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3 Things to Watch in the Stock Market This Week

Demitrios Kalogeropoulos, The Motley Fool

A mostly positive start to first-quarter earnings season pushed stocks higher last week, as the S&P 500 (SNPINDEX: ^GSPC) broke into record territory. The Dow Jones Industrial Average (DJINDICES: ^DJI) didn't rise as much but approached its own record, up more than 13% so far in 2019.

^SPX Chart

^SPX data by YCharts.

Earnings season continues in earnest with hundreds of companies set to post reports over the next few trading days. Below, we'll highlight the trends that could send shares of McDonald's (NYSE: MCD), Wayfair (NYSE: W) and Garmin (NASDAQ: GRMN) moving in the week ahead.

McDonald's U.S. trends

McDonald's announces its first-quarter results on Tuesday, and investors will be keenly interested in operating trends in its U.S. market. That division has been shedding customer traffic for almost a year, and the slump ensured that the chain's global comparable-store sales gains slowed to a 4.5% increase in 2018 from 5.3% the prior year. McDonald's U.S. market has posted lower traffic in two of the last three years.

CEO Steve Easterbrook and his team believe they can boost sales growth at home to more closely match international markets like France and the U.K., and they've been directing billions of dollars toward that goal. Thousands of restaurants have been modernized and remodeled in recent months, including by adding digital ordering kiosks and home delivery functionality. Investors this week will find out whether the improvements have helped the burger titan finally stabilize traffic trends at the start of fiscal 2019.

Wayfair's sales growth

Shares have settled down a bit since soaring after Wayfair's last quarterly announcement. Yet they're still up over 60% so far this year. That rally means the e-commerce giant has a high bar to meet when it reports first-quarter earnings on Thursday.

A modern appointed living room.

Image source: Getty Images.

Wayfair wowed Wall Street by announcing surprisingly strong sales growth over the holiday season. But the bigger shock was the fact that profitability outperformed management's targets. Pricing trends held up well during the competitive selling period, and Wayfair didn't have to resort to aggressive advertising spending, either. These wins suggest the company could be amassing a defensible position in the home furnishings e-commerce industry.

Investors this week will want to see further evidence, through high sales growth and steady gross profit margin, of that market strength. Deterioration in these trends, on the other hand, might send shares slumping as Wall Street shifts its focus toward the company's mounting financial losses.

Garmin's product plans

Garmin's Wednesday earnings report should determine whether the consumer tech specialist can keep rallying into 2019. The GPS device maker has trounced the market in the past year, after all, and left rivals like Fitbit far behind. Garmin achieved that outperformance with help from a deep product portfolio that's allowed it to weather big consumer demand shifts in areas including fitness trackers. Its innovation and marketing wins are keeping it at or near the top in important niches such as smartwatches, too.

CEO Cliff Pemble and his team are predicting sales growth of around 5% this year as Garmin notches its fifth consecutive year of rising gross profit margin. We are just early in 2019, and so that forecast isn't likely to change by much this week. But investors might get more clarity into executives' plans for releasing new products in its core consumer niches of hiking, fitness, and cycling, in addition to the higher-margin categories of aviation and boating. Garmin will need to protect market share across most of these franchises to keep its growth streak -- rare for consumer tech specialists -- alive for yet another year.

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Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool owns shares of and recommends Fitbit and Wayfair. The Motley Fool has a disclosure policy.