The slumping housing market struck a sour note Tuesday, somewhat dampening optimism that the economy is getting a big sugar rush from the best Christmas selling season in three years.

Splurging consumers bent on celebrating the holidays in style so far have been largely undeterred by continuing doubts about the state of the housing and jobs markets, retailers report. Consumer spending is the biggest engine of growth, accounting for about 70 percent of economic activity.

But a report from Standard & Poor's Corp. on Tuesday showed the housing market continues to cast a shadow over the consumer parade. A renewed drop of 1.3 percent in home prices in 20 major U.S. cities in October showed clearly that housing fell into a double-dip recession last fall...