The stock market is powering ahead, without waiting for slow-poke consumers to catch up.
Wall Street advanced to fresh all-time highs last week despite mounting evidence that the American economy isn't all it's cracked up to be.
Not only did growth grind to a halt during the first quarter, but now there are signs that the second quarter may not be much better.
This week could be a key test of the market's ability to rally in spite of -- rather than because of -- U.S. consumers. Pivotal earnings reports are on tap from some of the world's largest consumer companies, including Wal-Mart (, )Target ( and )Best Buy (. )
Lethargic consumer spending has slowed the economy. Even though the job market is humming along and energy costs are down a lot from a year ago, Americans just don't seem willing or able to open up their wallets and spend like they have in the past.
"The consumer is being a bit cautious and judicious before using the newfound gas windfall," said Mark Luschini, chief investment strategist at Janney Capital.
While that cautious approach is a positive for the longer term health of consumers, it's problematic in the near-term since consumption accounts for 70% of the U.S. economy. Without consumers, the American economy simply can't take off.
Alarming retail sales: The latest depressing consumer news emerged last week. Government stats show retail sales flatlined in April from the month before, missing expectations for a slight increase.
The year-over-year numbers were more alarming. Sales inched up just 0.9% from April 2014, the most anemic increase since October 2009 when the economy was emerging from the recession.
A number of major companies provided further evidence of the sluggish consumer environment. Kohl's ( shares plummeted 13% last Thursday -- their worst day ever -- after the retailer revealed a slowdown in sales driven by poor store traffic. )
Macy's (also surprised investors by posting a contraction in first-quarter profits. The department store blamed severe weather, the West Coast port strike and a new wrinkle: A )slowdown in sales from international tourists due to the stronger U.S. dollar.
Consumer stocks are hot: Despite all of this, consumer stocks have excelled this year. The consumer discretionary sector of the S&P 500 is up nearly 6% this year. That's second among the 10 sectors behind only health care and is double the broader index's gain.
While stocks didn't go nuts last week, the S&P 500 did manage to eke out another all-time high. The Nasdaq, which is home to many tech companies like Apple (Tech30) and , Amazon (Tech30) that do rely on consumer spending, is up a healthy 6.5% on the year. ,
But how long can stocks rally in the face of anemic consumer spending?
Huge week for retail world: That trend will be in focus this week as corporate "report cards" are due from a handful of retail companies.
Luchini said he's "eager" to hear from consumers like Wal-Mart because it appeals to a much wider swath of the American population, including less affluent shoppers who are most likely to benefit from the tumble in gasoline prices.
Wal-Mart is scheduled to hit the earnings stage on Tuesday, along with Home Depot (and T.J. Maxx parent )TJX Cos (. Other big-name consumer companies poised to release results this week include Target, Best Buy, )Lowe's (, )Staples (, )Gap ( and )L Brands (, which is the owner of Victoria's Secret. )
Let's hope these companies offer signs of healthier consumer spending ahead. Otherwise the bull market in stocks may have to tap the brakes and wait up for consumers.