The Consumer Stopped Spending. The S&P Didn't Notice. Four Earnings Reports This Week Will Settle It.
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RETAIL EARNINGS WEEK
The S&P Hit a Record. The Consumer Stopped Spending. Four Reports Decide Who’s Right.
Retail sales posted the sharpest decline in 14 months. Sentiment crashed to 51. The index closed at 7,786. This week, Home Depot, Target, and Walmart tell you which number is lying.
Monday, August 17, 2026 • S&P 500: 7,785.76 • Brent Crude: $87.97 • 10-Year Yield: ~4.55% • Gas: $4.08/gal
Key Idea
Your index fund hit a record last week. Your grocery bill did too. Retail sales fell 0.6% in July—the worst monthly drop since May 2025. Consumer sentiment cratered to 51.0, ending two straight months of recovery. But the S&P 500 notched its 27th record close of the year on Thursday. The market and the consumer are pricing two different economies. This week, four retailers report in four days. They will tell you which economy is real.
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Mode Mobile recently received their ticker reservation with Nasdaq ($MODE), indicating an intent to IPO in the next 24 months. An intent to IPO is no guarantee that an actual IPO will occur.
The Deloitte rankings are based on submitted applications and public company database research, with winners selected based on their fiscal-year revenue growth percentage over a three-year period.
THE CONSUMER CRACKED FRIDAY
The Commerce Department reported July retail sales fell 0.6%. That’s adjusted for seasons but not for inflation. Wall Street expected a 0.1% gain. It got the largest decline in over a year instead.
The damage was broad. Online retailers dropped 2.2%. That’s the category that covers Amazon. Motor vehicles and parts fell 1.8%. Gasoline stations slid 0.9%.
Think about that for a second. Amazon moved Prime Day from July to June this year, pulling spending forward. Car buyers paused after a strong June. Gas prices dropped at the pump. Three temporary forces all pointed the same direction. And total sales still came in at $763.6 billion, down from $768.1 billion the month before.
Now strip out those volatile categories. The control group, which feeds directly into GDP, fell 0.4%. That’s the weakest reading since early 2025. Your brokerage app showed green arrows all week. The cash register showed something else.
Real retail sales, adjusted for inflation, dropped 0.7%. The consumer is not pulling back on want-to-haves. The consumer is pulling back on have-to-haves. That distinction matters for every retailer reporting this week.
The damage was broad. Online retailers dropped 2.2%. That’s the category that covers Amazon. Motor vehicles and parts fell 1.8%. Gasoline stations slid 0.9%.
Think about that for a second. Amazon moved Prime Day from July to June this year, pulling spending forward. Car buyers paused after a strong June. Gas prices dropped at the pump. Three temporary forces all pointed the same direction. And total sales still came in at $763.6 billion, down from $768.1 billion the month before.
Now strip out those volatile categories. The control group, which feeds directly into GDP, fell 0.4%. That’s the weakest reading since early 2025. Your brokerage app showed green arrows all week. The cash register showed something else.
Real retail sales, adjusted for inflation, dropped 0.7%. The consumer is not pulling back on want-to-haves. The consumer is pulling back on have-to-haves. That distinction matters for every retailer reporting this week.
SENTIMENT HIT A WALL
The University of Michigan’s preliminary August consumer sentiment index dropped to 51.0 from 55.2 in July. That’s a gauge that measures how Americans feel about their financial lives. Economists expected 54.5. They got a reading below every month of 2024.
The details are worse than the headline. Expected business conditions fell 11% for the short run. Long-run expectations cratered 17%. Only 8% of consumers expect their income growth to outpace inflation over the next year. Read that again. Eight percent.
Year-ahead inflation expectations climbed to 4.3%, up from 4.2% in July. That is above every single reading from 2024. Gas at $4.08 a gallon does that. So does Brent crude at $88 with the Strait of Hormuz still functionally closed.
Survey director Joanne Hsu noted that sentiment fell across every political group. Republicans posted the steepest drop. Their reading is now 19% below where it sat before the Iran conflict. The sharpest declines hit older consumers, lower-income households, and those without a college degree. Those are the shoppers who walk into Walmart and Target. Those are the earnings reports you need to watch this week.
The details are worse than the headline. Expected business conditions fell 11% for the short run. Long-run expectations cratered 17%. Only 8% of consumers expect their income growth to outpace inflation over the next year. Read that again. Eight percent.
