Trading the numbers game

05/15/20
  • Earnings season may have peaked, but next week’s calendar is packed
  • Retail in spotlight: HD and LOW have thrived since March
  • NVDA has helped carry chip torch; coming off record highs this week

You may not be hearing much about “earnings season” anymore, but make no mistake, it’s not over. Yes, most of the mega-tech bellwethers and financial stocks have long since reported, but next week features some of the most recognizable names in retail, and some key tech stocks, too.

While this morning’s retail sales number will likely highlight the effects of store closures during the pandemic lockdown, that pain hasn’t necessarily been evenly distributed. Two national brick-and-mortar chains that haven’t been shuttered are home improvement centers Home Depot (HD) and Lowe’s (LOW), and their returns since their March lows reflect it:

Chart 1: Home Depot (HD), Lowe’s (LOW), S&P 500 (SPX), 3/20/20–5/14/20. Home Depot and Lowe’s price chart. Getting the job done.

Source: Power E*TRADE


Both have blown away the S&P 500 (SPX) since then, with LOW up more than 60% and HD up more than 50%. In fact, some analysts have argued that one of the possible risks for bulls as both stocks get ready to release earnings next week may be excessive expectations:1 As both stores have found themselves on the fortunate side of the lockdown, investors may be anticipating better results than either can deliver—something that could result in a post-earnings letdown, even if the numbers are, by any objective measure, good. (Both stocks have recovered more than two-thirds of their February–March sell-offs.)

The tech well isn’t entirely dry, either. In addition to Palo Alto Networks (PANW) and Analog Devices (ADI), next week’s calendar includes Nvidia (NVDA), a chipmaker that made new all-time highs on Monday and Tuesday, and which has gained more than twice as much as the Nasdaq 100 (NDX) since mid-March:

Chart 2: Nvidia (NVDA) and Nasdaq 100 (NDX), 3/19/20–5/14/20. Nvidia (NVDA) price chart. Chipmaker outperformance.

Source: Power E*TRADE


Nvidia also may have found itself in a bit of a sweet spot during the lockdown. Although it acknowledged the pandemic economy would take its toll on business, the company, which specializes in chips used in artificial intelligence (AI) and other high-performance applications, noted that demand remained strong from cloud-service providers2—which themselves have been critical during the pandemic as businesses have had to support remote workforces.

And just this week, Nvidia unveiled a new AI-centric chip line that, among other applications, was being deployed by the Argonne National Laboratory to help researchers study the spread of the coronavirus and explore treatments.3

Home Depot is currently scheduled to release its numbers on May 19, Lowe’s on May 20, and Nvidia on May 21. These stocks have been moving, and there’s little reason to expect that to change with key data on the horizon.

Note: Earnings dates sometimes change unexpectedly! You can check the E*TRADE market calendar for an up-to-date schedule, as well as each day’s Active Trader Commentary.

Market Mover Update: It didn’t take long for gold and oil to shake off their doldrums. June gold futures (GCM0) pushed above the top of their month-long consolidation with a 1%-plus rally yesterday, while July WTI crude oil (CLN0) surged more than 8% amid reports that demand may begin to outstrip supply, as well as Goldman Sachs analysts forecasting a rebound into the $60s in 2021.4 

Today’s numbers (all times ET): Retail Sales (8:30 a.m.), Empire State Manufacturing (8:30 a.m.), Industrial Production (9:15 a.m.), Business Inventories, (10 a.m.), Consumer Sentiment, (10 a.m.), Job Openings (10 a.m.).

Today’s earnings include: VF (VFC), DraftKings (DKNG), JD.com (JD).

 

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1 Barron’s. Home Depot and Walmart Face High Expectations on Earnings. Fair Warning. 5/13/20.

2 The Wall Street Journal. Nvidia’s Sunny Side Stays Up. 3/24/20.

3 MarketWatch.com. Nvidia unveils Ampere GPU architecture for AI boost, and the first target is coronavirus. 5/14/20.

4 CNBC.com. Goldman believes oil has bottomed and is headed back to $65 next year. 5/14/20.

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