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Consumer sentiment rebounded in early May to the highest level in nearly six years as Americans felt better about their financial and economic prospects, particularly among upper-income households, a survey released on Friday showed.

But lower income shoppers weren't as sanguine as they struggled with higher payroll taxes and an unemployment rate that is stuck above 7 percent, dampening sales at some of the nation's largest retailers.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in April, topping economists' expectations for 78.

It was the highest level since July 2007.

The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since October 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.

More consumers gave a favorable view of their personal finances than in anytime since 2007, with the largest gains among households in the upper third of income levels. More respondents also thought the economy would continue to improve in the year ahead.

Shopping plans were similarly encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137.

The survey's one-year inflation expectation was unchanged at 3.1 percent, while the survey's five-to-10-year inflation outlook edged down to 2.8 percent from 2.9 percent.

Among retailers,Wal-Mart reported a 1.4 percent drop in sales at Walmart U.S. stores open at least a year, and gave a profit forecast for the second quarter that missed Wall Street estimates. The world's largest retailer expects same-store sales at its namesake U.S. discount chain to be up 2 percent at best in the current quarter.

Kohl's Corp, a department store chain that caters to lower-to-middle income families, posted a 1.9 percent decline in same-store sales. Last week, J.C. Penney Co Inc, dealing with some self-inflicted problems, said its same-store sales fell 16.6 percent. Dillard's Inc reported a 1 percent increase.

"We are seeing some weakness amongst our more budget-conscious, what we call deal-hunting, customers," Macy's Chief Financial Officer Karen Hoguet told analysts this week.

Macy's first-quarter same-store sales rose 3.8 percent, slightly below Wall Street's expectations.

Though splurging on more fashionable clothing may be on the rise, retailers are noting that shoppers' top priority is buying basics at a good price.

"There's going to be some choppiness" in any recovery of consumer demand given how easy it is to spook shoppers, said ITG analyst John Tomlinson.

Wal-Mart has many shoppers who live paycheck to paycheck. The company's CFO Charles Holley said his customers' top concern is still jobs, followed by food costs and gas prices.

Kohl's said sales of merchandise by fashion designer Derek Lam, who also sells pricier clothes at luxury chain Neiman Marcus, were disappointing in April as customers moved toward basics.

"We have to continue to improve the quality of our merchandise and offer items at a great value," Kohl's CEO Kevin Mansell told analysts.