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Earnings Reports This Week - The Good, The Bad and The Ugly

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Earnings Reports This Week - The Good, The Bad and The Ugly

Aug 17 2015, 08.40am GMT

STOCK.com

Over half of the companies of the S&P 500 index (SPX) reporting earnings this week are from the retail sector which should give a reasonably accurate overview of consumer spending trends during the past three or four months.

The U.S. economy appears to be on more solid ground for the second half of the year after the July retail figures were released last week. At the same time, the figures for May and June were adjusted upwards, indicating a more entrenched growth in retail sales.

Earnings reports from some of the bigger retailers that were released last week indicating mixed success included  Macy’s and Kohl’s Group who missed forecasts while Nordstrom Inc. and J.C. Penney and Co. beat analyst expectations.

There are a number of retailers due to report earnings this week, the majors being Wal-Mart Stores Inc. (WMT, +0.37%) and Home Depot Inc. (HD, +0.61%) who report on Tuesday while Target Corp. (TGT, +0.46%) is due to report on Wednesday. About half of the S&P 500 (SPX) companies due to report this week are retailers.

The growth in retail sales in many respects provides a number of answers to the questions regarding the rate of recovery of the U.S. economy. The increase in the number of people employed as well as the increase, albeit small, in weekly wages puts more money in the pockets of consumers to spur growth in the GDP numbers to a greater degree.

The importance of retail or consumer spending to the GDP should not be underestimated as it is one of the four components that make up the final number. The other components to the GDP are business investments, government spending and net exports, with all four inputs of equal importance in the data calculation.

The big thing investors are going to be checking for this week are any signals and even obscure hints of  the intentions of the Federal Reserve with regard to the potential for and the timing of an increase in interest rates from the minutes of the July Federal Open Market Committee (FOMC) meeting due on Wednesday.

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