On Earnings This Week: Wal-Mart Earnings and Inflation Reading On Tap
Stocks managed to end the week higher despite a sell-off mid-week after American International Group Inc.
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PowerRating) reported a $5.4 billion quarterly loss, reigniting fears over the housing market and credit crisis. Freddie Mac
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PowerRating) and Fannie Mae
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PowerRating) added to the pressure after the government-sponsored enterprises reported losses more than three times what analysts expected.
This week, look for quarterly results from a number of technology companies and retailers. On Thursday, retailers should set the tone for trading as investors hear quarterly results from Kohl’s Corp.
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PowerRating), Nordstrom Inc.
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PowerRating) and Wal-Mart Stores
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PowerRating). Investors will also be closely watching for July’s Consumer Price Index released Thursday morning at 8:30 a.m. EDT. With the index up 5% for the year ending June 30, retailers are likely to post smaller profits as they continue to face pressure from rising raw material costs and the limited ability to raise prices.
On Tuesday, Applied Materials Inc.
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PowerRating) releases its third-quarter results after the close and analysts polled by Thomson Financial are expecting the second-largest microprocessor maker behind Intel Corp.
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PowerRating) to report a 60% decline in profit of $0.14 per share on revenue of $1.84 billion. The stock has a tendency to narrow its after-hours movements the next day following an evening earnings event. If the stock rallies in the pre-market, longs may want to take their profits before the open.
The stock has narrowed its moves after 11 of the last 16 earnings events. However, the near-term performance is mixed, with the stock widening its move twice, narrowing once and reversing once in the past four quarters. On May 13, 2008, Applied Materials jumped 1.5% after the close after it beat on revenue and profit, however the company’s guidance disappointed investors and the stock narrowed its gains the following day, up 0.2%.
Also Tuesday, look for results from chip-maker NVIDIA Corporation
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PowerRating). The company is expected to report a 65% drop in second-quarter earnings of $0.14 per share on revenue of 908.4 million. This stock may be a tough one to play. Shares generally favor a narrowing pattern between its after-hours move and the next day session following an evening earnings event. It has narrowed or reversed its next-day price movement 11 times and has widened its next-day movement seven. The near-term performance favors a reversing trend, with three reversing moves and one widening move on the books for the most recent four quarters.
Wal-Mart is expected to report its second-quarter results ahead of Thursday’s opening bell, and analysts polled by Thomson Financial expect the world’s largest retailer to post a 17% increase in profit of $0.84 per share on revenue of $101.7 billion. If the stock falls in the pre-market, longs should probably cover and shorts should take the lead, as the stock has a recent tendency to widen its pre-market moves, doing so three out of the past four quarters. Over the long term, the stock has seen seven instances of adding to its pre-bell trade in follow-on regular session action and six events where the stock narrowed. On May 13, 2008, the company reported first-quarter results that beat the Street but gave a cautious outlook for the remainder of the year. As a result, shares fell 1.2% in the pre-market and widened their move in the regular session, ending down 2.4%.
Cassie Slane is a Senior Editor at www.MidnightTrader.com.