Market Preview: Possible Trade Deal with Canada, Earnings from Dollar Retailers, Lululemon

Good news on several fronts is keeping the market in rally mode this week. A trade deal with Mexico, and what appears to be an imminent deal with Canada, have come much quicker than most pundits believed possible. GDP numbers released Wednesday morning revealed a 4.2% growth rate, the highest in 4 years. With Apple (AAPL) up on the trade news, Morgan Stanley fueled the fire even more by raising price targets on both Alphabet (GOOG) and Amazon (AMZN). Both the Nasdaq and S&P 500 hit record highs for the fourth straight session.

Thursday morning Dollar Tree (DLTR) and Dollar General (DG) trot into the earnings arena. While Dollar General has done well this year, bouncing back from an earnings disappointment at the end of May, Dollar Tree has been hammered after earnings reports in both March and May. Both companies blamed the weather for last quarter’s disappointment, which apparently contributed to lower sales and raised costs. Lululemon will report earnings after the close. The stock has been on a major run this year, and will need to report a perfect quarter to continue the blistering pace. Analysts expect new CEO Calvin McDonald to report an earnings increase of just over 25% when the athletic retailer takes the spotlight.

Thursday’s economic calendar includes jobless claims, the EIA natural gas report, and personal income and outlays. Income is expected to rise .3% and spending is expected to rise .4%. The core PCE Core Price Index, which is closely watched by the Fed as it sets interest rates, is expected to rise .2% for a year-on-year gain of 2%, which happens to be the Fed’s target. Friday, the last day of August, investors will see Chicago PMI, consumer sentiment, and Baker-Hughes rig count numbers. Consumer sentiment is expected to rise slightly after a sharp downturn in July. The preliminary August report was the lowest since September of last year, with consumers still fretting over the then unsettling trade tariff news.

The lone earnings report delivered Friday morning will come from discount retailer Big Lots (BIG). Last quarter same-store sales fell a whopping 3%, and the stock breached a two year low before recovering and staging a rally. Analysts will be watching to see if the Big Lots earnings are on the mend, or if the retailer will continue to stumble through the rest of 2018. Traders may want to keep an eye on what technicians call a cup and handle pattern which could be forming in the stock.

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