Market Preview: Retail Sales and Productivity Numbers in Focus, Home Depot and Cisco Earnings

Tuesday investors will continue to watch the currency crisis in Turkey unfold, and try to decipher what, if any, impact it will have on U.S. markets. While viewed in isolation, the crisis has little impact on U.S. companies. But, analysts fear a domino effect from the weakening lira. On Friday the market suffered its largest one day decline since early June, and investors don’t want to be left holding the bag if decisions in Turkey begin spilling into other markets. Protecting gains and hiding in quality may be the buzzwords most used for the remainder of the week.

On Tuesday Home Depot (HD) reports earnings. Analysts are looking for the home building and remodeling stock to put up good numbers. After missing earnings projections earlier this year, due to cold and severe weather, HD is expected to rebound in the second quarter and benefit from an upward remodeling trend. The trend has been fueled by construction costs outpacing home appreciation numbers, which are forcing homeowners to postpone new home purchases. Also reporting on Tuesday is Advance Auto Parts (AAP). Tom Greco, Advance CEO, also blamed weather for the auto parts retailer’s numbers earlier this year. Analysts will be looking for the company to continue to increase operational efficiency numbers this quarter, and improve the top-line as well.

Tuesday’s economic calendar brings import and export prices. Analysts are looking for July import prices to rebound after an unexpected .4 percent decline in June. Wednesday investors will focus on retail sales numbers. The headline number is expected to be a relatively weak .1 percent gain, but that is due to weakness in auto sales. The ex-auto numbers are expected at a more healthy .4 percent increase. Productivity and cost numbers for 2Q will also be released on Wednesday. High unit costs in the first quarter limited productivity gains, but those numbers are expected to rebound in 2Q with productivity projected to jump 2.5%, holding down labor costs. Investors will also have to digest new mortgage application numbers, the Empire State Manufacturing Survey and industrial production, all Wednesday morning.

Earnings are on tap from Macy’s (M) Wednesday morning and Cisco Systems (CSCO) after the close. After excellent inventory control measures buoyed the stock last quarter, analysts are looking for a continuation of the turnaround story at Macy’s this quarter. Momentum gained earlier in the year is expected to vault the retailer to another earnings beat on Wednesday. Analysts are giving Cisco a pass on earnings this quarter. With European weakness and the recent announced acquisition of Duo (a network security company) analysts believe CSCO may miss earnings this quarter, But, consensus is that the networking provider is on the right strategic path and that the upcoming quarter will be the real litmus test for the San Jose based tech company.

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