Retail Earnings Dominate Next Week
During any earnings season, there are two weeks I watch closely not just for my own investments but for the overall impact on the market. The first is big tech earnings. As a young investor, I hold many big tech names as a core foundation in my portfolio. The second week I always have an eye on is retail earnings week. These earnings often provide insight into how the consumer economy is positioned. It is a valuable look at macroeconomic trends and the strength of the consumer’s buying power. As with big tech earnings, retail earnings can dictate the path of the markets for the next few months. Next week, I’m watching one key retailer and a major semiconductor company for an indication of where our economy currently is.
Home Depot (NYSE: HD)
Why Home Depot over companies like Walmart (NYSE: WMT) or Target (NYSE: TGT)? In my opinion, Home Depot’s performance is a more telling sign that the economy is in a position of strength or weakness. Everyone needs staples and even in times of a recession, Walmart and Target are typically what we refer to as recession-proof. People will prefer to shop at cheaper retailers out of necessity.
But when people shop at Home Depot, they are usually making home improvements. Income that can be spent on things like home improvements is usually excess income that simply is not always there as interest rates rise and the middle class feels the crunch on mortgages and loans. If Home Depot can continue to show strength it likely means that the economy is stronger than we think. I understand that earnings are a trailing indicator, but I think it can provide at least a nice snapshot of how things are. If Home Depot blows out its earnings then I think there is some room for optimism. But if it misses or narrowly beats expectations, then we truly are feeling the pinch of the looming recession.
NVIDIA (NASDAQ: NVDA)
NVIDIA has been one of the hottest stocks over the past couple of months. It was one of the hardest-hit names during 2022 and rebounded nicely in 2023. When it comes to NVIDIA, we always want to look at the recent earnings from competitors. Sometimes there can be a detriment to reporting your earnings after the likes of Intel (NASDAQ: INTC) and AMD (NASDAQ: AMD). While Intel was disappointed greatly, AMD topped estimates and saw its stock surge.
With NVIDIA I think the narrative of ChatGPT and AI-driven software is going to help provide the stock with short-term momentum. Even if the company disappoints it is already ingrained in us that NVIDIA is the AI leader when it comes to GPUs. If NVIDIA beats, then I think we can see a sympathy run from AI-related stocks as well as other chip makers like AMD. Taiwan Semiconductor (NYSE: TSM) is another name I would watch for as a stock that bounces higher if NVIDIA does well.
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