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3 Things to Watch in the Stock Market This Week

Stocks dropped last week, with both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) shedding over 1%. That decline still left both indexes in positive territory so far in 2020.

Several highly anticipated earnings reports will be announced over the next few trading days, including from retail giants Home Depot (NYSE: HD), TJX Companies (NYSE: TJX), and Macy's (NYSE: M). Below we'll take a look at the key trends that might send these three stocks moving this week.

Image source: Getty Images.

1. Home Depot's outlook

Investors are looking forward to Home Depot's report on Tuesday, but the bar isn't set especially high for the home improvement leader. The retailer lowered its growth outlook in each of the last two quarters, after all, and is now expecting comparable-store sales gains to land at 3.5% for the year, down from management's initial 5% target. Given the sluggish results that both Target and Walmart reported over the holiday shopping season, Home Depot may even come up a bit shy of that latest forecast.

Shareholders will be more interested in hearing the latest reading on the housing industry from CEO Craig Menear and his team as they issue a detailed outlook for the 2020 fiscal year. That forecast will likely depend on a solid spring selling season, which in recent years has been heavily influenced by the weather. And as for profit, investors are bracing for a modest earnings slowdown this year before slower capital spending paves the way for a sharp rebound in 2021 and beyond.

2. TJX Companies' profits

On Wednesday, TJX Companies will reveal just how well it navigated the competitive holiday selling period. The off-price retailing giant entered the period with positive momentum, as sales gains trounced expectations in the third quarter by rising 4%. Solid contributions came from its existing T.J. Maxx and Marshalls stores, along with the addition of over 100 new locations.

Executives said in late November that they liked their inventory position heading into the fourth quarter, and that flexibility gave them the confidence to boost their profit outlook for the year even as they affirmed their forecast of roughly 3% comps gains in 2019. That financial success makes it highly likely that TJX Companies will boost its dividend again in 2020, which would leave it just one annual increase away from qualifying for Dividend Aristocrat status.

3. Macy's turnaround update

Macy's stock dramatically underperformed the market in 2019 as the company dealt with collapsing foot traffic at malls and a more competitive selling environment. Those negative trends are likely to affect its fourth-quarter results, due out on Tuesday.

Thanks to a mid-quarter update in early February, investors already have some good ideas about what to expect to hear this week. Sales declined slightly in the fourth quarter, executives said, and earnings will likely land near the high end of management's forecast for the period. The retailer has an ambitious plan to pair sharp cost cuts with modest sales declines in 2020, and those goals have some investors interested in a potential value play for this beaten-down stock. Yet shares aren't likely to sustain a rebound until Macy's demonstrates a clear path back toward sales growth.

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Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends The TJX Companies and recommends the following options: long January 2021 $120 calls on Home Depot and short February 2020 $205 calls on Home Depot. The Motley Fool has a disclosure policy.


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