Last week was a great week to trade in the markets. The “Earnings Beat but Guidance Lower” trend continued, and it continued to produce some buyable dips on a few stocks. Additionally, the mixed inflation data last week caused some whipping movements with the S&P 500 ($SPX) (SPY) finishing just about even on the week.
In addition, it appears WeWork (once a darling IPO) is heading for bankruptcy, and it will be interesting to see how the markets digest that event if it happens. Several banks also received credit downgrades last week as consumer debt has reached an all-time high. Still, the market was fairly resilient given the headlines of the week. Heading into this week we have several news events to keep an eye on as well as some more earnings to listen to. Here are 5 things to watch this week.
Earnings
Still in the market cycle are company earnings. A few potential names of interest this week are Home Depot (HD) on Tuesday before the market opens, TJX Companies (TJX) on Wednesday before the open as well, Walmart (WMT) on Thursday, and Deere (DE) on Friday. These companies could be of particular interest because they are all pretty vital components of the economy. Given the themes so far, an earnings beat is possible but watching how they issue guidance will be critical. Home Depot, Walmart, and TJX could be the most telling since they have a direct connection with both consumers and construction. If their guidance is weak it's possible we are not completely out of the woods yet on the recovery we have been seeing in recent months in economic news.
Retail Sales
Continuing on with the guidance theme from the earnings section is Retail Sales which is out Tuesday at 8:30 am. Both Core and Retail are estimated to be an increase from last month's release which would show more spending in the retail sector. This is usually a strong sign of economic health and could be interpreted as a positive sign by the markets. If there is a miss though, the markets could continue the “sell the rip” paradigm from last week. As an additional point, this measures the dollar value of the sales, not the quantity sold.
Empire State Manufacturing
Due out at the same time as retail sales is the Empire State manufacturing index. The last two months have shown improving conditions in manufacturing activity so if this trend continues it is possible the market reacts accordingly to the good news. If however there is a big miss again like there was in May is possible we see continued selling pressure on the markets.
FOMC Meeting Minutes
This will have nothing new in terms of rate information in it, but it will provide a lot of insight into why the Fed chose to vote the way they did for the last rate hike. This is often scoured for clues about how the Fed is feeling about the current state of affairs and if more potential rate hikes are due. This event usually produces some volatility in the general market around the time of the actual event, but these are often great for options trading as they move the IV around on several contracts.
Unemployment Claims
Finally, we have unemployment claims due out Friday morning at 8:30 am Eastern. This release can produce some volatility but could be more helpful to watch for trends in employment. We have been trending higher over the past several weeks at a time of year when seasonal employment usually helps keep the number low. Watching how both the market and bonds react to this could be telling about what the market thinks if the current trend continues. Of course, if there is a miss, and claims return to coming in lower than expected the market could see this as a catalyst for a rally to close out the week.
Best of luck this week and don’t forget to check out my daily options article.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
