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3 Things to Watch in the Stock Market This Week

Demitrios Kalogeropoulos, The Motley Fool

Stocks were up last week, with both the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI) gaining ground as companies reported generally strong second-quarter earnings.

The increase pushed markets closer to the all-time highs set earlier in the year:

^SPX Chart

^SPX data by YCharts.

Earnings season is winding down, but several major retailers have yet to post their latest results. The upcoming reports from Lowe's (NYSE: LOW), TJX Companies (NYSE: TJX), and Target (NYSE: TGT) could send those stocks moving over the next few trading days. Let's take a closer look at what investors can expect from these reports.

TJX Companies' sales growth

TJX Companies' off-price retailing focus has allowed the company to grow at a healthy rate despite the traffic struggles affecting the wider industry. At its first quarterly report of the year, in fact, shopper volume held up well across its TJ Maxx, Home Goods, and Marshall's franchises to push comparable-store sales up 3% overall. Investors are looking for another modest revenue increase in the retailer's second-quarter report, due out before the market opens on Tuesday. Customer traffic has been growing for 15 consecutive quarters, after all, and comps have risen in each of the last 23 years.

Two customers at a clothing rack

Image source: Getty Images.

TJX left its full-year outlook unchanged back in May, but the latest operating trends might convince management to lift those targets on Tuesday. As it stands now, executives believe comps will rise by between 1% and 2% in 2018 as earnings improve by between 5% and 6%.

Their long-term goals, which likely won't be updated this week, assume modest sales gains supporting growth in the store base as it reaches as many as 6,100 locations around the world, up from about 4,100 today.

Lowe's strategic plans

Investors are expecting good news from Lowe's when it announces its earnings results on Wednesday morning. The home-improvement giant will likely benefit from a weather-related shift in demand from the first quarter into the second quarter, just as rival Home Depot did. Thus, look for sales gains to significantly outpace the 0.5% boost that Lowe's announced back in May. However, its growth will likely trail that of its bigger rival, which announced an 8% sales increase last week. Lowe's profitability also routinely underperforms Home Depot's, which rose to 15% of sales in the second quarter.

Shareholders are hoping that new CEO Marvin Ellison, who spent many years working as an executive at Home Depot, will find ways to help close the performance gap between the two home-improvement retailers. That's why investors will be closely watching Ellison's first quarterly report as CEO for signs that Lowe's is shifting its sales strategies, cost structure, or capital return plans.

Target's 2018 outlook

Target steps up to the plate on Wednesday, and is likely to impress Wall Street with its second-quarter numbers. Customer traffic set a 10-year high in the most recent quarter, after all, and executives said that this momentum strengthened even further in the first few weeks of the new quarter.

A man with a red shopping cart in a grocery aisle

Image source: Getty Images.

Investors are hoping Target's profitability trends improve: Margins have taken a big hit over the last two years, as the company cut prices and scaled up its investments in the digital sales channel. Management has promised stabilization in 2018, but that didn't happen last quarter.

Assuming the positive shopper momentum held up, or even accelerated as Walmart's did, Target might be in a position to lift 2018 guidance -- it currently calls for sales to rise by low single digits as core earnings decline.

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Demitrios Kalogeropoulos owns shares of HD. The Motley Fool has the following options: short September 2018 $180 calls on HD and long January 2020 $110 calls on HD. The Motley Fool recommends HD. The Motley Fool has a disclosure policy.