"The consumer has shown surprising resilience throughout this tepid recovery and we believe will continue to do so," Cavanaugh says. The housing turnaround "will further aid consumer and consumer confidence," she says.
Sales of new homes rose in November to the fastest pace in two and a half years, the government said Thursday. The National Association of Realtors' pending home sales index also rose last month to its highest level in two and a half years, the group said Friday.
Consumer spending, to be sure, is a critical indicator of economic activity. It accounts for about 70 percent of the economy, so a true slowdown could have a painful ripple effect. That's especially true in the final two months of the year, which contribute as much as 40 percent of annual sales for many retailers.
Some analysts are warning that the pain for retailers has only just begun. Brian Sozzi, chief equities analyst at NBG Productions, says revenue results and fourth-quarter earnings forecasts, due out early next month, pose another threat to retail stocks. Sozzi recommends betting against some weaker brands, including teen apparel chain Aeropostale.
Assuming stocks continue to sink because of weak guidance and "general market angst," Sozzi said in a note to clients Friday, "the moment to potentially entertain this sector from a long perspective will be sometime before earnings season begins in mid-February."
According to Kelly and other market bulls, consumers haven't meaningfully slowed their spending. They're merely holding off as they wait for lawmakers to craft a deal that would prevent some of the scheduled tax increases.
"There's a difference between confidence and spending attitudes," Kelly says. "People are generally feeling more confident because home prices are going up."
Kelly and others believe that a deal on the fiscal cliff is all but inevitable — eventually. He acknowledges that the waiting could be painful for consumers, retailers and most other businesses, but says, "If we don't get a fiscal cliff deal, then we'll wait and get a fiscal cliff deal."
Analysts who doubt that spending will bounce back quite so quickly argue that consumers are still paying down debt and have less interest in shopping sprees, in part because median incomes are falling.
Despite the stronger housing market and other positive signs, "they're going to take the opportunity to retrench, rather than buy stuff," says Derrick Irwin, portfolio manager for Wells Fargo Advantage Funds.
Peter Tchir, manager of the hedge fund TF Market Advisors, says consumers may be shopping less because economic turbulence has helped people reassess the value of what they consume.
"We've overconsumed for so long ... how much do you really need to add?" he says. "To some extent, it's healthy for Americans to live within their means. But clearly, this week, it's not great for retail stocks."
AP Business Writer Christina Rexrode and AP Retail Writer Anne D'Innocenzio in New York contributed to this report.
Daniel Wagner can be reached at www.twitter.com/wagnerreports