AI has pushed the stock market to record highs. Why the economy could drag it down.

Subscribe to enjoy similar stories. Investors are getting mixed messages on health of the U.S. economy, leaving stocks in limbo ahead of next week’s Federal Reserve rate decision.

After being powered by the artificial-intelligence trade all year, stocks don’t seem to know where to head this month—traditionally one of the market’s strongest—thanks to data showing solid gains in some corners of the world’s biggest economy, and ongoing weakness in others. Those conflicting signals are playing havoc with bets on how the Fed will proceed at next week’s rate-setting meeting—and how markets will react later this month once official economic data start filling in the blanks left by the government shutdown. Lower Fed interest rates would almost surely support market valuations over the months ahead.

But lukewarm jobs data and retailers’ shaky consumer outlooks could chip away at Wall Street’s projections for corporate earnings growth, which is key to the market’s chances for big gains next year. “Consumption isn’t just one of many factors in GDP … it is the factor, accounting for nearly 70% of all economic activity," said Mark Malek, CIO at Siebert Financial. “When the consumer wobbles, the economy wobbles.

When the consumer spends, companies breathe. When the consumer tightens up, markets eventually follow," he added. That’s why the recent spate of economic data has been so vexing for Wall Street.

The Institute for Supply Management’s benchmark reading of activity around the services sector, the economy’s primary growth driver, expanded in November at the fastest pace since February, according to data released Wednesday. Input prices fell the most since March 2024—another positive for the sector. Employment in services, however,