BREAKING: Market Rally Underway, But Wait For This Signal

Friday's stock market rally was pretty, but not nearly enough to save the three big market benchmarks from another weekly decline. A rally attempt begun on Thursday erupted into a broad rally Friday, setting the stage for a potential follow-through day as early as next week. That places added emphasis on earnings next week from a raft of big retail names, including Home Depot (HD) and Walmart (WMT). Cisco Systems (CSCO) and Applied Materials (AMAT) head the tech stock earnings list. And some highflying shipping stocks, including ZIM Integrated (ZIM), also report.

Despite Friday's rally, the week's decline left the Nasdaq composite and S&P 500 with six straight weekly losses. That was the first six-week drop for the Nasdaq since 2012, and for the S&P 500 since 2011. The Dow notched a seven-week sled ride, its first since 2001.

The stock market remains in its most harsh correction since the onset of the coronavirus pandemic in 2020. That steep bear market showed just how quickly market turns can occur. To be prepared, investors should be filling and maintaining watchlists with well-positioned, high-quality stocks. Eli Lilly (LLY) has a new flat base, but could offer an early entry from a strong 50-day bounce. Dollar Tree (DLTR) also could have a 50-day line/trendline early entry. WWE (WWE) is consolidating in a shallow base, but below a key level for now. Cigna (CI) is just below a cup-with-handle buy point. Lithium giant Albemarle (ALB) is more speculative, but isn't far from an early entry.

Two key economic reports out Tuesday, April retail sales data at 8:30 a.m. ET, and industrial production at 9:15, should show a softer tone to both consumption and output on the goods side of the economy. To some extent, slower demand for durables and nondurables has reflected a shift to services spending, so the softer the data, the better, as far as both the Fed and the stock market are concerned. Regional manufacturing surveys will offer a more timely picture of manufacturing activity, with the Empire State Manufacturing report out Monday at 8:30 a.m. and the Philadelphia Fed survey due on Thursday at 8:30 a.m. Housing starts and building permits, out Thursday at 8:30 a.m., will show whether single- and multifamily home building continues to defy higher mortgage rates amid tight supply. 

Keep an eye on share buybacks announced in the coming week. The 86% of the S&P 500 companies that have so far reported announced $250 billion during the March quarter, according to Howard Silverblatt at S&P Dow Jones Indices. The tally set a new 12-month record of $953 billion, 8% above the prior record set in Q4. Low share prices mean the buybacks also rake in a higher number of shares, levering a greater impact on earnings.

Early Tuesday, Home Depot (HD) is likely to deliver a 5% EPS decline for the April quarter on a 2% revenue drop. Early Wednesday, Lowe's (LOW) should manage a 0.4% EPS gain despite a 3% revenue decrease. Same-store sales are seen falling 3% for both home improvement store chains after 5%-8% gains in the prior quarter. The pandemic boom in home renovations and spending is easing, while rising interest rates are weighing on the housing sector broadly. Meanwhile, labor issues including driver shortages continue to dog the big-box retailers.

Investors get a closer look inside one of the stock market's most resilient segments, ocean freight and shipping. ZIM Integrated Shipping reports first-quarter earnings for its ocean container freight fleet on Wednesday. Analysts see the company earning $12.57 per share, a 135% jump. Sales estimates from FactSet were unavailable. Danos (DAC), which leases container ships under long-term contracts to companies like ZIM and Maersk, reports on Monday. Golden Ocean (GOGL) operates a dry bulk fleet, hauling ores, grains and fertilizers worldwide. Golden Ocean shares are up 63% for the year and at new highs. ZIM and Danaos are both basing, up 34% and 8%, respectively.

Walmart and Target (TGT) report first-quarter earnings on Tuesday and Wednesday, respectively. The big-box retailers issue results as Wall Street tries to diagnose the impact of rising prices for basics on consumer demand. Wall Street expects Walmart to earn $1.48 per share, down 12%, with revenue largely unchanged at $138.8 billion. Target's earnings per share were expected to fall 17% to $3.06, with revenue up 0.9% to $24.4 billion. BJ's Wholesale reports Thursday. 

Discounters TJX Cos. (TJX) and Ross Stores (ROST) report on Wednesday and Thursday, respectively. Wall Street expects TJX, which runs T.J. Maxx and Marshalls, to earn 60 cents per share, a 36% gain, with sales up 15% to $11.6 billion. Analysts see Ross earning $1.02 per share, down 24%, as sales remain largely unchanged at $4.53 billion. The companies report as rising prices could lead more customers toward the bargain hunt, but as analysts worry about inflation's harsher impact on lower-income consumers. Meanwhile, department store Kohl's (KSS) reports first-quarter earnings Thursday, following a post-earnings rally by rival Dillard's. Foot Locker (FL) reports Friday, after signaling it would rely less on Nike (NKE) to drive sales.   

Active-apparel retailers VF Corp. (VPF) and Deckers Outdoor (DECK) report fourth-quarter earnings on May 19. FactSet analysts expect VF, maker of Vans and The North Face brands, to post earnings of 46 cents a share, a 71% increase from the year-ago quarter, on a 10% rise in sales to $2.832 billion. Views for Deckers, which makes Hoka sneakers and UGG footwear, are for EPS to grow 11% year over year to $1.31, and revenue to climb 14% to $639.5 million.

AerCap Holdings (AER), an aircraft lessor, reports first-quarter earnings on Tuesday. Wall Street expects EPS of $1.41, down 20%, as revenue climbs 73% to $1.899 billion.

Cisco Systems reports fiscal Q3 earnings after the market close on Wednesday. Analysts estimate EPS of 86 cents, up 3% from a year earlier. Revenue is expected to climb 4% to $13.34 billion.

Software maker Dynatrace (DT) reports fiscal Q4 earnings after the stock market close on Wednesday. Analysts expect EPS of 15 cents, flat with a year earlier. Revenue is expected to climb 25% to $246.6 million

Semiconductor design software maker Synopsys (SNPS) will report results for its fiscal second quarter late Wednesday. Analysts expect it to earn $2.37 a share, up 39%, on sales of $1.26 billion, up 23%.

Flowers Goods (FLO), a large producer of bread and other baked goods, reports first-quarter earnings on Thursday. Wall Street expects earnings of 39 cents per share, down 5%, as sales rise 8% to $1.405 billion.

Cybersecurity firm Palo Alto Networks (PANW) reports fiscal Q3 earnings late Thursday. Analysts estimate EPS of $1.68, up 22% from a year earlier. Revenue is expected to climb 27% to $1.36 billion. Analysts are modeling billings of $1.6 billion and next-generation product recurring revenue of $1.56 billion.

Semiconductor equipment vendor Applied Materials plans to announce its fiscal second-quarter results late Thursday. Wall Street is modeling earnings per share of $1.90 a share, up 17%, on sales of $6.35 billion, up 14%.

Early Friday, Wall Street expects Deere (DE) to report an 18% EPS increase to $6.69 on an 18% revenue gain to $14.223 billion, the highest sales growth in three quarters. 

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