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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Oct 10, 2021 at 7:00AM

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Bank of America is one of several big stocks set to announce Q3 earnings results this week.

Stocks jumped last week after several difficult weeks for markets. The Dow Jones Industrial Average (^DJI -0.61%) and the S&P 500 (^GSPC -1.11%) each gained over 2% and are sitting up 14% and 17%, respectively, so far in 2021.

Earnings season is ramping up in the days ahead, and we'll take a look at a few highly anticipated announcements, by Domino's (DPZ -1.01%), Delta Air Lines (DAL -0.38%), and Bank of America (BAC -0.73%).

Domino's profit margin

Investors have some big questions heading into Domino's third-quarter report on Thursday. The pizza delivery leader's last announcement contained mostly good news about the business. Sure, growth slowed from the pandemic spike a year earlier. But the fast-food giant maintained positive market share momentum even as it boosted profit margins.

That profitability will be a key metric to watch as Domino's deals with spiking inflation. Wall Street is also looking for signs that the chain is struggling to stay fully staffed in a tight labor market.

Finally, look for CEO Ritch Allison and his team to project a bright future ahead with major growth avenues, including new store launches and a push into the attractive drive-through market.

Delta Air Lines' holiday outlook

Delta Air Lines announces its results on Wednesday morning, and that report might reveal a lot about its operating rebound. The pace of that recovery has slowed in recent months because of resurgent COVID-19 cases. Delta's latest projection calls for revenue and capacity levels to fall by about 35% in Q3 compared with the same period in 2019. The airline stock is also dealing with rising costs, which could pressure profits through late 2021.

Airplane passengers seated while wearing masks.

Image source: Getty Images.

Yet investors might look past those challenges if Delta makes positive comments about holiday season travel trends, especially as case rates have begun to fall in many parts of the world. Rising demand could meet with reduced capacity to push profitability higher, but there's always a risk in misjudging that demand. Watch for Delta to explain how it expects to navigate those challenges in a potentially volatile Q4 ahead.

Bank of America's deposits

Bank of America steps up to the earnings plate on Thursday morning. The stock has pulled further ahead of the market in recent weeks, reflecting high expectations for this week's report amid conflicting signs about the strength of the global economy.

Bank of America's business is primed to benefit from the right mix of economic conditions that are developing, including rising interest rates and robust consumer spending and savings. That potential helps explain why Wall Street is getting more bullish about the stock lately, even though a resurgent COVID-19 virus pressured the business over the summer.

The pandemic pressure might contribute to weakening growth in areas such as business and consumer loans, deposits, and credit transactions. Yet Bank of America should still have positive things to say about the health of the economy heading into the final quarter of the year.

Look for those comments to drive the bank stock's movement in the wake of Thursday's report, and potentially steer the wider market as investors look for clarity about how quickly the economy will grow in Q4.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines and Domino's Pizza. The Motley Fool has a disclosure policy.

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