Updated from 2:29 p.m. EST

Investors flocked back into retail stocks Wednesday ahead of the monthly onslaught of sales reports, encouraged by positive consumer spending data from October.

The S&P Retail Sales Index gained 1.6%, having previously dropped almost 3% since last Friday after

Wal-Mart

(WMT) - Get Report

sharply reduced its November sales projection over the weekend. Still, economists say their expectations remain muted amid the Wal-Mart news and other signs of disappointment coming from the traditional, post-Thanksgiving shopping spree.

"I think the tone for now is that we've had a soft start to the holiday shopping season," said Michael Niemera, chief economist and director of research with the International Council of Shopping Centers. "Something happened at the end of the month that sort of weakened consumers' demand. Whether it was consumers just bargain-hunting or something more economywide, we just don't know yet."

The ICSC lowered its forecast for overall growth in same-store sales for November to 2.5% to 3%, down from its previous estimate of 3% to 4%. However, the council stopped short of lowering its estimate for December from 3% to 4%. In October, the ICSC reported a 4% jump, based on its survey of over 70 major retail chains throughout the U.S.

Investors took heart Wednesday after the Commerce Department said consumer consumption rose more than expected in October, by 0.7%, up from the 0.6% recorded for September. Personal income increased 0.6%, after rising an unrevised 0.2% in the month before.

But the latest data could not erase the uncertainties sowed by Wal-Mart's announcement on Saturday that it expects its same-store sales in November to be up only 0.7%, rather than its earlier projection of 2% to 4% growth.

Richard Hastings, a retail analyst with Bernard Sands LLC, said Wal-Mart's performance should not be viewed as a barometer of the whole sector, but he acknowledged that this decline was startling.

"This means that Wal-Mart's U.S. supercenter division, the biggest division in the corporation, may have come in with flat or slightly less-than-flat comps -- it's too scary to say negative," Hastings said. "That would be an astounding event."

While a variety of competitive, marketing, pricing and store-environment factors seemed to all play a role in Wal-Mart's shortfall, there are other signs that 2004's Black Friday shopping bonanza left something to be desired.

ShopperTrak, which compiles sales results from 30,000 chains, reported Tuesday that sales rose a modest 2.9% for the post-Thanksgiving shopping weekend compared to last year. That was down from a 10.8% increase logged on Friday, suggesting that many consumers opted for an abbreviated weekend.

Meanwhile, the National Retail Federation said it expects that total sales, excluding restaurant and auto sales, will gain 4.5% for the months of November and December, down from last year's 5.1% increase for the same period.

Such tepid outlooks are coming along with a continued decline in measures of consumers' attitudes. On Tuesday, the Conference Board said its consumer confidence index continued its string of monthly declines, falling to 90.5 in November from a revised 92.9 in October. Also,

Money Magazine

and

ABC News

said their consumer comfort index fell to -9 for the week ended on Nov. 26.

The barrage of monthly sales reports from individual retailers expected on Thursday has been prefaced by several forecasts in addition to Wal-Mart's.

Hot Topic

( HOTT) cut its fourth-quarter earnings forecast and said its total sales dropped 8% in November. Its same-store sales dropped more than expected, by 8%.

Elsewhere,

Chico's

(CHS) - Get Report

said its same-store sales beat Wall Street's estimates, jumping 8.6% in November, with total sales climbing 28% to $88.7 million.

American Eagle

( AEOS) also beat expectations, reporting a same-store sales gain of 22.7%, and

Aeropostale

(ARO)

said comps rose 4.1% for the month.

Hastings is expecting good numbers out from other retailers, including

Target

(TGT) - Get Report

,

Costco

(COST) - Get Report

,

Federated Department Stores

( FD),

Ann Taylor

(ANN)

,

Nordstrom

(JWN) - Get Report

and

Neiman Marcus

(NMG)

.

"Spending in November was mixed between serious spending on gifts for the holidays and ordinary seasonal purchases of sweaters, footwear, jeans and business clothing," Hastings said. "There's also a lot of electronics, entertainment and lifestyle spending going on. Overall, the rate of growth will have slowed a bit in November compared to October."