Brick-and-mortar retailers will be in the spotlight for a second week as several retail giants report earnings, while a slew of April economic reports will have a direct impact on GDP growth estimates.

Last week, several department store retailers including Kohl’s (KSS), Macy’s (M) and Nordstrom’s (JWN), pulled the retail sector lower with disappointing earnings results. The miss came despite strong consumer spending, which accelerated to 1.3 percent growth in April. This week, discount and home improvement retailers will tell us if this trend is isolated to department stores, or if others in the brick-and-mortar retail sector are under competitive threat.  

Home Depot (HD) will report on Tuesday. The world’s largest home improvement specialty retailer is expected to deliver solid earnings per share of $1.33 on revenues of $22.35 billion. Analysts also anticipate increases in same store sales. Target and Lowe’s will report earnings on Wednesday. Target (TGT) is expected to report EPS of $1.20 on earnings of $16.32 billion and Lowe’s (LOW) is projected to show EPS of $0.80 and revenues of $14.84 billion. Both Home Depot and Lowe’s are components in some housing and construction funds.

Wal-Mart (WMT) will release earnings on Thursday. The company is expected to report EPS of $0.88 on revenues of $113.14 billion. Wal-Mart missed sales estimates last quarter and reaffirmed the weaker guidance that sent shares to a 52-week low in November 2015. At $65 and change, WMT remains more than $20 below its 2015 high. Another important report this week will come from heavy equipment manufacturer John Deere (DE), which reports earnings on Friday. Analysts anticipate EPS of $1.47 and revenues of $6.72. DE is a component in industrial sector funds as well as Market Vectors Agribusiness (MOO).

On Monday, the Empire State manufacturing index came in at negative 9, below expectations. The drop indicates a slowdown in the greater New York region’s manufacturing sector. On Tuesday, the consumer price index (CPI) will be released, with economists forecasting a 0.3 percent increase in April. The core CPI is expected to increase 0.2 percent, with a year-over-year increase of 2.1 percent. With GDP growth estimates rising, a surprise to the upside would likely rattle the bond markets and revive speculation over the timing of the Federal Reserve’s next hike.

The Fed will release the minutes of its last FOMC meeting on Wednesday. Statements made by a few Fed officials in the month since that meeting tend to indicate a hawkish sentiment. One or two officials shifting their outlook wont’s affect policy though; the odds of a rate hike (according to the futures market) don’t cross 50 percent until December. Eurozone CPI will also be released on Wednesday and is expected to show deflation. Eurozone core CPI is expected to rise 0.7 percent versus last year.

Thursday’s weekly unemployment claims will be watched closely after last week’s unexpected increase. The state of the U.S. housing market will be revealed with April housing starts and building permits on Tuesday, mortgage purchase application index on Wednesday and existing home sales on Friday. April industrial production and capacity utilization are due on Tuesday as well.

Nearly every data point this week could affect second quarter GDP estimates if they come in on the high or low side from current expectations. Last week’s very strong retail sales data pushed the Atlanta Fed’s GDP Now model to 2.8 percent growth, up from 2.2 percent before the report and well above the 1.7 percent estimate of a couple of weeks ago. If data misses on the downside this week, it will nudge GDP estimates back into the expected range of growth. Further upside surprises could push GDP estimates above 3 percent, putting pressure on the Federal Reserve and reviving the U.S. dollar bulls. 

Market Perspective for May 16, 2016

Brick-and-mortar retailers will be in the spotlight for a second week as several retail giants report earnings, while a slew of April economic reports will have a direct impact on GDP growth estimates.

Last week, several department store retailers including Kohl’s (KSS), Macy’s (M) and Nordstrom’s (JWN), pulled the retail sector lower with disappointing earnings results. The miss came despite strong consumer spending, which accelerated to 1.3 percent growth in April. This week, discount and home improvement retailers will tell us if this trend is isolated to department stores, or if others in the brick-and-mortar retail sector are under competitive threat.  

Home Depot (HD) will report on Tuesday. The world’s largest home improvement specialty retailer is expected to deliver solid earnings per share of $1.33 on revenues of $22.35 billion. Analysts also anticipate increases in same store sales. Target and Lowe’s will report earnings on Wednesday. Target (TGT) is expected to report EPS of $1.20 on earnings of $16.32 billion and Lowe’s (LOW) is projected to show EPS of $0.80 and revenues of $14.84 billion. Both Home Depot and Lowe’s are components in some housing and construction funds.

Wal-Mart (WMT) will release earnings on Thursday. The company is expected to report EPS of $0.88 on revenues of $113.14 billion. Wal-Mart missed sales estimates last quarter and reaffirmed the weaker guidance that sent shares to a 52-week low in November 2015. At $65 and change, WMT remains more than $20 below its 2015 high. Another important report this week will come from heavy equipment manufacturer John Deere (DE), which reports earnings on Friday. Analysts anticipate EPS of $1.47 and revenues of $6.72. DE is a component in industrial sector funds as well as Market Vectors Agribusiness (MOO).

On Monday, the Empire State manufacturing index came in at negative 9, below expectations. The drop indicates a slowdown in the greater New York region’s manufacturing sector. On Tuesday, the consumer price index (CPI) will be released, with economists forecasting a 0.3 percent increase in April. The core CPI is expected to increase 0.2 percent, with a year-over-year increase of 2.1 percent. With GDP growth estimates rising, a surprise to the upside would likely rattle the bond markets and revive speculation over the timing of the Federal Reserve’s next hike.

The Fed will release the minutes of its last FOMC meeting on Wednesday. Statements made by a few Fed officials in the month since that meeting tend to indicate a hawkish sentiment. One or two officials shifting their outlook wont’s affect policy though; the odds of a rate hike (according to the futures market) don’t cross 50 percent until December. Eurozone CPI will also be released on Wednesday and is expected to show deflation. Eurozone core CPI is expected to rise 0.7 percent versus last year.

Thursday’s weekly unemployment claims will be watched closely after last week’s unexpected increase. The state of the U.S. housing market will be revealed with April housing starts and building permits on Tuesday, mortgage purchase application index on Wednesday and existing home sales on Friday. April industrial production and capacity utilization are due on Tuesday as well.

Nearly every data point this week could affect second quarter GDP estimates if they come in on the high or low side from current expectations. Last week’s very strong retail sales data pushed the Atlanta Fed’s GDP Now model to 2.8 percent growth, up from 2.2 percent before the report and well above the 1.7 percent estimate of a couple of weeks ago. If data misses on the downside this week, it will nudge GDP estimates back into the expected range of growth. Further upside surprises could push GDP estimates above 3 percent, putting pressure on the Federal Reserve and reviving the U.S. dollar bulls.