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3 Things to Watch in the Stock Market This Week

Demitrios Kalogeropoulos, The Motley Fool

Stocks fell last week on rising trade tensions between China and the U.S., the world's two largest economies. By closing bell on Friday, the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) had each shed about 1 full percentage point. Both indexes remain higher for the year but are off the record levels set in late July.

Companies are still posting second-quarter earnings results that promise to create volatility for their shareholders. Below, we'll take a look at the metrics that could send shares of Five Below (NASDAQ: FIVE)Okta (NASDAQ: OKTA) and Ambarella (NASDAQ: AMBA) moving over the next few trading days.

An engineer at work on a microchip.

Image source: Getty Images.

Five Below's outlook

Five Below announces its latest results on Wednesday, and investors are eager to learn how the retailer is navigating an increasingly difficult cost environment. Its first-quarter report back in June contained mostly good news, as growth at existing stores hit the high end of management's forecast. New tariffs didn't hurt profitability, either.

But tariff rates have increased on many popular categories for the youth-focused retailer, and investors will learn this week whether that has caused a shift in Five Below's outlook or its retailing approach. Executives said they were considering offering products priced at above $5, for example, at the risk of alienating some customers.

Given those issues, Five Below's sales and profit forecast will be closely watched on Wednesday as investors look to see if there are signs that the company's positive momentum is stalling. However, even a slight downgrade in its outlook likely won't knock the company from its long-term plan to roughly double its store base over the next few years.

Okta's market share

The stakes are high for Okta's report on Wednesday since the digital identity-management specialist's shares have more than doubled so far in 2019. Investors found plenty of reasons to celebrate the company's last report, as sales jumped past management's forecast and Okta achieved positive free cash flow.

CEO Todd McKinnon and his team have predicted a slowdown for the current quarter, so it will be interesting to see whether Okta again surpasses that guidance. High-value contracts will be especially important to follow, since gains there suggest the company is establishing itself as an important service among top enterprises.

Finally, while expectations are modest around the cloud specialist's earnings this year, investors will be looking for signs that Okta can soon start cashing in on its strengthening market-share position.

Ambarella's China trade

Investors are optimistic heading into Ambarella's report on Thursday. The video-tech specialist edged past Wall Street's sales expectations in the fiscal first quarter while posting a surprise profit. The stock jumped in response to those positive trends, and the rally continued in recent weeks on hopes that its latest lineup of computer vision chips will meet with robust demand.

This week's report will show whether that bullish scenario played out over the last few months, but investors will be even more interested in seeing whether the tech stock has been caught up in the trade war between the U.S. and China. The image-processing chipmaker supplies many large Chinese clients that produce products like drones and security cameras, and changes to their purchasing patterns could disrupt sales and profits.

Overall, while optimism is on the rise for Ambarella as it pivots away from supporting mainly consumer-focused products like sports cameras, that stock-price rally is at risk until the company can show that its streak of painful revenue declines is finally behind it.

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Demitrios Kalogeropoulos owns shares of Okta. The Motley Fool owns shares of and recommends Ambarella and Okta. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com