NEW YORK (TheStreet) -- It took a while, but U.S. consumers may finally be reacting to the stock market's wealth-crushing summer swoon and a cooling job market by cutting back on spending.

And that could mean bad news for big retailers such as Wal-Mart (WMT) - Get Walmart Inc. Report and Best Buy (BBY) - Get Best Buy Co., Inc. Report , which are in the trenches right now preparing for the all-important holiday season.

On Wednesday, the U.S. Census Bureau reported that September retail sales rose 0.1%, missing forecasts for a gain of 0.2%. Excluding sales of autos, retail sales plunged 0.3%, the biggest decline since January. Wall Street was forecasting a 0.1% drop.

Sales fell in seven of 13 merchandise categories. Most concerning was that the weaker-than-expected sales arrived during the critical back-to-school shopping period, where consumer demand for products such as backpacks and tablets for kids is often seen as an indicator of holiday season sales.

Moreover, retailers such as J.C. Penney (JCP) - Get J. C. Penney Company, Inc. Report , Dick's Sporting Goods (DKS) - Get Dick's Sporting Goods, Inc. Report and American Eagle Outfitters (AEO) - Get American Eagle Outfitters, Inc. Report voiced on their second quarter earnings calls in mid-August that back to school shopping started well, suggesting consumers pulled back the spending reins in September as headlines about the economy and stocks soured.

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Many of those dreary headlines came on the state of the employment market. The number of jobs created in September clocked in at 142,000, falling shy of forecasts for 200,000. Further, downward revisions to the jobs figures for August and July lopped off 59,000 jobs, likely reflecting decisions from many companies in the manufacturing and mining sectors to pare down staff and hours in response to a slowing Chinese economy and the impact of the strong dollar on international profits.

According to a study by Bankrate, more than three in five Americans are limiting their spending each month, with 28% citing stagnant income as the main reason.

Says Bankrate, "This could be a troubling sign for the upcoming holiday shopping season -- it looks like retailers will need to continue to offer steep discounts in order to encourage consumers to spend."

Some of those steep discounts may already be starting to appear as major retailers close out their second quarters this month and report third quarter results in mid-November. Walmart.com is currently holding a "Warehouse Clear Out" event online, promising "rock bottom" prices on hundreds of new items. Best Buy is highlighting up to 60% off clearance and open box items online up until Oct. 17.

As a result of more cautious consumers weeks before Black Friday, and retailers possibly poised to react with steeper discounts, investors may want to reconsider their bullishness on consumer discretionary stocks.

The Consumer Discretionary Select Sector SPDR ETF (XLY) - Get Consumer Discretionary Select Sector SPDR Fund Report has gained 7.6% year to date, outperforming the S&P 500's 2.6% decline and Dow Jones Industrial Average's 4.1% nosedive.