Stock Market Action Plan: Walmart, Target, Home Depot Lead Crucial Week For Retail

It’s not surprising that the stock market’s mixed week ended with the big benchmarks sending conflicting signals. And it’s also not surprising that an extended market has chosen the traditionally weak stretch of the summer to consolidate its gains. The question now, as Sam Stovall at CFRA says, is “How low do we go?” He sees the S&P 500 surrendering “a total of from 5% to 12% before resuming the bull-market advance.”

Retail earnings are likely to play a big part in how the coming week plays out. Dow Jones names Walmart (WMT) and Home Depot (HD) lead the list. July retail sales data from the Commerce Department could influence markets on Tuesday. Outside of retail, Cardinal Health (CAH), Cisco Systems (CSCO), On Holdings (ONON) and Palo Alto Networks (PANW) will be some of the names to watch.

Stocks To Watch: Resilient Stocks, Ailing Stock Market

The market rally is now clearly under pressure, with many leading stocks crumbling. That means investors should be cautious. And they should be building their watchlists with resilient stocks. Some good examples are oil services giant SLB (SLB), Arista Networks (ANET), KB Home (KBH), Carnival (CCL) and Mastercard (MA). All of them are trading around buy points from proper bases. SLB, Arista, KB Home and Carnival all have Relative Strength Ratings of 90 or higher. Mastercard is rebounding from support at its 10-week line, in a buy zone above a flat base entry. KB Home and Carnival both pulled back and are testing 10-week support.

Economic Calendar: Focus On Retail, China Data

The coming week’s economic news packs a flurry of key reports into a few days. July retail sales on Tuesday will be closely watched, after June’s report showed a smaller-than-expected increase as sales slowed for service stations and building materials stores. Home building markets get a solid dose of data, with builder sentiment from the National Association of Homebuilders on Tuesday and the Commerce Department’s July housing starts and permits on Wednesday. Given the recent uncertainty and volatility in China, investors will also be watching that country’s July industrial production, retail sales and employment data, due out on Monday.

CPI Inflation Rate Trends Tame, Signaling Patient Fed, But S&P 500 Erases Gains

Big-Box Retail: Views Split On Target, Walmart

The late-season surge of retail earnings reports faces wildly divergent expectations for Target (TGT) on Wednesday and Thursday’s report from Walmart. Dow Jones retail leader Walmart is seen posting a low-single-digit slip in earnings, and an equal gain in revenue. FactSet analysts see Target’s earnings soaring 271%, along with a modest revenue slip. But Credit Suisse hiked Walmart’s price target Friday, touting the company’s defensive characteristics as strengths in the current environment. Meanwhile, Barclay’s trimmed Target’s price target by nearly 13%, with an equal weight rating, warning there could be resistance to the retail chain’s earnings recovery.

Stock Market Perspective: Testing Late-Summer Support

The Nasdaq punched below 50-day support in a mixed week, while the S&P 500 deftly tested that line. The Dow held firm at its 21-day exponential average, just 1% off its high, vs. a 9% drop for the Nasdaq. The Nasdaq is down in three of four recent weeks, the Dow up in three of four, and the S&P 500 evenly balanced. Not bad, all in all, heading into the end-of-summer doldrums.

U.S. Economic Optimism Hits One-Year Low; Investors Sour As S&P 500 Slides

Blue Chip Tech: Cisco Set To Wrap Fiscal 2023

Dow Jones tech heavy Cisco Systems (CSCO) reports fiscal Q4 earnings late Wednesday. Analysts estimate EPS of $1.06, up 27%. Revenue is expected to rise 15% to $15.05 billion, but there are cautions. Cisco rival Juniper Networks (JNPR) recently gave a disappointing outlook. Cisco has trimmed its backlog, a positive, but order growth has decelerated. Also, Cisco already expects fiscal 2024 growth to moderate. Analysts model a 6% EPS gain for 2024, with a 2.6% advance in revenue. Shares ended the week at their highest finish since April 2022.

