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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Jul 25, 2021 at 7:00AM

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Earnings season hits a higher gear over the next few trading days.

The start of earnings season has put investors in a good mood. Stocks rose last week, as the Dow Jones Industrial Average (^DJI -0.56%) gained 1% and the S&P 500 (^GSPC -0.69%) hit a new high while jumping 2%.

Earnings season ramps up with many of the market's most widely held stocks reporting results over the next few trading days. Let's look at a few standout businesses from that list: Apple (AAPL -1.78%), Amazon.com (AMZN 0.61%), and McDonald's (MCD -0.16%).

A woman checks her smartphone while shopping.

Image source: Getty Images.

1. A 5G lift at Apple

Apple's Tuesday report should clear up a few big questions on Wall Street. The iPhone maker's stock hit an all-time high in July, pushing its market share to $2.5 trillion on hopes of soaring demand across its portfolio in 2021. iPhone sales could jump 20% this year with help from a massive transition to its latest 5G models.

Investors will be watching iPhone demand on Thursday, in addition to sales of other key products like Macs and iPads. Look for CEO Tim Cook and his team to highlight booming growth in the services segment, too. Meanwhile, Apple's cash return figures might stun Wall Street again given management's plan to quickly reduce its massive cash holdings through dividends and stock buybacks.

2. Services sales at Amazon

Amazon had a fantastic 2020, and investors are betting on another banner year ahead. The e-commerce titan's last announcement, in late April, showed soaring demand in its core business, but the real standout was its services unit. That segment, which includes its cloud platform and subscriptions like Amazon Prime, added nearly $20 billion year over year.

This Thursday's report should reveal more strength in both arenas. Most investors who follow the stock are looking for sales to jump 29% to $115 billion in Q2. The quarter will get a boost from the Prime Day event that was absent from last year's results. But Amazon is also benefiting from several massive, long-term trends like the enterprise shift toward the cloud and the consumer shift toward online shopping, that promise to keep pushing profits higher well beyond the current pandemic-related surge.

3. Customer traffic at McDonald's

Shareholders are hoping that the upcoming earnings report from McDonald's can help the fast-food titan start changing the weak investing narrative that's had the stock underperforming wider indexes in the last years. Heading into Wednesday morning's announcement, shares are barely higher in 2021 following a tough 2020 for the stock.

That's a surprise, considering McDonald's began setting sales records again in the fiscal first quarter. Sales were especially strong in the U.S. market that was reopening as COVID-19 case rates started to fall. There should be more evidence of that rebound this week, with most investors looking for revenue to rise to $5.5 billion compared to $3.8 billion last year, when pandemic closures severely pressured results.

The chain might make cautious comments about the second half of the year given the trend toward more social distancing in some markets. But McDonald's wider growth outlook is bright. Look for CEO Chriz Kempczinski and his team to outline a clear path toward setting new profit margin records in the next year or so. Shareholder returns should also be amplified by the chain's growing dividend, which has now increased for 40 consecutive years.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Demitri Kalogeropoulos owns shares of Amazon, Apple, and McDonalds. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Stock Quote
Apple
AAPL
$145.48 (-1.78%) $-2.63
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,156.40 (-0.56%) $-188.25
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,998.42 (-0.69%) $-27.70
McDonald's Stock Quote
McDonald's
MCD
$274.56 (-0.16%) $0.44
Amazon Stock Quote
Amazon
AMZN
$93.98 (0.61%) $0.57

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

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