Year-ahead inflation expectations climbed to 4.3%, up from 4.2% in July. That is above every single reading from 2024. Gas at $4.08 a gallon does that. So does Brent crude at $88 with the Strait of Hormuz still functionally closed.
Survey director Joanne Hsu noted that sentiment fell across every political group. Republicans posted the steepest drop. Their reading is now 19% below where it sat before the Iran conflict. The sharpest declines hit older consumers, lower-income households, and those without a college degree. Those are the shoppers who walk into Walmart and Target. Those are the earnings reports you need to watch this week.
FOUR REPORTS IN FOUR DAYS
This is the most important earnings week for the consumer since Walmart warned in May.
Tuesday: Home Depot (HD) reports Q2 before the bell. Wall Street expects $4.71 earnings per share on $47.5 billion in revenue. The stock has underperformed the S&P by nearly 30 points over the past year. CEO Ted Decker is on temporary medical leave as of August 12. Interim leadership faces the market alone. Q1 comps came in at 0.6%. That is a number that needs to hold or the full-year guide breaks.
Wednesday: Target (TGT) reports before the open. Last quarter it missed on earnings. Analysts expect $2.32 per share. Target’s shoppers skew lower-income. They are the demographic that Michigan just flagged as most pessimistic. If Target guides down, it is not a Target problem. It is a consumer problem.
Thursday: Walmart (WMT) reports at 6 AM Central. Consensus is $0.73 earnings per share on roughly $178 billion in revenue. Walmart is the bellwether. It serves 280 million customers per week across 10,900 stores. When Walmart talks about trade-down behavior, Wall Street listens. When Walmart talks about higher-income shoppers switching from specialty grocers, that tells you the consumer is stretching.
Here is where it gets interesting. Applied Materials reported record revenue of $9.12 billion on Thursday, beat on every line, raised guidance to $10.25 billion for Q4, and the stock still fell 7.5% across two sessions. The AI supply chain is selling the news. If the consumer retailers beat and sell off too, this market is telling you something. It is rotating away from momentum and toward cash.
Tuesday: Home Depot (HD) reports Q2 before the bell. Wall Street expects $4.71 earnings per share on $47.5 billion in revenue. The stock has underperformed the S&P by nearly 30 points over the past year. CEO Ted Decker is on temporary medical leave as of August 12. Interim leadership faces the market alone. Q1 comps came in at 0.6%. That is a number that needs to hold or the full-year guide breaks.
Wednesday: Target (TGT) reports before the open. Last quarter it missed on earnings. Analysts expect $2.32 per share. Target’s shoppers skew lower-income. They are the demographic that Michigan just flagged as most pessimistic. If Target guides down, it is not a Target problem. It is a consumer problem.
Thursday: Walmart (WMT) reports at 6 AM Central. Consensus is $0.73 earnings per share on roughly $178 billion in revenue. Walmart is the bellwether. It serves 280 million customers per week across 10,900 stores. When Walmart talks about trade-down behavior, Wall Street listens. When Walmart talks about higher-income shoppers switching from specialty grocers, that tells you the consumer is stretching.
Here is where it gets interesting. Applied Materials reported record revenue of $9.12 billion on Thursday, beat on every line, raised guidance to $10.25 billion for Q4, and the stock still fell 7.5% across two sessions. The AI supply chain is selling the news. If the consumer retailers beat and sell off too, this market is telling you something. It is rotating away from momentum and toward cash.
THE TWO-ECONOMY PARADOX
The S&P 500 posted its 27th record close of 2026 on Thursday. Three consecutive weekly gains. The longest winning streak since May. The index is up 18.9% over the past year. That is the market economy.
The consumer economy looks different. Sentiment at 51 sits in the 2nd percentile of the survey’s entire history. Gas is $4.08 a gallon, up 30% from a year ago and at a record seasonal high for August. Retail sales volumes, adjusted for prices, fell 0.7%. Clothing was up 1.9%, but KPMG attributes part of that to GLP-1 drugs prompting shoppers to buy smaller sizes. That is not a spending boom. That is a wardrobe replacement forced by a medical trend.
The market sees cooling CPI, stable Fed policy, and Nvidia reporting August 26 with $92 billion in expected revenue. The consumer sees $4 gas, $88 oil, a Strait that won’t reopen, and a mortgage rate that has climbed back above where it sat in June. These are not the same economy. One of them is wrong. The earnings this week will reveal which one.
