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LivestreamMenuRetail earnings next week could shed light on how consumers are faring amid some signs that the economy may be weaker than expected. Next week brings reports from some of the country’s largest retailers, including consumer bellwether Walmart , as well as Target , Home Depot , Lowe’s and TJX . Companies that rely on consumers’ discretionary spending have come under pressure this year amid stubbornly high inflation and gasoline prices about $1 per gallon higher than before the Iran war. Of 11 major S & P 500 stock sectors, consumer discretionary is one of only two that’s down this year. Retail earnings, generally for the quarter that ended July 31, come after the Commerce Department on Friday said consumer spending unexpectedly dropped last month. Last week, the Labor Department reported a shocking loss of jobs in July. Together, they paint a picture of a potentially sluggish economy at a time when the Federal Reserve has turned its full attention to fighting inflation. Next week’s retail earnings could show that much has remained the same for the economy, which is being held aloft by the higher-income consumer wherein the lower-income household is struggling — a phenomenon often referred to as the K-shaped economy. “It’s not consensus that things are getting worse, but you are seeing pockets of weakness or some cracks out there that it’s right to question,” said Steve Shemesh, equity research analyst at RBC Capital Markets. Mixed picture The retail environment up to now has reflected that mixed picture. Walmart’s earnings especially will be tracked for any broader insight into the consumer. The budget-friendly retailer known for offering shoppers low prices has struggled this year, with the stock rising just 3% after warning that higher gas prices are hitting shoppers. In spite of a brief reprieve from higher gas prices in June, Walmart shares have tumbled 13% in the last three months. According to GasBuddy petroleum analyst Patrick De Haan, gas prices climbed above $4 per gallon this week, which he said has never before happened before at this time of the year. If Walmart or other retailers reporting next week signal a potential turn for the worse, that could hurt not only their own stocks, but potentially the broader market. But the professional class on Wall Street is downplaying that outcome. “Our kind of baseline is that it’s been consistent that the low income consumer is still very much under pressure. We do have high gas prices. They are still working with less SNAP allotments than they had last year. So, there are clear pressures,” Shemesh at RBC said. “But I don’t know that it’s gotten worse on a quarter-over-quarter basis.” For now, the stock market is still at all-time highs, with the S & P 500 having touched one record this week and three last week, despite a sleepy stretch of summer. Investors are awaiting the Federal Reserve’s Jackson Hole conference later this month, as well as Nvidia earnings, the week after next. In the meantime, the Russell 2000 index of small company stocks touched all-time highs three times this week in a broadening out of the bull market that continues to bode well for traders. “I cover the waterfront in terms of new all time highs, and that tends to imply favorable price performances for the next several months,” said Sam Stovall, chief investment strategist at CFRA. “Likely through the end of the year.” Week ahead calendar All times ET. Monday Aug. 17 8:30 a.m. Empire State Index (August) 10:00 a.m. NAHB Housing Market Index (August) Tuesday Aug. 18 8:15 a.m ADP Weekly Employment (08/01) 8:30 a.m. Export Price Index (July) 8:30 a.m. Housing Starts (July) 8:30 a.m. Import Price Index (July) 9:15 a.m. Capacity Utilization (July) 9:15 a.m. Industrial Production (July) 10:00 a.m. Pending Home Sales (July) Earnings: Keysight Technologies , Jack Henry & Associates , The Home Depot Wednesday Aug. 19 2:00 p.m. FOMC Minutes Earnings: Nordson , The TJX Cos. , Analog Devices , Target , Lowe’s Companies , The Estee Lauder Companies, Raymond James Financial , The Progressive Corp. Thursday Aug. 20 8:30 a.m. Initial Claims (08/15) 8:30 a.m. Philadelphia Fed Index (August) 10:00 a.m. Leading Indicators (July) Earnings: Ross Stores , Walmart , Deere & Co. Friday Aug. 21 9:45 a.m. S & P Global PMI Manufacturing preliminary (August) 9:45 a.m. S & P Global PMI Services preliminary (August)Read More
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