The narrator has to get a nine-to-five job (it's not easy being a writer), so he doesn't get to see much of Holly since their hours are now so different (she's usually still asleep or just waking up when he gets home). His neighbor's always headed out the door for a night out, most often with Rusty, Mag, and José.
The narrator doesn't think that José fits with the rest of the group (we learn that his full name is José Ybarra-Jaegar, by the way) since "he was intelligent, he was presentable, he appeared to have a serious link with his work, which was obscurely governmental, vaguely important, and took him to Washington several days a week" (8.2), but he seems to enjoy their company nonetheless. The narrator comes to the conclusion that, because he's not American, José doesn't really make distinctions between the Americans he meets, so his friends seem "to be tolerable examples of local color and national character" (8.2). He also realizes that "Holly's determination" (8.2) keeps José around, too (we'll hear more about this later).
One day, the narrator sees Holly going into the public library, which strikes him as odd since "Holly and libraries were not an easy association to make" (8.3). He follows her into the building (again, seeming kind of creepy but he's just more curious than anything), and this prompts some interesting meditations on his part about people's personalities.
As he watches Holly flip through mountains of books, he starts to think about a girl he once knew named Mildred Grossman. Mildred and Holly couldn't be more different since Mildred is a "top-heavy realist" (8.3) and Holly is a "lopsided romantic" (8.3). But, for some reason, the two "acquired a Siamese twinship" (8.3) in the narrator's mind since, unlike the "average personality that reshapes frequently" (8.3), Holly and Mildred will never change. He determines that Holly will always be exactly as she is now.
The narrator gets sort of lost in his thoughts until he sees Holly get up to leave. He heads to the table where she was sitting and finds a ton of books about Brazil (she's obviously trying to learn about José's world, but we don't really know why yet. Maybe Mag should be worried!).
The chapter shifts to Christmas Eve and Holly and Mag invite the narrator to their apartment for a party. The group decorates a huge Christmas tree with ornaments and tinsel and some balloons that Holly steals from Woolworth's (nothing like tradition around the holidays, right?), and Holly tells the narrator that she has a gift for him.
The gift turns out to be the antique bird cage the narrator showed Holly on their day out in the city, and he's horrified that she would spend so much money on him (it costs $350). But Holly brushes this off as just "a few extra trips to the powder room" (8.8). She makes the narrator promise that he'll "never put a living thing in it" (8.8), but she's glad she can give him the gift.
The narrator leans in to kiss Holly (we can't tell if this is a friendly peck or something more), but she stops him by demanding the gift he has for her. The narrator gives her a St. Christopher's medal from Tiffany's, which he assumes in later years that she loses since "Holly was not a girl who could keep anything" (8.10). On the flip side, we learn that he keeps the birdcage with him for years as he travels around the country and the world.
Things take sort of nasty turn here as the narrator describes the "big falling-out" he has with Holly (8.10) after she gets back from a winter vacation with Mag, Rusty, and José.
We first get to hear about the trip from Holly. The four travelers start in Key West where Rusty gets into a fight with some sailors and has to "wear a spine brace the rest of his life" (8.11). Mag also has a horrible trip since she gets first-degree burns from being out in the sun and subsequently has to stay in the hospital, covered in "blisters and citronella" (8.11). Ever the caring friends (we're being sarcastic here), Holly and José leave Mag and Rusty in Key West and head to Havana, Cuba, a city that Holly loves.
Once they get back to Florida, Mag is convinced that Holly and José have been having an affair until Holly convinces Mag that she's gay (we don't know if anything happens between Holly and José in Cuba, but it's possible, right?).
Holly tells the narrator all of this while they're in her apartment. It's March and the Christmas tree is still in the living room. Holly wants to "preserve her tropic look" (8.12) from the trip, so she asks the narrator to rub oil on her back while she lies under a sun lamp, which he does.
She tells him that she passed one of his stories to O.J. Berman, who "was quite impressed" (8.16). But Berman doesn't think the narrator should continue to write about "N****es and children" (8.16) since no one cares about these things. Holly apparently agrees with Berman and refers to the characters in the narrator's story as "brats and n*****s" (8.18). She doesn't think his stories "mean anything" (8.18).
This is when the falling out happens. As the narrator rubs oil on Holly's back and has to listen to her criticize his writing, he has the overwhelming urge to spank her like child – "My hand, smoothing oil on her skin, seemed to have a temper of its own: it yearned to raise itself and come down on her buttocks" (8.19). This sounds potentially sexual, and it might be, but the narrator is clearly angry at this point.
He asks Holly for an example of a story "that means something" (8.19), and she replies with Wuthering Heights. This makes him want to hit her even more since she's comparing his writing to "a work of genius" (8.21), but when it becomes clear that she's only seen the movie and never read the book the narrator feels better. He seems relieved (as he describes it), and Holly takes this as a sense of superiority on his part. "Her muscles hardened, the touch of her was like stone warmed by the sun. 'Everybody has to feel superior to somebody,' she said. 'But it's customary to present a little proof before you take the privilege'" (8.24).
The narrator tells Holly that he doesn't compare himself to her or to Berman, "therefore, [he] can't feel superior" (8.25). He says he doesn't want the same things they want (like money), and Holly realizes that this is a criticism of her. She warns him that it would be in his best interest to want money since he has "an expensive imagination" (8.28) and since "not many people are going to buy [him] bird cages" (8.28).
He offers a half-hearted apology, and Holly tells him that he really will be sorry if he hits her. She elaborates, "You wanted to a minute ago: I could feel it in your hand; and you want to now" (8.30). And the narrator does want to hit her at that moment. He tells her that he wouldn't be sorry if he hit her but that he is sorry she spent so much money on his Christmas gift since "Rusty Trawler is too hard a way of earning it" (8.31). Although we get no intimation that Holly sleeps with Rusty for money (especially because she's convinced he's gay), the narrator all but accuses her of acting like a prostitute, and this is the last straw for Holly. She gives him two seconds to get out of her apartment, and he leaves with both of them angry with each other.