With stocks at highs, investors eye consumer results

NEW YORK (Reuters) – US stock investors may look to a host of results from consumer-facing companies including Wal-Mart Stores Inc. this week for signs on whether the recent market rally has more room to run.

The consumer names are among the last major companies of the S&P 500 earnings season to report. But the results will also be watched for a read on spending as well as for commentary from executives on President Donald Trump’s proposal to tax imports.

Retail executives, some of whom met with Trump last week, have argued such a tax will raise consumer prices and hurt their businesses.

Besides Wal-Mart, Macy’s and Home Depot Inc. are among the heavyweights due to report this week.

Investors also will keep a close eye on housing-related data to gauge if a recent rise in consumer spending and inflation data is translating into higher home prices and a pickup in home sales, market strategists said.

Wall Street ended last week on a high note, with all three major indexes registering record highs and the Dow reaching a seventh straight record close.

Investors were watching consumer names last week as Trump met with chief executives of Target Corp., Best Buy Co. Inc. and six other major retailers.

This week, investors may be looking for more clues about the impact of Trump’s proposals on retailers, with particular focus on Wal-Mart, according to JJ Kinahan, the chief market strategist at TD Ameritrade in Chicago.

“Maybe not so much what their earnings say as much as what their conference call will say about some of the president’s proposals around border taxes and immigration,” he said.

Results from some of the largest consumer-facing companies will also provide a read on whether improving consumer sentiment is reflected in actual results, Federated Investors portfolio manager Steve Chiavarone said.

“Does sentiment continue to work higher and eventually pull up actual results, or can sentiment only take you so far until you have some follow-through in the real data? Those are the things that will be on our minds,” he said.

Results from small-cap retail companies will also be pored over, as these companies have struggled from a profitability standpoint, Jefferies equity strategist Steven DeSanctis said.

“Though retail-sales numbers have been good, profitability for a lot of the retailers has not been good,” he said. “That’s going to be a big telltale sign for us. We’re overweight discretionary, thinking that was the cheapest group out there, and it still is the cheapest. But... if the E drops out the PE, you run into a problem there,” he said, referring to the price-to-earnings ratio for the group.