Wall Street coasted into the weekend on a quiet note, as both the Nasdaq Composite and the S&P 500 (SNPINDEX:^SPX) pulled back slightly from near-record levels. The Dow Jones Industrial Average (DJINDICES:^DJI) fared the best with a minimal gain, but worries about what the future might bring on the economic and COVID-19 fronts are still weighing on investors' minds.

Today's stock market

Index

Percentage Change

Point Change

Dow

+0.12%

+34

S&P 500

(0.02%)

(1)

Nasdaq Composite

(0.21%)

(23)

Data source: Yahoo! Finance.

Yet not all of the economic news has been bad. Today, some glimmers of hope on the retail front appeared in the latest economic data, and that helped send shares of some hard-hit retail stocks climbing. The big question, though, is whether consumers can stay strong even in the face of economic strains from the pandemic.

How retail sales fared

Retail sales were up 1.2% in July, according to the latest data from the Census Bureau. Economists were looking for a number closer to 2%. But when you take out volatile areas like auto sales and gasoline, adjusted figures were up 1.5% from June's levels, which were actually above projections from experts. The gains in sales during the month helped lift year-over-year gains to 2.7% for all retail sales and 3.9% for figures excluding autos and gasoline.

The numbers were the first reasonably calm moves in several months. Sales figures plunged in March and April, but sharp rebounds in May and June largely made up for the lost ground. Especially strong during July were sales from electronics and appliance stores, surging nearly 23%. Clothing stores, food services establishments, and miscellaneous store retailers also fared well.

Multilevel shopping mall with escalators and stairs, along with a few dozen people.

Image source: Getty Images.

Good news for retail stocks

Shares of major department store retailers celebrated the news, even though the retail sales figures for their niche of the market showed only a 0.1% increase in July. Macy's (NYSE:M) led the way higher with a 3% rise, while Nordstrom (NYSE:JWN) and Kohl's (NYSE:KSS) followed with 2% gains.

Also helping the sector out was a better-than-expected quarter from Dillard's (NYSE:DDS), whose shares were up 8%. The news from Dillard's wasn't exactly good, with revenue plummeting 35%. But the retailer's loss was narrower than expected, and smart inventory moves helped clear out less desirable merchandise and produce higher margins.

Nevertheless, it's hard to say major retailers are out of the woods just yet. Smart moves to emphasize e-commerce channels have worked well for some players, but others have struggled to gain traction online. Moreover, moves from Amazon.com (NASDAQ:AMZN) to utilize abandoned mall space as delivery infrastructure could destroy whatever's left of the traditional shopping mall experience.

Will consumers have money?

Even more troubling for retailers is the loss of stimulus money for ordinary Americans. Wrangling between Capitol Hill and the White House continues without results, leaving many Americans with reduced or eliminated unemployment benefits and other sources of income. Retailers need shoppers to have disposable income, and if they don't, the solid retail sales numbers in July could rapidly return to what they looked like during the early days of the pandemic.