Markets to Focus on Retail Stock Earnings

This will be a big week for the retail sector, with fresh data and earnings due.

On Tuesday, the Commerce Department is likely to show retail sales were up 0.8% in April, following a 0.6% gain the month before. The data comes after the University of Michigan's Consumer Sentiment Index slumped to its lowest level in nearly 11 years in May, as worries about inflation persist.

Also on Tuesday, Walmart is expected to report a fall in first-quarter profit, hurt by higher shipping and other supply chain costs. On Wednesday, Target is similarly expected to report a fall in first-quarter earnings hurt by higher shipping, warehousing and labor costs. Comments on consumer demand and inflation will also be in focus.

Home improvement chains Home Depot and Lowe's will post their results on Tuesday and Wednesday, respectively. Analysts are projecting a decline in first-quarter revenue as higher mortgage rates and prices weigh on customers.

So far this year, Walmart ( WMT ) shares are up 2.4%, while Target ( TGT ) shares are down over 5%. Home Depot ( HD ) shares are nearly 28% lower, and Lowe's ( LOW ) shares are down 24% so far this year.

“We need to pay attention to not only how much consumers are spending at these stores, but what we are spending our money on. Are we buying high-ticket items, or hitting the bargain bin? If it’s the latter, retail sales and the profitability of these companies will suffer,” suggested Caleb Silver, Editor-in-Chief of Investopedia.