Even as investors get more and more bullish about the outlook for the U.S. economy, the economy’s underlying foundation continues to erode.

Several key second-quarter earnings reports could either validate or undercut assertions that the U.S. economy is poised for recovery.

Now that the results of the U.S. bank stress tests are finally in the books, the extent of the capital shortfalls are known and – in many cases – are actually being addressed.

With thinning household budgets, deteriorating retirement and home prices taking a nosedive, Wal-Mart (WMT) is a leading recession retailer. But can it clean up the other casualties in its sector?

With stores tripping over themselves to offer steep holiday season discounts, their efforts were largely in vain, as many consumers simply weren’t financially able to take full advantage. Even the beast that is Wal-Mart (NYSE: WMT) struggled to make much headway. As we reported yesterday, Thomson-Reuters projected a 2.8% same-store sales rise for the firm in December. But the actual results proved otherwise.

If there’s a proverb that captures the outlook for the U.S. economy in the New Year, it’s the one that says: “It’s always darkest before the dawn.”

Cyber Monday was better for online retailers than most expected. But consumers were only interested in heavily-discounted goods. That’s why Andrew Snyder thinks eBay (NASDAQ:EBAY) is well placed to turn a profit this Christmas. It not only attracts bargain hunters, but also sellers desperate to raise cash. And better still, it has a balance sheet that most companies dream of these days.

Early indicators suggest that there is still some life left in the American consumer. The hordes were back out for the Thanksgiving weekend, though mega discounts means retailers will still struggle to break even. Martin Denholm says investors should stick with bargain-oriented retailers like Wal-Mart (NYSE:WMT) and TJX Companies (NYSE:TJX).

By all reasonable measures, we are already in a recession, says Shah Gilani. Deflation has become today’s number one threat. But massive government rescues mean another bout of inflation looms on the horizon. Shah says investors should look to short vulnerable stocks in 2009. But in 12-18 months, they should be prepared for a “generational opportunity” to make a fortune.