Stocks Rise Monday Ahead of Retail Earnings

Stocks rose Monday ahead of a busy week of retail earnings reports and some important, but secondary, economic reports.

Retail Earnings

After underwhelming and ill-received reports from economic bellwethers Walmart (WMT) and Home Depot (HD) last week, lots more retailers will be reporting.

The headliners will be Target (TGT), Costco (COST), and Lowe’s (LOW), with Kohl’s (KSS), Dollar Tree (DLTR), and Macy’s (M) reporting this week as well.

Target, Costco, and Lowe’s are all expected to mirror cracks shown last week, as margins continue to come under pressure with consumer spending continuing to shift from higher-margin discretionary wants to non-discretionary needs.

Further, retailers have been marking prices down to clear inventory and any sign that levels are returning to normal will be seen as a win.

Master Plan Pt. 3

Earnings won’t be the only headline stock news this week. Tesla (TSLA) is hosting its investor day Wednesday afternoon, where CEO Elon Musk is expected to unveil his “Master Plan Part 3”.

What is this plan, you may ask? Well, we don’t quite know yet, but there are a lot of theories of what to expect and it actually won’t be limited to Tesla - with SpaceX and The Boring Company expected to get updates as well.

As for the parts about Tesla, “scale” and “AI” are going to be the main talking points.

With scale in mind, Tesla’s gigapress - which currently makes the entire Model Y bodies with a single front and rear cast - could headline here. The rear casting alone reduced 70 parts into one while eliminating the need for 300 robots and reducing body shop space by 30%.

A very likely talking point is the $25,000 EV that has long been a goal of the company. While it will fairly likely be talked about, it will gain a lot of credence if it is accompanied by production innovations such as single-cast die casting.

While humanoid robots will have some sort of announcement, the AI from Master Plan Part Deux will be the bigger robot-related talking point. Tesla has come under a lot of heat for its “Full Self Driving” and “Autopilot” technologies, so updates on this will be interesting and important.

Economic Roundup

Lastly, the ISM Manufacturing and Services Indices are due on Wednesday and Friday, respectively, while the Consumer Confidence report is due Tuesday.

Confidence is expected to rise to 108.4 for February following 107.1 in January. Last time around, the report included a reading of 77.8 to its Expectations index and an acknowledgment by the Conference Board that readings below 80 tend to precede a recession in the next year.

Meanwhile, the manufacturing index is expected to show activity remaining below 50, the dividing line between contraction and expansion. The index is expected to come in at 47.8% for February, a slight improvement from a 47.4% reading in January.

Lastly, the services index is projected to decline to 54.5% from a reading of 55.2% in January.