3 Things to Watch in the Stock Market This Week

Investors saw several large market swings for a second straight week last week. The general trend remained negative, though, as both the the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) shed more than 1 percentage point. The decline left both indexes higher by over 10% so far in 2016, but they’re down from the all-time highs reached in late July.

Several highly anticipated earnings reports will be announced over the next few trading days, including from retail giants Home Depot (NYSE:HD), TJX Companies (NYSE:TJX), and Foot Locker (NYSE:FL). Below, we’ll take a look at the key trends that might send these stocks moving this week.

Home Depot’s growth pace

Home Depot announced surprisingly weak sales growth in each of the last two fiscal quarters, but management hasn’t wavered from its bullish outlook for 2019. The slowdowns were related to temporary weather challenges, they said in May as they affirmed revenue targets.

On Tuesday, investors will find out whether CEO Craig Menear and his team have been too optimistic in calling for a rebound when wet weather finally passed in the late spring. The best indicator to watch will be comparable-store sales, which fell to 2.5% last quarter but need to average over 5% for the rest of the year to stay on track with management’s predictions. Rival Lowe’s (NYSE:LOW) will announce its results on the following day, too, and that report will show whether its modest market-share gains against the industry leader continued into the fiscal second quarter.

TJX Companies’ holiday forecast

Investors are eager to hear from TJX Companies on Tuesday, since the off-price retailer’s report will answer some key questions they have about its short-term outlook. Sales gains were generally strong to start the year, but weak results in the Canada market raised questions about its ability to keep expanding at the robust pace shareholders saw in 2018.

Investors will be watching cost trends closely this week, too, given that labor and freight expenses pinched profitability last quarter. Tariff rate increases might have added to that earnings pressure, as well, although management has predicted that trade skirmishes could help the retailer’s market position.

All eyes will be on TJX’s updated forecast for 2019 that incorporates management’s best reading of the industry heading into the key holiday shopping season. Executives raised their outlook a year ago but might stay more conservative this time around if second-quarter sales trends disappoint. A strong result on Tuesday, on the other hand, would convince CEO Ernie Herrman and his team to boost their forecast that currently predicts sales gains of between 2% and 3% this year, compared to 6% in 2018.

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