for Amazon. But the internet giant isn’t waving the white flag just yet.

Amazon told CNN Business on Thursday that it plans to file a formal legal complaint, my colleague Clare Duffy reports. The company claims the deal was marred by “errors and unmistakable bias.”

The Pentagon contract — called Joint Enterprise Defense Infrastructure, or JEDI — involves providing cloud storage of sensitive military data and technology, such as artificial intelligence. This could result in a $10 billion payout for the provider over 10 years.

It’s not just about the price tag, per Clare. “Losing the deal could threaten Amazon’s position as leader of the cloud industry, as well as its ability to land other potentially lucrative government deals in the future. [Its web services unit] has long been the company’s leading profit driver,” she writes.

Amazon could drag out the process, Wedbush Securities analyst Daniel Ives notes. But at this point, he sees Microsoft as the “lone winner.”

Up next

J.C. Penney and report results before US markets open.

Also today:

  • US retail sales for October arrive at 8:30 a.m. ET.
  • The Empire State manufacturing survey for November posts at the same time.

Coming next week: Can Target, Home Depot and other retailers replicate Walmart’s success?

Article Topic Follows: Biz/Tech

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