The holiday shortened trading week is off to a relatively slow start as investors are looking at a market calendar that’s, well, just not that exciting.
The economic calendar remains relatively light until Friday, when we’ll get the Personal Consumption Expenditures (CPE) report. I know that doesn’t sound exciting, but it’s Federal Reserve Chairman Jerome Powell’s favorite take on where inflation is heading, so the market is going to trade that figure with gusto.
With stocks trading at or near all-time highs, investors appear happy to continue hitting the “buy” button through what is likely to be a relatively quiet week. I’ll talk more about a few sectors to take notice of tomorrow morning, but until then, let’s look at a few of the key earnings reports for the week.
This could turn out to be one of the rougher weeks for earnings results.
As we roll into the last few weeks of the earnings season, the calendar starts to focus on the retail sector. Over the last few weeks, we’ve seen results from Target (TGT), Home Depot (HD), and Lowe’s (LOW) that suggest that the consumer is slowing their activity dramatically.
Here are the three earnings and an exchange-traded fund (ETF) to watch this week…
First, one for the ETF investors.
This week will focus on some of the smaller, specialty retailers like Kohl’s (KSS), Nordstrom’s (JWN), Dick’s Sporting Goods (DKS), and Foot Locker (FL).
The SPDR Retail ETF (XRT) has been sitting on technical thin ice as the retail sector softens. Watch for this week’s earnings to act as a tipping point for the sector, initiating the next 10-15% move in the retail group.
Watch for any sign of weakness in the retail reports to tip the XRT below its 20- and 50-day moving averages. That technical break will direct the XRT shares to a target price of $70.
I wrote about Costco (COST) last week. Click here if you missed it.
The leader in the warehouse club space will announce their results on Thursday after the market closes. Just like Dell (DELL), Costco shares have had a nice run ahead of their earnings report, putting it at risk of a “sell the news” drop after the results hit the tape.
Two things may help to overcome that.
First, the company is expected to announce an increase in their membership fees. Shares sold off after last quarter’s results when the company didn’t make that move. With a new CFO at the table, the company is likely to disappoint members with an increase in membership fees. That, of course, will make Costco shareholders happy, driving the stock higher.
Second, last week, rival BJ’s Wholesale (BJ) did a great job of setting the stage for Costco’s report.
Shares of BJ’s traded higher after the company told us what we already know… consumers are opting for warehouse deals as their first line against inflation. Costco is at the epicenter of this movement. Expect this quarter’s results to show their true strength.
It’s not all about retail this week as there are several AI-related companies reporting their results.
Nick’s favorite company – and a stock that has been outpacing the market with its year-to-date performance of more than 100% - Dell will announce their quarterly results on Wednesday after the market’s close.
The stock has been on a wild ride higher over the last two weeks, getting its latest boost from Nvidia (NVDA)’s results.
The 25%, 10-day rally has all the looks of a “buy the rumor” run ahead of Dell’s results. For that reason, and that alone, I’m taking a cautious approach ahead of earnings. Any pullback in shares of Dell should be viewed as an opportunity to “buy the dip” on this old-school technology company that has pivoted into the AI space seamlessly.
Salesforce.com (CRM) will announce their earnings results after Tuesday’s market close. The stock’s technical position makes this a “must win.”
Last quarter, Salesforce’s results failed to rally the stock, despite better-than-expected earnings results.
The company beat their revenue and earnings per share target, and even delivered an outlook that was better than Wall Street’s expectations. Shares rallied for two days before turning lower and then ultimately slipping into an intermediate-term bear market trend.
One reason for the tailing share performance comes from the company’s year-over-year growth. Revenue from last quarter did beat analysts’ targets, but only reflected year-over-year growth of 10.8%, the company’s lowest growth rate in five years.
This quarter’s expectations reflect a 12% revenue growth figure, which should put the stock back on a growth trajectory that will draw more buyers from the AI space.
From a technical perspective, a positive earnings result will launch the stock from its current price at $170. This price is significant because shares have been trading at this level since mid-April.
This type of technical activity suggests that the stock is building a foundational bottom at this price ($270) from which to launch its next four-to-six week-long rally to take out the $310 level and move to new highs.
Failure of the company to impress with its earnings results will trigger an aggressive move to $250 where it will find round-numbered support before breaking lower to $220, which is where the stock’s long-term technical support currently sits in the form of its 20-month moving average.
