US stocks soared last week and we had the best day since June. This week, investors would watch several indicators including retail sales, economic data, and the G20 meeting.
The last week was particularly good for Big Tech stocks most of which have otherwise slumped this year. Apple created a record when its market cap increased by almost $191 billion on Thursday. Other FAANG peers like Amazon and Alphabet also surged last week. Small-cap stocks also rallied amid the broader market rally.
The better-than-expected inflation data for October triggered a rally in US stocks last week. However, the market rally might get tested this week as there is a flurry of economic indicators and earnings scheduled for the week.
While there are key earnings like that from Nvidia and Chinese companies like Alibaba and Li Auto, retail earnings would be in the limelight this week.
There are concerns over slowing consumer spending in the US and retail earnings would throw more light on the spending patterns of US consumers.
Key Retail Earnings This Week Include Walmart and Home Depot
US retail majors typically release their quarterly earnings in the same week. This week, Walmart, Target, Home Depot, Gap, Kohl’s, Ross Stores, and Macy’s would release their earnings.
Notably, some of the companies like Peloton and Amazon provided tepid commentary on holiday sales during their earnings calls. Amazon missed revenue estimates in the third quarter.
Brian Olsavsky, Amazon’s CFO said during the earnings call, “As the third quarter progressed, we saw moderating sales growth across many of our businesses, as well as increased foreign-currency headwinds … and we expect these impacts to persist throughout the fourth quarter.”
Amazon stock slumped after its Q3 2022 earnings release. Several analysts lowered their target price on the stock but overall, Wall Street is overwhelmingly bullish on the stock. We have a guide on how beginners can buy Amazon stock.
What to Watch in Retail Companies’ Earnings This Week?
Amazon said that it expects sales to rise between 2-8% YoY in the fourth quarter, which was lower than what analysts were expecting. Commenting on holiday shopping, Olsavsky said, “we’re realistic that there’s various factors weighing on people’s wallets, and we’re not quite sure how strong holiday spending will be versus last year. And we’re ready for a variety of outcomes.”
As multiple retail companies report their earnings this week, markets would watch out for commentary on consumer sentiments, especially the sales of discretionary products. Also, markets would closely watch the commentary on inventory.
Notably, amid rising inventories, Amazon held its second Prime Day of the year in October. However, it did not provide the sales numbers for the event. It did say that the consumer response was “great.”
Even Alibaba did not report the numbers for its mega Singles Day sales. Alibaba also reports earnings this week and the release would shed light on the health of retail sales in China.
Key Economic Indicators to be Released This Week
We’ll also get the retail sales data for October this week where analysts expect sales to have risen 1% after a flat September. Amazon’s Prime Day sales are among the reasons US retail sales are expected to have rebounded last month.
Along with retail sales, several other economic data, especially housing market indicators are scheduled this week. The housing sector is going through severe pain as high mortgage rates and a slowing economy have taken a toll on sales.
US treasury yields have meanwhile come off their highs after inflation data was released last week. Bond guru Jeffrey Gundlach believes that bonds are an attractive investment option.
Markets would also closely follow the G20 meet and the meeting between US President Joe Biden and Chinese President Xi Jinping. US-China rivalry is only adding to the geopolitical uncertainty and any easing of tensions between the world’s two largest economies would be a welcome step.
All said last week’s humongous stock market rally would face a reality test this week as investors weigh stock valuations amid the economic uncertainty.
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