Home Improvement: The Nesting Curve Turns

Federal sales data showed a slowdown in home improvement store sales in June, putting Home Depot’s Tuesday earnings report on the hot seat. Analysts expect lower earnings, revenue and same-store sales. Both Citi and Argus have buy ratings on the stock. Citi’s price target is at 375. Argus lowered its target to 350, from 400, saying consumers are cutting back on home projects after more than two years of “aggressive repair and remodeling activity.” Home Depot, a Dow Jones stock, cleared a cup-with-handle buy point in July. Peer Lowe’s (LOW) reports on August 22.

Industry Tracker: A Few Unexpected Leaders

Four of IBD’s 197 industry groups have logged gains of more than 50% so far this year. Computer hardware leads by a long shot, up nearly 98% and powered mainly by Apple (AAPL). The travel booking group has an almost 56% gain, with Airbnb (ABNB) and Booking Holdings (BKNG) dominating. Duolingo (DUOL) has pushed the educational software group to a 54% gain. The building maintenance and services group just cleared the 50% mark. Its top names are IES Holdings (IESC), up 97% year to date, and Installed Building Products (IBP), with an 80% rally.

Stock Market Earnings Briefs

Tuesday

Cardinal Health (CAH) reports Q2 earnings early Tuesday. Analysts expect the medical wholesaler to earn an adjusted $1.49 per share on $52.72 billion in sales. Earnings would climb 42% as sales rise 12%. Cardinal stock is in a flat base, below an entry at 95.10.

H&R Block (HRB) reports Q4 and fiscal 2023 results late Tuesday. FactSet forecasts a 31.5% spike in adjusted earnings to $1.88 per share on a 3.5% revenue decline to $1.01 billion. HRB stock surged ahead of earnings, breaking out from a three-weeks-tight pattern.

SeaDrill (SDRL) reports Q2 earnings Tuesday. Analysts expect earnings to soar to $7.33 a share after a loss of $3.22 per share a year ago. Wall Street also forecast sales increasing 34% to $3.89 billion. The 10-month-old oil drilling stock is in a consolidation, trading around 5% above a 45.48 buy point.

On Holding (ONON) is trading tightly after clearing a cup-with-handle base with Q2 results due early Tuesday. Analysts project that the Swiss shoe brand will report a 6.7% decline in adjusted earnings to 14 cents per share while revenue sprints 54.7% higher to $475 million.

Wednesday

TJX (TJX) reports early Wednesday. Analysts see an 11% EPS rebound on a 5% revenue bounce, which would mark slightly accelerating growth from the prior quarter. TJX stock is trading near new highs, after clearing a cup-with-handle base in June.

Brinker International (EAT) announces fiscal fourth-quarter earnings and sales early Wednesday. Analysts project EPS growing 15% to $1.32 and revenue increasing 6% to $1.08 billion. Wall Street forecasts fiscal 2023 profit falling 11% to $2.76 vs. 2022. Meanwhile, EAT stock is consolidating and around 6% below a 40.98 entry point.

Thursday

Applied Materials (AMAT) reports fiscal Q3 results after the stock market close on Aug. 17. Analysts expect the maker of semiconductor manufacturing equipment to report EPS of $1.74, down 10% from a year earlier. Revenue will drop 5% to $6.15 billion, analysts project.

Lumentum Holdings (LITE) reports fiscal Q4 results early Aug. 17. Analysts expect EPS for the maker of fiber-optic components to fall 76% to 56 cents with revenue dropping 13% to $366 million. For fiscal 2024, analysts predict EPS of $3.19, down 29%.

Friday

Palo Alto Networks (PANW) will report fiscal Q4 results after the stock market close on Aug. 18. It’s unusual timing for the cybersecurity firm. Palo Alto said it will hold an extended earnings call to cover a handful of strategic topics beyond results, including its medium-term outlook. The company typically reports on a Monday or Tuesday the fourth week of the month. Analysts are modeling EPS of $1.28, up 60%. Revenue is expected to rise 26% to $1.96 billion.

Deere (DE) reports early Friday. The ag and construction equipment maker is seen delivering a 42% EPS jump on a 34% revenue gain, which would be a fourth straight quarter of gains above 25%. But upcoming growth is seen falling sharply.

XPeng (XPEV) reports early Friday. Analysts expect the China EV startup to narrow losses to 30 cents per ADR despite a 35% revenue drop, continuing two consecutive quarters of declining sales.