The consumer economy looks different. Sentiment at 51 sits in the 2nd percentile of the survey’s entire history. Gas is $4.08 a gallon, up 30% from a year ago and at a record seasonal high for August. Retail sales volumes, adjusted for prices, fell 0.7%. Clothing was up 1.9%, but KPMG attributes part of that to GLP-1 drugs prompting shoppers to buy smaller sizes. That is not a spending boom. That is a wardrobe replacement forced by a medical trend.
The market sees cooling CPI, stable Fed policy, and Nvidia reporting August 26 with $92 billion in expected revenue. The consumer sees $4 gas, $88 oil, a Strait that won’t reopen, and a mortgage rate that has climbed back above where it sat in June. These are not the same economy. One of them is wrong. The earnings this week will reveal which one.
THREE SCENARIOS FOR THIS WEEK
Base
Walmart beats modestly. Revenue comes in near $179 billion. Management describes trade-down behavior from higher-income shoppers but holds full-year guidance. Home Depot comps print flat to slightly positive, enough to keep the fiscal-year guide alive. Target meets the low bar at $2.32 EPS. The S&P holds between 7,750 and 7,820. XRT, the retail ETF, recovers last week’s 2% decline. WMT holds above $80, HD stabilizes near $340. The consumer is tired but not broken.
Upside
Walmart raises full-year guidance. E-commerce growth accelerates past 26%. Home Depot reports positive comps above 1% and CEO Decker returns to the earnings call. Target surprises above $2.40 EPS. The Michigan sentiment print was noise. The consumer traded down but did not stop spending. XLY rallies 2–3%. The S&P pushes above 7,850. Dollar weakens further on reduced rate-hike odds. Nvidia earnings on August 26 become the next catalyst rather than a risk event. If you own WMT and HD, you hold.
Risk
Walmart cuts full-year guidance citing gas prices and consumer fatigue. Target misses again and guides below consensus for the back half. Home Depot comps go negative and interim leadership offers cautious commentary. Three consecutive misses would confirm what Michigan and retail sales are signaling: the consumer is retreating. XRT drops 3–5% for the week. The S&P pulls back 2–3% from the record as defensive rotation accelerates. Rate-hike odds at the September meeting climb above 35%. Oil above $88 with the Hormuz situation unresolved adds fuel-cost pressure that the consumer cannot absorb. If you are overweight consumer discretionary (XLY), this is where you hedge with consumer staples (XLP).
Our View
We have been tracking this split for months. In May we told you Walmart’s warning was the first crack. In June we showed you what 4.2% CPI costs your family at the gas pump, the grocery aisle, and the mortgage desk. The Michigan number just confirmed it. The consumer who drives 66% of GDP is not participating in this rally.
The S&P is trading on two engines: AI earnings growth and the belief that the Fed will pause. Both are real. Nvidia’s $92 billion quarter estimate is not a fantasy. CPI cooling to 3.4% is not a mirage. But neither engine runs on sentiment at 51 and retail sales falling 0.7% in real terms.
Here is what this week will teach you. If Walmart says the higher-income shopper is trading down into its stores, that is bullish for WMT and bearish for everything above it. If Home Depot says the professional contractor is holding but the do-it-yourself customer has vanished, that confirms a two-speed consumer. And if Target misses again, that tells you the lower-income shopper is no longer trading down. That shopper is sitting out.
Watch Tuesday morning. Home Depot reports into a market that just sold off Applied Materials after a record quarter. If HD beats and sells off too, the market is telling you it wants to rotate. If HD beats and holds, the consumer trade is alive. Either way, you will know before the opening bell. That is why you read this.
The S&P is trading on two engines: AI earnings growth and the belief that the Fed will pause. Both are real. Nvidia’s $92 billion quarter estimate is not a fantasy. CPI cooling to 3.4% is not a mirage. But neither engine runs on sentiment at 51 and retail sales falling 0.7% in real terms.
Here is what this week will teach you. If Walmart says the higher-income shopper is trading down into its stores, that is bullish for WMT and bearish for everything above it. If Home Depot says the professional contractor is holding but the do-it-yourself customer has vanished, that confirms a two-speed consumer. And if Target misses again, that tells you the lower-income shopper is no longer trading down. That shopper is sitting out.
Watch Tuesday morning. Home Depot reports into a market that just sold off Applied Materials after a record quarter. If HD beats and sells off too, the market is telling you it wants to rotate. If HD beats and holds, the consumer trade is alive. Either way, you will know before the opening bell. That is why you read this.