Thrifty Shoppers and a Metaverse Diet: Discount Chains Shine as Wall Street Waits on the Fed

A quiet tape with plenty going on underneath

If you only glanced at the index screen, you’d think nothing much happened on Thursday. The Dow slipped about 0.1%, while the Nasdaq added roughly 0.2%. Under the hood, though, the cross-currents were very real: AI winners and losers, a retail sector split between haves and have-nots, and a central bank story that is slowly but surely tilting more dovish.

Weekly jobless claims fell to 191,000, the lowest level since 2022, – a “no-hire, no-ire” labor market where companies are slow to add people but equally reluctant to cut them.

On top of that, markets are now pricing in a very high probability of a Fed rate cut at next week’s FOMC meeting, with chatter intensifying that Kevin Hassett could replace Jerome Powell as Fed chair next year, a combination that keeps downward pressure on the dollar and supports risk assets.

Meanwhile, Bitcoin changed hands around $92,400, the Russell 2000 small-cap index pushed to a new record, WTI crude gained a bit over 1%, and EUR/USD hovered near 1.1646, all consistent with a market that is positioning for easier policy and a softer dollar.

So yes, the indices were calm. But this was one of those days where the action was in the details.

Meta finally blinks on the metaverse

The clearest single stock story was Meta Platforms (META | +3.43%). Shares jumped after reports that the company is preparing deep cuts to its metaverse budget, up to 30% less for Reality Labs in 2026, with layoffs in that division potentially starting as early as January.

Reality Labs has already burned through $70+ billion since 2021 with very little mainstream adoption for virtual worlds or VR hardware.

Investors have been treating the metaverse as a bottomless money pit for years, so a decisive pivot toward more discipline - and toward higher-ROI AI initiatives - is naturally being rewarded.

To make life a bit more interesting for Meta, the European Commission also opened a probe into whether its rules for AI developers using WhatsApp are anti-competitive. The regulatory noise isn’t going away, but right now, the market is clearly more focused on the prospect of a leaner capex budget and better margins.

Personally, I’d summarize Meta’s day as: “Less headset, more headset-free cash flow.”

The frugal U.S. consumer is picking sides

If you want to understand where the U.S. consumer is today, Thursday’s retail tape was a near-perfect snapshot.

Discount chains soared, traditional grocers and warehouse clubs stumbled.

Here’s a quick visual to keep the key moves straight:

*Approximate % change vs prior close.

Dollar General: when penny-pinching pays

Dollar General (DG | +14.01%) delivered the kind of quarter that makes you forget how gloomy the macro headlines can be. EPS came in at $1.28 versus expectations around $0.94, and even last year’s $0.89 looks modest in comparison. Revenue grew about 4.6% to roughly $10.7 billion, and management raised full-year EPS guidance to $6.30–$6.50, up from a prior range that topped out at $6.30.

Summarized: demand for cheap essentials is robust, store traffic is improving, and this business is built for a world where Joe Sixpack is counting every dollar bill twice. When households are trading down, Dollar General is often where they land.

Dollar Tree (DLTR | +2.61%) also edged higher. It’s seeing fewer customers but is offsetting that with higher prices, leaning into a slightly more “premium discount” positioning.

Kroger and Costco: good businesses, tougher backdrop

On the other side of the ledger, Kroger (KR | -4.62%) got punished despite decent cost discipline. Identical sales ex-fuel rose 2.6% in Q3, but that was shy of analyst expectations, and guidance now calls for full-year sales growth of 2.8–3.0%, down from an earlier 2.7–3.4% range.

Consumers are hunting aggressively for bargains even on staple items, and Kroger is losing some ground to Walmart (WMT | +0.38%) and Target (TGT | +0.74%), both of which have rolled out broad price cuts on everyday essentials.

That forces Kroger to defend share with promotions while still digesting higher costs and restructuring moves, a tricky balance, even if some analysts still see value here.

Costco (COST | -2.86%) was another casualty of high expectations. November comparable sales rose 6.9% year-on-year, which is objectively strong, but the street wanted 7.3%. That small gap was enough to knock the stock lower on the day.

My read: the consumer isn’t collapsing, but they’re very selective. They’re still willing to spend, just not at any price, and increasingly not at the traditional supermarket.

AI and software: one big miss, two big hits

The AI and software complex served up a neat contrast:

Snowflake (SNOW | -11.41%) dropped sharply despite highlighting rising demand for its AI tools and announcing a $200 million deal with Anthropic. Markets clearly wanted more - either on growth, margins, or forward guidance - and punished the stock accordingly. zacks.com

Salesforce (CRM | +3.66%) rallied after raising its outlook, showing that large-cap enterprise software can still surprise positively when execution is tight and AI features translate into real-world monetization rather than just buzzwords.

UiPath (PATH | +24.36%) was the day’s standout in software, surging after it beat expectations and guided strongly for the current quarter. The company is clearly benefiting from the push toward automation and efficiency – a theme that fits well with a mature, slower-growth macro backdrop.

In short: the market is happy to pay for AI, but only when the numbers back up the story.

Small caps, crypto and oil: risk appetite still alive

Beyond single names, three broader signals are worth noting:

• The Russell 2000 hitting a fresh record tells me investors are starting to look past the mega-caps and rotate into the more cyclical, domestically focused part of the market. That’s usually a sign of growing confidence in the economic outlook.

• Bitcoin at roughly $92,400 fits with the “rates lower for longer” narrative: a weaker dollar, lower real yields and investors reaching further out on the risk spectrum.

• WTI crude up more than 1% keeps energy very much in play, especially if a softer dollar and resilient demand support prices into year-end.

None of this screams “euphoria,” but it certainly doesn’t look like a market bracing for imminent recession either.

What I’m watching next

From here, three threads matter most for portfolio decisions:

Fed next week:

A quarter-point rate cut is largely priced in. The real question is the path the Fed signals for 2026 and how a potential Hassett Fed would change that trajectory. More dovish guidance would further support small caps, high-beta tech and rate-sensitive sectors.

Consumer trade-down and margin pressure:

The gap between winners like Dollar General and laggards like Kroger isn’t going away overnight. I’d expect continued pressure on full-service grocers and even on some warehouse clubs if promotional intensity stays high, while the dollar-store segment retains momentum as long as households feel squeezed.

Meta’s capital allocation pivot:

If Meta really follows through with a leaner metaverse budget and doubles down on profitable AI and ad products, the stock can justify a higher multiple over time. If the cuts end up being cosmetic, markets will notice.

In other words: thrifty shoppers, a softer dollar and a humbled metaverse are setting the tone. For investors, that’s an environment to favor:

• Discounters and value-oriented retailers with strong traffic trends;

• Quality software and AI names where growth, guidance and cash flow all line up;

• Select small caps that benefit from easier financial conditions, without being overly exposed to a single macro swing.

And as always in this kind of market, it pays to remember: volatility doesn’t disappear, it just changes sectors.

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Kristoff - ChartMill

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