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3 Things to Watch in the Stock Market This Week

Demitrios Kalogeropoulos, The Motley Fool

Stocks logged big gains last week following two consecutive weeks of declines. With increases of almost 5%, the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) returned to positive territory for 2018, up roughly 2% each.

Earnings season remains in high gear, with hundreds of companies set to announce holiday-quarter results over the next few trading days. Some of the most anticipated reports are coming from Home Depot (NYSE: HD), Domino's (NYSE: DPZ), and Walmart (NYSE: WMT).

Home Depot's outlook

Home improvement titan Home Depot announces its results on Tuesday, and while the holiday quarter isn't its biggest sales period, investors are still looking forward to this update. After all, the company's last outing showed its fastest expansion in years. That boost had a lot to do with the hurricanes, earthquakes, and wildfires that struck different sections of its sales footprint. However, Home Depot earned more than its fair share of that recovery business, with comparable-store sales soaring 7.9% compared to a 5.7% gain for rival Lowe's.

CEO Craig Menear and his team are predicting that full-year comps will rise by 6.5% to mark a nice acceleration over the prior year's 5.6% -- and the 3.5% gain that Lowe's is targeting. Look for the home improvement giant to announce a healthy boost to its dividend, as well, even as it likely forecasts a growth slowdown in 2018 following 2017's banner result.

Domino's market share

Few restaurant chains can claim anything approaching the success that Domino's has seen in the past decade. Comparable-store sales have outpaced rivals by a wide margin as its share of the pizza delivery market shot up from 19% in 2007 to nearly 30% today. That gap was evident in Domino's most recent results, as comps improved by 8.4%, compared to 2% or less for rivals including Yum Brands' Pizza Hut and Papa John's. The increase helped power a tasty 19% spike in net income, and shareholders are expecting more of the same in Tuesday's results.

A man and woman each take a bite of pizza.

Image source: Getty Images.

Domino's long-term forecast calls for comps to rise by between 3% and 6% annually for the domestic business, and that will take continued innovations around home delivery as more fast-food giants enter that market. Management is just as excited about their opportunities in international markets, though. This segment represents a small portion of the business today, but, given the chain's low-cost operating model, it could quickly ramp up to a significant growth source.

Walmart's profit forecast

The world's biggest retailer announces its holiday-season results before the market opens on Tuesday. Management's last official forecast called for a continuation of the modest rebound that Walmart has enjoyed for over a year now, with comparable-store sales rising between 1.5% and 2%, translating into adjusted earnings of between $4.38 per share and $4.46 per share.

Customers browsing inside WalMart.

Image source: Walmart.

If rivals' results are any indication, the company could reveal a slightly higher result. Target raised its fourth-quarter comps forecast in mid-January following a strong holiday sales period. And Costco saw its comps jump to 7% from 5.8% in the prior quarter.

For Walmart to report a similar acceleration, it will need to have won more traffic in its physical stores and at its website and shopping apps. The retailer has been pouring resources into both sales channels, and investors are hoping that 2018 marks the start of a profit rebound given that revenue growth appears to be back on track.

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Demitrios Kalogeropoulos owns shares of Costco Wholesale and Home Depot. The Motley Fool has the following options: short May 2018 $175 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Costco Wholesale, Home Depot, and Lowe's. The Motley Fool has a disclosure policy.