It's not looking good for American consumers or, for that matter, the businesses that cater to them.

On Monday, signs were everywhere that consumer spending is softening.

Wal-Mart

(WMT) - Get Report

lowered its August sales forecast, saying back-to-school buying was weaker than expected. The retailer says same-store sales in the month could be flat to up 2% compared with a year ago.

Toys R Us

(TOY)

said sales for the quarter ended July 31 fell 3.9%. And

SCS Transport

(SCST)

, a Kansas City-based trucking firm that serves retailers, warned that third-quarter earnings would be 41 to 47 cents a share, not the 51 cents to 57 cents previously forecast.

The reports all signaled that higher oil prices and the fading stimulus of mortgage refinancing and tax cuts have prompted consumers to close their wallets and pocketbooks.

Target

(TGT) - Get Report

,

Costco

(COST) - Get Report

and

Kmart

(KMRT)

all fell along with Wal-Mart and could keep falling as long as consumers feel pinched. After the close, Target said it wasn't changing its prediction of flat to a 2% gain in August sales.

Monday's retail selloff was broad-based, taking down everyone from specialty chains like

Petco

(PETC)

and

Sports Authority

(TSA)

to high-end clothing stores like

Saks

(SKS)

and

Nordstrom

(JWN) - Get Report

.

The trend will curb the broader economy as well. Consumer spending has been critical to the economic recovery and aided the stock market's upsurge last year. Consumer consumption increased 3.3% in 2003 after adjusting for inflation and accounted for more than 60% of the total increase in real gross domestic product. In the second quarter of this year, it was down to a 1% real increase and 50% of the total improvement.

Doug Gillespie, an economic analyst who runs his own firm and used to oversee the taxable bond department at US Trust, warns that the markets could be in for a shock when the Commerce Department revises its second-quarter GDP report on Friday. The previously reported 3% increase could be cut to as little as 2% because of the huge trade deficit the U.S. ran in June.

"If 3% was disappointing, something less than 3% would be more so," he said.

The one piece of countervailing data on Monday was

Fed Ex's

(FDX) - Get Report

announcement that the third quarter was running better than expected. The company expects to make $1 to $1.10 per share in the quarter that ends Aug. 31, up from its previous estimate of 90 cents to $1 a share. The company said its ground business was especially strong, including home deliveries.

That created a conundrum for knee-jerk investors that wanted to sell trucking company stocks based on the SCS earnings warning. SCS lost almost 30% but

Yellow Roadway

(YELL)

,

Arkansas Best

(ABFS)

,

CNF

(CNF) - Get Report

and

JB Hunt

(JBHT) - Get Report

all lost about 4% as well. After the close, Yellow said it wasn't lowering its previous earnings forecast of $1.20 to $1.25 a share.

Analyst Jason Seidl, who covers the trucking industry for Avondale Partners and used to work at what is now FedEx's ground freight unit, checked around with executives at some of the other firms. SCS's competitors aren't experiencing the same slowdown in business, he said.

"No one is seeing similar things," said Seidl, who doesn't own any of the stocks he covers. One reason may be SCS's tilt toward retailers including Wal-Mart, he said. Others like Yellow serve more industrial customers. "The market's reaction was overdone."

Trucking companies haven't been hurt too badly by higher fuel costs; most can increase surcharges they pass along to customers when gas prices rise.

Amidst the gloom on consumer spending, there was a bright note for those that have extended credit for the purchases of all those DVD players and TV sets. Credit card delinquencies in June were at the lowest level in four years, according to Moody's. The delinquency rate has dropped for 11 straight months, the rating agency said.

That could change as interest rates rise. Most card balances are charged interest at rates tied to the prime rate and banks hike their prime rates in lock-step with

Federal Reserve

interest rate hikes. The Fed meets three more times this year and the futures market is still pointing to another half-percentage-point of hikes.

Consumers may have picked up a few signals that higher rates are on the way, though. Moody's said cardholders paid off a record 16.8% of outstanding debt in the month. And that could explain where some of the money that wasn't being spent on new backpacks and pencil cases at Wal-Mart went.

In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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