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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - May 16, 2020 at 8:55AM

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It could be a big week for these three stocks.

Stocks declined last week as investors absorbed more data on the scale of the economic slump sparked by the COVID-19 pandemic. Both the Dow Jones Industrial Average (^DJI 0.23%) and the S&P 500 (^GSPC -0.16%) shed over 2%, and the indexes are down 17% and 11%, respectively, so far in 2020.

The coming week brings highly anticipated earnings announcements from the likes of Home Depot (HD 0.82%), Walmart (WMT 0.80%), and NVIDIA (NVDA -1.18%). Below we'll take a look at the metrics that might send their stocks moving over the next few days.

A man working on a home improvement project.

Image source: Getty Images.

Home Depot's industry comments

Home Depot kept its network of stores open through the pandemic, which should help it report continued sales growth on Tuesday morning. The home improvement giant announced accelerated gains in the prior quarter, and its robust e-commerce segment will likely help it outpace rival Lowe's, which reports the following day.

Yet Home Depot faced several challenges in its fiscal first quarter, including reduced store hours and the cancellation of its traditionally huge spring seasonal sale. Investors will find out this week whether consumer demand for home projects allowed it to offset those issues and keep comps expanding at around the same 4% rate the chain had been enjoying before the pandemic.

Looking ahead, CEO Craig Menear and his team will be using some of the worst unemployment and GDP numbers in modern history when they attempt to update their industry outlook for the rest of 2020. That situation might result in the scrapping of Home Depot's current forecast that calls for comps to accelerate slightly to 4%, as operating margin dips to 14.0% of sales from 14.4% in 2019.

Walmart's digital ordering

Walmart also makes its fiscal first-quarter announcement on Tuesday morning in what could be a big day for sales growth. The country's largest retailer became a critical resource for many Americans as they stocked up on home supplies, groceries, and other essentials through the pandemic. That surging demand will put a spotlight on the digital ordering service Walmart has been expanding for over a year, in both its home delivery and in-store pickup offerings.

The company reported a surprise growth slowdown during the holiday shopping season in late 2019, but management predicted faster gains in 2020. That outlook has surely been impacted by COVID-19 and the recession conditions in most of the country right now. Walmart tends to grow in a wide range of economic environments, though, and that's why investors might hear a bullish forecast from executives this week.

NVIDIA's outlook

NVIDIA shares have completely avoided the broader stock market decline, and that outperformance has set a high bar for its earnings report on Thursday afternoon. Investors like that the chip giant is exposed to several major industry-growth trends, including AI, autonomous driving, and gaming.

The company's last report was highlighted by a surprisingly strong return to sales growth, with revenue jumping 41% year over year. The gaming and data center segments were standout performers and should see continued gains through the start of fiscal 2021.

Most investors who follow the stock are looking for revenue to land at $3.0 billion this quarter, up 35% from the prior-year period. Wall Street will be just as interested in the outlook that CEO Jensen Huang and his team issue for the rest of the year.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot and NVIDIA. The Motley Fool recommends Lowe's and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$126.58 (0.80%) $1.01
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$309.69 (0.82%) $2.52
NVIDIA Corporation Stock Quote
NVIDIA Corporation
$189.89 (-1.18%) $-2.26
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,803.47 (0.23%) $76.65
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,145.19 (-0.16%) $-6.75
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$199.08 (0.97%) $1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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