Motley Fool
0
All posts from Motley Fool
Motley Fool in Motley Fool,

3 Things to Watch in the Stock Market This Week

Stocks took a step back from record highs last week as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) shed over 1% in the wake of a flood of earnings reports and rising geopolitical tensions. Indexes remain higher by more than 9% so far in 2017.

^SPX data by YCharts

Dozens of companies will post second-quarter reports that could send their shares moving over the next few days, including Dow giants Home Depot (NYSE: HD), Cisco Systems (NASDAQ: CSCO) and Wal-Mart (NYSE: WMT).

Here's what to look for in the reports.

Home Depot's customer traffic

Home improvement giant Home Depot will post its second-quarter results on Tuesday. Its shares are beating the market this year as the company has remained well defended against a slowdown in the broader retailing industry. Comparable-store sales jumped 5% last quarter to trounce numbers put up by rival Lowe's (NYSE: LOW).

Image source: Getty Images.

Home Depot has been benefiting from surging growth on the professional side of the business in addition to industry-leading e-commerce gains.

Investors will be looking for more evidence of market share growth this week. But within the comps improvement, keep an eye on customer traffic. The metric has declined recently, falling to below 2% last quarter from a 3% pace in 2016. Rising average spending per visit has helped offset that dip, but a further traffic slowdown would raise a caution flag.

Meanwhile, any update by management on its full-year outlook might move the stock price. Home Depot's most recent projection, issued in mid-May, called for comps growth of 4.6% as earnings rise 11% to $7.15 per share .

Cisco Systems' cost cuts

Cisco shares haven't performed well following the networking titan's most recent quarterly report. In May, the company announced generally positive results, with revenue holding steady while net income improved 7%. Those top and bottom line figures both met management's expectations despite a dip in gross margin that was driven by weakening pricing trends. 

However, investors weren't excited about Cisco's forecast for its fiscal fourth quarter that called for revenue to decline by as much as 6%. That slump might not be so bad for the business -- if it simply reflects customers moving toward subscription services. If it's powered by lost sales, though -- a slowdown in Cisco's federal government segment, for example -- that's another story. In either case, CEO Chuck Robbins and his executive team are likely to highlight Cisco's continued push into software and subscription services this week. Management should also discuss how their efficiency initiatives are enabling higher earnings and cash flow despite flat overall sales.

Wal-Mart's growth forecast

The world's biggest retailer is set to post its results on Thursday amid growing investor optimism. Wal-Mart has given shareholders a few solid reasons to be excited recently. Sales improved last quarter as an uptick in customer traffic at stores combined with spiking volumes in its e-commerce segment. "We're moving faster to combine our digital and physical assets," CEO Doug McMillon said in a press release, and "our plan is gaining traction ."

Image source: Wal-Mart.

Executives' latest outlook reflected their growing optimism. McMillon and his team in May predicted an acceleration in growth for the current quarter, with comps rising by between 1.5% and 2% compared to the prior quarter's 1.4% uptick. If the retailer hits those targets, Wal-Mart will mark solid progress at getting its expansion pace back on track, with comps rising for the second straight year following three consecutive years of near zero growth . Another positive report this week could mean fears of a costly e-commerce disruption of its business have been overblown.

10 stocks we like better than Wal-Mart Stores
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Wal-Mart Stores wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 1, 2017

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool recommends Cisco Systems, Home Depot, and Lowe's. The Motley Fool has a disclosure policy.