Target had weak holiday sales. Investors better hope it's an outlier

Can US consumers keep spending? After Target reported lackluster sales during the critical holiday stretch, it's a question that deserves fresh attention.

What happened: Target's sales increased by just 1.4% in November and December at stores open at least a year, a key measure of the retailer's health. That was below the company's expectations — and well short of the 5.7% growth it scored a year earlier.

Watch that stock: Shares of the retailer, one of the few traditional brick-and-mortar retailers thriving in the age of Amazon, fell more than 6%. It was a rare moment of weakness for a stock that had shot up more than 80% in the past year.

Investors now have to determine whether Target's performance was the exception or the rule. The US consumer has kept the American economy chugging along, and needs to keep spending for growth to continue. Shares of Walmart and Best Buy, which still need to report holiday sales, fell Wednesday as worries spread.

One good sign: Costco said sales in December jumped by more than 9%. Its stock ticked higher.

What's clear is that stores with strong online presences will continue to be the winners. Mastercard reported late last month that holiday retail sales grew 3.4% compared to 2018. But online sales leaped nearly 19% against the previous year.

Those tied to shopping malls continue to struggle. Macy's announced last week that it would close 29 stores. JCPenney, Kohl's, Bed Bath & Beyond and other mall staples also reported weak holiday sales, my CNN Business colleagues Nathaniel Meyersohn and Chris Isidore report.

Worth monitoring: US retail sales for December arrive Thursday. Expect a market response if there's any sign of weakness. (Economists are looking for 0.5% month-on-month growth, excluding autos.)

A world trade war is brewing. The US-China deal won't stop it

The United States has signed an initial trade agreement with China. But that doesn't mean simmering conflicts and uncertainty over trade won't drag down the global economy this year, my CNN Business colleagues Jill Disis and Charles Riley write.

Their take: "Tensions between the world's two biggest economies are likely to persist in 2020 as Beijing and Washington enter a second round of trade talks that are expected to be more difficult than the "phase one" process that culminated in a deal Wednesday in Washington.

... The European Union is also locked in its own trade dispute with the United States that has strained ties between the preeminent western powers. And the United Kingdom's looming break with Europe brings with it a slew of challenges as the country attempts to forge a new relationship with its largest export market."

Read their full analysis here.

Get caught up: President Donald Trump and senior Chinese leaders on Wednesday signed an 86-page agreement. It included a promise from Beijing to buy more US agricultural products and manufactured goods over two years. In exchange, the United States agreed to reduce tariffs on $120 billion in Chinese products from 15% to 7.5%.

"Are we in an ideal spot? No," Robert Lighthizer, Trump's top trade negotiator, told reporters at the White House before the signing. "Is this a massively good first step? Yes."

Could the market predict the next president?

Just 55% of Americans own stock. Even so, markets could help predict the outcome of the 2020 presidential election — at least according to Sam Stovall, chief US investment strategist at CFRA Research.

If the S&P 500 rises between July 31 and October 31 in an election year, the incumbent candidate wins 80% of the time, Stovall said on CNN Business' "Markets Now" digital live show.

"Investors don't like uncertainty, and a new regime injects uncertainty," he said. If stocks fall, the incumbent loses 88% of the time.

And what about all those voters who don't own shares? "While people on Main Street might not benefit directly in the stock market, they benefit indirectly because corporations are hiring [and] salaries are going up," Stovall said.

Up next

BNY Mellon, Charles Schwab and Morgan Stanley report results before US markets open.

Also today:

US retail sales for December arrive at 8:30 a.m. ET.The NAHB Housing Market Index for January arrives at 10 a.m. ET.

Coming tomorrow: On the heels of the signing of an initial US-China trade deal, Beijing will release GDP data for the last three months of 2019.