09/17/2020

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The Week Ahead on Wall Street



Economic Data

Today, the Chicago Fed National Activity Index for July is released. This report gives investors a picture of economic activity in Indiana, Iowa, Illinois, Michigan, and Wisconsin. It tracks employment, personal consumption, manufacturing, and other indicators. In June, the figure was 4.11—up from 3.50 in May. Any value over zero indicates economic growth.

Tomorrow, the Case-Shiller National Home Price Index for June, new home sales for July, and the Consumer Confidence Index for August are published. The Consumer Confidence Index tracks how optimistic consumers feel about the state of the economy based on their spending and saving activities. The index fell between June and July because of a flare-up of coronavirus cases across the country.

On Wednesday, look out for July durable goods orders and July core capital goods orders. Core capital goods are a leading indicator of economic growth. This figure measures goods that businesses use on a daily basis, so it’s a helpful way to gauge how optimistic business owners are feeling about the future. Core capital goods orders rose 3.3% in June, beating economists’ expectations.

On Thursday, the Pending Home Sales Index for July and Q2 GDP revisions are released, along with weekly jobless claims. Last week, jobless claims were back above 1 million. This could be a result of layoffs after COVID-19 cases spiked in some communities. All eyes will also be on Fed Chair Jerome Powell and his opening comments of the Jackson Hole conference, where he will outline the central bank’s monetary policy heading into the end of the year. The Economic Symposium sponsored by the Federal Reserve Bank of Kansas City has been held in the famous ski town every year since 1981 and features finance ministers, academic minds, and high-profile financial players. This year, the event will be an all-virtual affair.

Lastly, on Friday, the final August Consumer Sentiment Index is released, along with July inflation, July consumer spending, and July personal income. Personal spending climbed in May and June, but analysts are wondering if this recovery will continue as COVID-19 cases spike in some parts of the country and jobless claims rise. Consumer spending accounts for over two-thirds of US economic activity.

Earnings to Keep an Eye On

Palo Alto Networks Inc (PANW) is scheduled to report its fiscal Q4 earnings today. So far shares of the next-generation security platform have risen 16% year-to-date. Last Thursday, Deutsche Bank (DB) awarded the company with a buy rating noting how “firewall demand is remaining resilient despite cloud adoption and COVID-19.” Bank of Montreal’s (BMO) Capital Market analyst also believes that increased internet traffic amid more people working from home will increase firewall spending, which could benefit Palo Alto Networks.

Salesforce.com Inc (CRM) is expected to release its latest earnings report tomorrow. The customer relationship software provider has lagged behind other big tech names, but its subscription-based business model, which operates through a robust cloud network, helped sales jump 30% during the first quarter. Additionally, its August 2019 acquisition of Tableau likely helped the company bolster its data analytics business.

Tiffany & Co (TIF) is scheduled to report its latest results on Wednesday. The jeweler and specialty retailer is expected to show an annual revenue decline, which will impact its earnings, but it did declare its regular dividend last week. One of the biggest storylines surrounding the company is LVMH’s (LVMUY) $16 billion acquisition of Tiffany & Co last year. Given the impact the pandemic has had on the global luxury business as a whole, French billionaire Bernard Arnault, LVMH’s Chief Executive and controlling shareholder, has since questioned the deal. That said, during LVMH’s earnings release at the end of July, the acquisition appeared to still be on track. Investors will be interested in hearing about this and more heading into the end of the year, which includes the all-important holiday shopping season.

Dollar General Corp (DG) is due to release its latest results on Thursday. Dollar General sometimes gets lumped into the same category as Walmart (WMT) and Target (TGT), both of which had blockbuster quarters driven by a surge in ecommerce sales. With that said, Dollar General is slightly different in the sense that it’s still more of a store-centric model. At the same time, the company has been successful in expanding its footprint into locations where ecommerce giants like Amazon (AMZN) aren’t. It’s also experimenting with digital offerings and in-store pickups. Wall Street will be interested to see whether or not Dollar General reports a blowout quarter like some of its quasi-peers.

Big Lots Inc (BIG) is up on Friday. The community retailer operates approximately 1,419 stores in over 47 states and sells everything from food to electronics. At the end of July, Big Lots announced a partnership with PICKUP to offer same-day delivery through Biglots.com. Similar to Walmart and Target, the company is attempting to adjust its operations to remain successful during the pandemic. Online ordering and an easy delivery process are areas that all retailers are focusing on, especially in light of COVID-19. Investors will be tuning in to see how Big Lots is tackling these aspects of the customer journey process.


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