By Wallace Witkowski, MarketWatch
Retailers in focus as Wal-Mart, Home Depot report results
As earnings season winds down, investors will be keeping a sharp
eye on whether financial stocks and other risk-on plays can
maintain their recent momentum, and on retail stocks, which begin
reporting in earnest in the coming week.
Stocks finished Friday higher with closing records
(http://www.marketwatch.com/story/dows-record-run-could-get-taken-out-ahead-of-long-holiday-weekend-2017-02-17)
from the Dow Jones Industrial Average , the S&P 500 index , and
the Nasdaq Composite Index . All three benchmarks finished the week
nearly 2% higher.
Nearly 50 companies on the S&P 500 report earnings during
the Presidents Day holiday-shortened week
(http://www.marketwatch.com/story/which-markets-will-be-closed-on-presidents-day-2017-02-16)
with an emphasis on traditional retailers, including Dow components
Wal-Mart Stores Inc.(WMT) and Home Depot Inc.(HD)
More than 80% of the S&P 500 has reported earnings this
season with gains tracking at 4.6% from a year ago, in what would
be the first two season of consecutive year-over-year earnings
growth since early 2015, according to John Butters, senior earnings
analyst at FactSet. Also, companies are issuing fewer than average
outlooks that fall below the Wall Street consensus: 68% of outlooks
fall below the consensus compared with the five-year average of
74%, according to FactSet data.
As stocks continue to carve out records and earnings return to a
growth cycle, the question is how much more of a continued appetite
will investors have for risk-based assets that have been
outperforming as of late.
"We need to see if financials can hold their gains and how risk
assets do coming out of earnings," said Sahak Manuelian, managing
director of equity trading at Wedbush Securities, in an interview.
"If you look at what has been leading, you see there is investor
appetite for risk."
S&P 500 Sector % change since election % change since inauguration
Financials 22.5% 6.1%
Industrials 13.0% 3.2%
Materials 11.4% 3.4%
Tech 10.5% 5.7%
Consumer discretionary 10.3% 3.1%
S&P 500 10.1% 3.7%
Health Care 7.8% 4.9%
Telecom 7.4% -3.1%
Real Estate 3.6% 1.8%
Consumer staples 3.2% 3.7%
Energy 3.0% -3.4%
Utilities 1.2% 1.6%
Financial stocks will also be the focus of Ryan Detrick, senior
market strategist for LPL Financial, in the coming week. Recently,
Goldman Sachs Group Inc.(GS) closed at a record high
(http://www.marketwatch.com/story/goldmans-stock-surges-toward-first-record-close-in-over-9-years-2017-02-14)
above its previous high set in 2007, but that's been a bit of an
outlier. While the financial sector has rallied since the election,
Detrick notes that the sector as a whole is still below its 2007
peak.
"They've had a big rally but they've underperformed since the
financial crisis, so finally you're seeing outperformance," Detrick
said in an interview. "Clearly, for the near-term, they're
overextended, but potentially there is still a good amount for them
to outperform."
"There's so much momentum, it's incredible: We want to see if
[stocks] hold these levels," said Wedbush's Manuelian. "There may
be short-term weakness on rhetoric [out of Washington, D.C.],"
However, Manuelian expects to see demand to bounceback following
any short-term pullbacks, particularly in leaders.
Manuelian also cited health-care stocks, which he said "got
beaten up in the face" last year, as a sign that investors are once
again in a risk-on mood given their volatility over the focus on
rolling back drug pricing.
Read: How President Trump's stock-market performance in his
first 30 days ranks
(http://www.marketwatch.com/story/how-president-trumps-stock-market-performance-in-his-first-30-days-ranks-2017-02-17)
Retail earnings reports to cast attention on battered
subsector
Heading into the week, retail stocks will also fall under heavy
scrutiny as several traditional retailers report earnings.
With the exception of Home Depot, retailers scheduled to report
have underperformed benchmarks and seen their shares punished since
the election, mostly from weak forecasts following a stale holiday
season.
Retailer % change since election % change since inauguration
Wal-Mart -1.3% 1.9%
Home Depot 14.4% 4.5%
Macy's Inc. US:M -15.8% 8.1%
TJX Cos. US:TJX 4.8% 2.3%
Nordstrom Inc. US:JWN -14.7% 2.9%
Kohl's Corp. US:KSS -5.3% 3.2%
L Brands Inc. US:LB -12.5% -5.7%
While the bar has been set low because of poor outlooks coming
out of the holiday shopping season, Manuelian expects investors to
focus on margins, and CEO chatter regarding Trump's border tax
rhetoric.
From a data standpoint, Markit issues its purchasing manager's
index for February on Tuesday, while January existing-home sales
and minutes from the Federal Reserve's latest policy meeting comes
out Wednesday. In addition to jobless claims on Thursday, the
Chicago Fed will release its national activity index for January,
and on Friday comes January new home sales and the February
consumer sentiment index.
Notable earnings reports scheduled
Report date Company/ticker (FactSet EPS / revenue estimate)
Mon., Feb. 20 Stock markets closed for Presidents Day holiday
Tues., Feb 21 Wal-Mart ($1.29 / $131.06 billion) Home Depot ($1.33 / $21.79 billion) Medtronic PLC US:MDT ($1.11 / $7.22 billion) Macy's ($1.95 / $8.59 billion) First Solar Inc. US:FSLR ($1 / $404.4 million)
Weds., Feb 22 TJX ($1 / $9.44 billion) HP Inc. US:HPQ (37 cents / $11.81 billion) Southern Co. US:SO (32 cents / $4.41 billion) Host Hotels & Resorts Inc. US:HST (14 cents / $1.31 billion) Newmont Mining Corp. US:NEM (34 cents / $1.75 billion)
Thurs., Feb 23 Hewlett Packard Enterprise Co. US:HPE (44 cents / $12.07 billion) Nordstrom ($1.15 / $4.35 billion) Kohl's ($1.33 / $6.21 billion) L Brands ($1.90 / $4.49 billion) Public Storage US:PSA ($1.89 / $657.7 million) Chesapeake Energy Corp. US:CHK (7 cents / $2.04 billion) Apache Corp. US:APA (7 cents / $1.5 billion) Transocean Ltd.US:RIG (6 cents / $812.1 million) Hormel Foods Corp. US:HRL (45 cents / $2.28 billion) Intuit Inc. US:INTU (27 cents / $1.03 billion) Iron Mountain Inc. US:IRM (28 cents / $935.8 million)
Fri., Feb. 24 Foot Locker Inc. US:FL ($1.32 / $2.11 billion) Public Service Enterprise Group Inc. US:PEG (52 cents / $2.71 billion) Cabot Oil & Gas Corp. US:COG (1 cent / $352.8 million)
(END) Dow Jones Newswires
February 18, 2017 08:02 ET (13:02 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.