U.S. stocks hovered near record territory on Monday as investors confronted a question likely to shape the market’s next move: Can consumers keep corporate earnings growing without prompting the Federal Reserve to maintain tighter monetary policy for longer?

The S&P 500 slipped about 0.1% around midday Monday, while the Dow Jones Industrial Average fell roughly 200 points and the Nasdaq Composite edged higher, according to the Associated Press. The restrained trading followed a strong earnings season and left the broad market close to the record it established last week. Investors appeared reluctant to make large commitments before reports from major retailers and the release of minutes from the Fed’s July policy meeting.

Consumer activity remains central to the outlook because household expenditures account for roughly two-thirds of U.S. economic activity. Spending that remains firm can support retailers, payment companies, banks, travel businesses and technology platforms while limiting the probability of a recession. But demand that proves too strong—particularly if accompanied by rising prices—could complicate the Fed’s effort to return inflation sustainably to its 2% objective.

The latest retail-sales report offered evidence of both durability and possible deceleration. Census Bureau data released Aug. 14 showed a decline in July’s headline sales after earlier gains, although month-to-month comparisons were affected by the timing of large online promotions, including an earlier Amazon Prime Day. Retail sales are reported in nominal dollars, so higher prices can also make household demand appear stronger than the underlying volume of goods purchased.

That ambiguity makes this week’s corporate results unusually important. Home Depot is scheduled to report Tuesday, followed Wednesday by Target, Lowe’s and TJX. Walmart, the country’s largest retailer, reports Thursday. The companies serve different segments of the consumer economy, giving investors an opportunity to compare demand for groceries and household necessities with apparel, home-improvement projects and other discretionary purchases.

Walmart’s results may provide the broadest indication of household resilience because of its exposure to food, general merchandise and shoppers across income groups. Investors will examine comparable sales, transaction counts and management’s full-year forecast. They will also look for signs that customers are choosing lower-priced products, buying smaller quantities or shifting more of their budgets toward groceries and other essentials.

Home Depot and Lowe’s will offer a different perspective. Elevated mortgage rates and affordability pressures have restrained housing turnover, reducing the number of purchases typically associated with moving into a home. Large renovation projects may remain vulnerable even if routine repair and maintenance demand holds up. A recovery in big-ticket purchases would strengthen the case that consumers remain confident, while cautious guidance could reinforce concerns that high financing costs are constraining discretionary spending.

Target and TJX should help show whether pressure is spreading into apparel and general merchandise. Strong results from discount-oriented retailers would not necessarily mean that household finances are uniformly healthy. They could instead indicate that shoppers are trading down, seeking promotions or concentrating purchases at merchants perceived as offering better value. Investors will therefore focus on margins and inventories alongside revenue.

The market enters those reports with substantial support from corporate profits. Companies in the S&P 500 are on course to post exceptionally strong year-over-year earnings growth for the spring quarter, according to FactSet figures cited by the AP. That performance has helped justify the index’s advance even as Treasury yields and geopolitical uncertainty have remained elevated.

However, the earnings comparison is flattered by conditions a year earlier, and investors generally price stocks according to expected future cash flows rather than past results. Retail executives’ comments about August demand, promotional activity, tariffs, wages and transportation costs may consequently move markets more than the quarterly numbers themselves. A consumer slowdown that remains orderly could still be compatible with continued profit growth. A sharper pullback would threaten revenue forecasts across industries.

Interest rates are the second half of the equation. Investors have recently reduced expectations that the Fed will increase rates at its September meeting after softer inflation and employment readings. Goldman Sachs economists said in an Aug. 16 analysis that they expected policymakers to remain on hold, arguing that inflation is more likely to improve than deteriorate as the year progresses. Market pricing nevertheless continued to assign some probability to another increase, underscoring the uncertainty surrounding the policy path.

Minutes from the Fed’s July meeting, due Wednesday, will be scrutinized for the breadth of concern about inflation and the conditions that could justify another move. The central bank left its target range unchanged at that meeting, but a divided debate would signal that upcoming employment, price and spending data could still alter the outcome in September.

For equity investors, lower odds of a rate increase can support valuations by reducing expected discount rates and pressure on corporate financing costs. The benefit is particularly important for technology and other growth companies whose valuations depend heavily on profits expected years into the future. Rate-sensitive areas such as housing, small businesses and consumer credit could also benefit if borrowing costs stabilize.

Yet the relationship between spending and stocks is not straightforward. Strong retail demand may improve earnings estimates while pushing Treasury yields higher if bond investors believe the economy can tolerate tighter policy. On Monday, the 10-year Treasury yield climbed to about 4.70% after a stronger-than-expected New York manufacturing report, according to the AP. Rising yields create more competition for stocks and can weigh on highly valued shares even when economic growth remains healthy.

Energy costs add another complication. Brent crude traded near $89 a barrel Monday amid continuing uncertainty over Middle East supply and shipping. Higher gasoline prices operate like a tax on consumers by reducing the income available for other purchases. They can also raise companies’ transportation and production expenses, potentially squeezing margins or producing price increases that keep inflation above the Fed’s target.

Household resilience is also uneven. Higher-income consumers generally benefit more from rising asset prices and are better positioned to absorb inflation. Lower- and middle-income households tend to spend a larger portion of their earnings on food, housing, transportation and credit payments. Aggregate sales can therefore remain healthy even while a meaningful share of consumers becomes more cautious or relies more heavily on promotions.

Credit trends will be another signal to watch. Retailers and banks have reported normalization from unusually low pandemic-era delinquency rates, while interest charges remain high for borrowers carrying revolving balances. A gradual increase in late payments would be manageable; a sharper deterioration could point to weaker future spending and higher credit losses for lenders.

The most supportive scenario for stocks would be a controlled moderation: consumers continue spending enough to sustain revenue, inflation cools, and the Fed leaves rates unchanged. That outcome would preserve confidence in economic growth without placing substantial additional pressure on bond yields.

The less favorable possibilities run in both directions. A sudden contraction in demand would undermine earnings expectations and intensify concerns about employment. Conversely, unexpectedly strong sales combined with renewed inflation could revive the case for another rate increase, lowering the present value of future corporate profits.

With major indexes already near records, the threshold for positive surprises is high. This week’s retailer reports and Fed minutes will not settle the debate, but they should reveal whether consumer resilience remains an uncomplicated source of market strength—or is becoming another reason for monetary policymakers to stay cautious.