The Dow Jones Industrial Average (^DJI 0.40%) avoided the worst of the bear market in 2022, and even though it has underperformed in 2023's rally, it has still climbed enough to bring it to within a few percentage points of an all-time high. Investors are watching the index closely to see if it can confirm a new bull market by setting a new record in the months ahead.
In order to get there, the Dow will need positive contributions from companies reporting their latest financial results. This week, Dow components Home Depot (HD 0.94%), Cisco Systems (CSCO -0.50%), and Walmart (WMT -0.08%) will release their latest readings on their financial conditions, and smart investors will be watching to draw conclusions about the broader consumer economy and the health of the tech sector heading into the end of the year.
Can Home Depot keep climbing?
Home Depot reports before the opening bell on Tuesday morning, and shareholders have seen the home improvement retailer's stock remain resilient in 2023. Despite concerns about the housing market, Home Depot shares have clawed their way back from significant losses to move slightly above where they started 2023.
Home Depot's financial results are likely to reflect a continued slowdown following extremely strong numbers in the early years of the COVID-19 pandemic. Most of those following the stock expect a modest sales decline of roughly 3.5% year over year, with earnings dropping by nearly 12% to $4.45 per share.
That would follow similar declines in Home Depot's fiscal first quarter for the period ended April 30. Rising mortgage rates and a return to consumer spending on travel, entertainment, and other out-of-home pursuits caused revenue to drop 4.5% year over year. Earnings took a roughly 7% hit from year-ago levels, and the company cut its guidance for the full year, citing macroeconomic factors.
Investors want to see Home Depot bounce back from its recent malaise and get back on its longer-term growth track. That seems inevitable at some point, but if signs of a recovery don't show up in this week's earnings report, then it could disappoint both Home Depot shareholders and those looking for a broader consumer recovery.
Cisco looks to build upward momentum
Investors expect to hear from Cisco late Wednesday afternoon, and the news from the networking company should be more favorable. Analysts want to see a sales gain of roughly 15% from year-ago levels, with earnings of $1.06 per share representing growth of about 28%.
After a slow start to the year for Cisco, the stock has moved upward to its best levels in more than a year during the summer months. That may have come in part from a delayed reaction to strong fiscal third-quarter financial results for the period ended April 29. Demand for its core switching products helped boost revenue by 14% year over year, and Cisco showed encouraging growth in its subscription software business, helping to boost adjusted earnings by 15% from year-earlier levels.
In order to keep rising, though, Cisco will have to show shareholders that it has resolved supply chain challenges and started seeing new product orders at a rising rate. In addition, investors will have a chance to see how sensitive Cisco is to broader macroeconomic pressures, even in a tech industry that's going through a growth spurt due to artificial intelligence-driven demand.
Mixed results from Walmart?
Walmart is the last of this Dow trio to report its results, with a release expected Thursday. Most of those following the stock expect a modest gain of 4% to 5% in revenue for the fiscal second quarter ended July 31, but with earnings falling nearly 5% year over year to $1.69 per share.
Shares of Walmart have risen to all-time highs, as its strategy to catch up on the e-commerce front has paid off handsomely. Indeed, e-commerce was a highlight in Walmart's fiscal first-quarter report, as online sales jumped 27% to lift overall revenue by nearly 8%. Earnings fell 16% year over year, though, with Walmart seeing a drop in demand for bigger-ticket items that carry higher margins.
Walmart is a good gauge of retail activity among bargain-hunting shoppers, and it often does well in challenging times. What Walmart says should give a good signal as to whether consumers are bracing for a recession or still expect to escape without a big economic pullback, and that could determine the future direction of the stock market in the near term.
