3 Things to Watch in the Stock Market This Week

Stocks logged solid gains last week, with positive earnings results helping lift both the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) by about 2%. The indexes are back in positive territory for the year, but remain below the all-time highs they reached in late January.

^SPX data by YCharts.

The week ahead includes earnings announcements from two major retailers, Home Depot (NYSE: HD) and Walmart (NYSE: WMT), and an updated look at video game publisher Take-Two Interactive’s (NASDAQ: TTWO) latest growth trends.

Let’s look at what investors can expect from these highly anticipated reports.

Home Depot’s customer traffic

Home Depot enjoyed a banner 2017 fiscal year as accelerating sales growth pushed annual revenue above $100 billion for the first time. A healthy housing market, plus rebuilding efforts in the wake of destructive hurricanes, helped. But the retailer also executed well by winning market share from rivals like Lowe’s while pushing its profitability to new highs.

A contractor installs a window.

Investors will be looking for more good news from Home Depot in its first-quarter report on Tuesday morning. Back in February, CEO Craig Menear and his team said that, despite rising mortgage rates, strength in the broader economy should protect the multiyear industry rebound. That optimism led executives to forecast just a small growth slowdown in 2018.

Tax cuts, meanwhile, are making this efficient business even more productive, and investors can expect that shift to support rising cash returns even as the company spends aggressively to lay the foundation for a targeted annual sales base of as much as $120 billion by 2020.

Take-Two Interactive’s outlook

Take-Two Interactive lacks the massive sales base and the deep portfolio of larger video game rivals like Electronic Arts and Activision Blizzard. However, the company is still benefiting from the positive trends, like a shift toward digital spending, that have made these giants more profitable in recent years.

For example, a 64% spike in its digital sales channel pushed Take-Two’s overall revenue higher in the most recent quarter on strength from its Grand Theft Auto franchise, along with growing contributions from sports titles like NBA 2K18.

The publisher recently delayed the launch of its highly anticipated Red Dead Redemption sequel to late October, and investors will be looking for updates on the financial implications of that move when the company reports earnings on Wednesday afternoon. But, assuming the delay resulted in a stronger final product, it’s likely Take-Two’s business will still see strong sales and profit growth in 2018.

Walmart’s e-commerce sales

The world’s biggest retailer will announce its earnings results on Thursday morning. Walmart disappointed investors at its last quarterly outing by revealing a slowdown in its e-commerce segment during the holiday season. That trend, plus the negative impact of increased expenses and the closure of several underperforming Sam’s Club locations, reduced investors’ expectations for a robust sales rebound.

The outside of a Walmart store.

Yet this business has massive built-in advantages. Walmart is still expecting e-commerce revenue to rise 40% this year with help from resource investment at a level that few companies on the planet could hope to support. Comparable-store sales, or sales at existing locations, are targeted to rise by about 2% in the core U.S. market to mark continued progress at protecting modest, but positive, customer traffic trends.

These sales increases will be bolstered by a dividend that recently inched up by 2% to $0.52 per share. That payout hike was Walmart’s 45th consecutive annual increase, which demonstrates the enduring power of its low-price approach to retailing.

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