Confidence Is Back, But Earnings Show the Consumer Is Being Picky

Summary

This year, as the market is preoccupied with how the Iran war is propping up the energy sector and how the memory chip shortage has been driving the AI rally, there has been little focus on consumer discretionary stocks' underperformance. In 2026, consumer discretionary remains among the weakest S&P 500 sectors. The Consumer Discretionary Select Sector SPDR Fund, a commonly used proxy for the sector, is down nearly 4% year-to-date.Get Domino's Pizza alerts:Sign Up But as Q2 earnings season continues, signs are pointing to a rebound in consumer confidence. While that may bode well for the sector broadly, a sampling of consumer discretionary companies shows that if it is sustainable, the results are anything but uniform. After hitting all-time lows earlier this year, the University of Michigan’s Surveys of Consumers showed a minor uptick in July, with the index jumping from 49.5 in June to 54.4. Despite remaining below the critical threshold of 60—the historical level that serves as a recession risk warning—the sentiment reading marked the second straight month of a 10% increase and the highest reading since February. However, economists chalk that up to lower prices at the pump over the past few weeks, which have already begun to reverse course as the United States and Iran have resumed fighting. That was reinforced with a lower June Consumer Price Index reading, with the moderated 3.5% year-over-year (YOY) increase attributed to a drop in gas prices. Nonetheless, the reprieve from higher prices—even if momentary—has had a psychological impact on consumers. But thus far, consumer discretionary earnings have been a mixed bag, telling a more complicated story. Domino’s Value Deals Drive Orders, But Not Meaningful GrowthDomino's Pizza TodayDPZDomino's Pizza$327.80 -1.17 (-0.35%) As of 02:31 PM Eastern This is a fair market value price provided by Massive. Learn more.52-Week Range$282.00▼$486.68Dividend Yield2.43%P/E Ratio18.89Price Target$402.16 As Domino’s Pizza NASDAQ...