As the majority of Q2 earnings reports have already been released, a clear narrative has emerged: while companies are still beating earnings expectations, the extent of these beats has diminished, and top-line growth has shown signs of slowing. This trend suggests a cooling economy where demand is becoming more challenging to sustain. Although corporations have managed to protect their bottom lines through innovations and cost-cutting measures, these efforts can only go so far in counteracting weak demand. The one notable exception to this trend is the AI hardware sector, which continues to experience impressive growth. With much of the earnings season behind us, it might seem logical to shift focus entirely to macroeconomic factors, especially with the upcoming Jackson Hole symposium and speculation about potential Fed rate cuts. However, the Federal Reserve remains data-dependent, and while economic reports are critical, corporate earnings still hold significant sway over market sentiment. As such, earnings reports will continue to play a crucial role in shaping investor expectations and influencing the markets. This brings us to the importance of the upcoming July-end reporting period, which includes companies that close their fiscal years in January. These reports offer investors a unique glimpse into corporate performance through July, providing a mid-term update for the Q3 earnings period. Particularly noteworthy is the concentration of retail earnings, as many of these companies align their fiscal years with the holiday season. This period will be instrumental in offering insights into consumer behavior and spending, while tech companies like Cisco, Applied Materials, Snowflake,and Palo Alto networks will shed light on enterprise demand trends. Perhaps the most important earnings report of the season looms on August 28 when market general Nvidia (NVDA) is set to report. We will save an in depth dive into that name for its own report! In this piece, we will explore key upcoming reports and highlight what investors should watch for in this crucial reporting period. Home Depot- Watching Consumer Discretionary Spending Home Depot provides us with good insight into the consumer discretionary spending habits. Home Depot's Q2 earnings report presented a mixed picture. The company reported a 3.3% decline in comparable sales, slightly missing analyst expectations, reflecting continued consumer pullback amidst high interest rates and economic uncertainty. Despite the sales miss, Home Depot managed to beat EPS estimates, thanks to strong cost management, which helped maintain healthy margins. However, the company revised its full-year guidance downward, anticipating no recovery in sales during the second half of the fiscal year, with comparable sales expected to decline between 3% and 4%, a more pessimistic outlook than previously forecasted. The addition of SRS Distribution led to an upward revision of the company's full-year revenue guidance to a growth range of 2.5% to 3.5%, it also resulted in a more conservative EPS forecast due to the amortization expenses associated with the acquisition. The integration of SRS is expected to bolster Home Depot's Pro business, allowing it to compete more effectively with rival Lowe's, particularly in larger-scale, complex projects. Looking ahead, while Home Depot faces near-term challenges with a sluggish demand environment, the market is cautiously optimistic about the longer-term potential. Investors are already eyeing a potential boost from future Federal Reserve rate cuts, which could reinvigorate the home improvement market by making large-scale projects more affordable and potentially increasing housing market activity. The HD report indicates that consumers are becoming more cautious with their spending, particularly on large-ticket home improvement projects. The caution is driven by high interest rates and broader economic uncertainties. It also reflects the slowing housing market as there is less demand for the kind of home improvement products typically purchased during moves or major renovations. Shares of HD slipped below the 200-day moving average ($345) before finding support at the $339 area. The stock has reversed back through those levels and rallied to $358 on Wednesday. The stock has been aided by the cooler CPI figures which is driving expectations for a pick up in discretionary spending. Peers: LOW (Reports August 20) Cisco and the Read on Enterprise Demand HD gave us insight into consumer demand. Cisco (CSCO) will provide us with insight into the enterprise demand cycle. CSCO used to provide a read on IT hardware, however, its acquisition of Splunk (SPLK) will expand the scope of this report into the software side of the sector. Cisco Systems' upcoming Q4 earnings report is significant for the broader market as it will provide crucial insights into the health of the tech sector, particularly in the context of ongoing macroeconomic challenges. With expected earnings of $0.85 per share on $13.54 billion in revenue, the report will shed light on how companies are navigating the current environment of cautious IT spending and economic uncertainty. Cisco's ability to meet or exceed these expectations, despite a year-over-year decline, will be closely watched as an indicator of whether tech companies can maintain resilience in a tough market. Additionally, Cisco's strategic shift towards higher-growth areas like cybersecurity and AI, highlighted by its $28 billion acquisition of Splunk, will be a focal point, as investors look for signs of how these investments are impacting the company's performance and long-term prospects. The broader market is also paying attention to Cisco's Q4 report due to its implications for future economic conditions and corporate strategies. Cisco's potential announcement of a second round of layoffs, following similar actions earlier this year, underscores the pressures facing the tech industry and could signal further challenges ahead. The company's guidance for FY25, particularly whether it can maintain its forecasted sales growth, will be a key factor in shaping investor sentiment. As one of the largest players in the tech sector, Cisco's performance and outlook will provide valuable context for understanding the broader trends in enterprise demand, IT spending, and the adoption of new technologies like AI and cybersecurity. Shares of CSCO have traded in a tight range between $44.75-46 since the early August market swoon. It has not seen the same bounce back as others due to worries about a poor earnings report. The stock briefly hit a three year low earlier this week. If we see a meaningful contribution from its SPLK acquisition, then investors may start moving into the downtrodden tech play. Peers- ANET, MSI, ERIC, NOK Walmart (WMT)- A Deep Dive into Retail Spend As the world's largest retailer, Walmart (WMT) provides valuable insights into the overall health of the consumer economy. The company's earnings reflect consumer spending patterns, which are a critical component of economic growth. WMT's reports often highlight shifts in consumer behavior, such as changes in spending on essentials verse discretionary items. WMT's vast supply chain and global presence make it a bellwether for supply chain disruptions and inflationary pressures. Investors closely watch these factors and how they are impacting costs, pricing strategies, and profit margins. The company serves as a benchmark for the broad retail sector. Walmart has been consistently improving its e-commerce offerings, which now account for 16% of its revenue, reflecting the company's strategic focus on expanding its digital footprint. This growth in e-commerce, along with innovative supply chain automation and new revenue streams such as advertising and memberships, has driven Walmart's margin expansion and overall financial performance. Notably, Walmart's ability to sustain a new all-time high in stock price, despite a challenging retail environment, underscores its resilience and strategic positioning compared to competitors like Amazon. In recent quarters, Walmart's management has emphasized the significance of its new business ventures, such as Walmart Plus and digital advertising, which have contributed significantly to its operating income. The company's Q1 fiscal 2025 performance highlighted the impact of these emerging segments, with around one-third of its operating income coming from these high-margin areas. Walmart's international e-commerce sales have also shown robust growth, indicating that the company's omnichannel strategy is resonating well with customers globally. Looking ahead, investors are optimistic about Walmart's continued revenue growth and margin expansion, particularly as the company integrates its digital and physical retail operations. Management has indicated that they expect revenue and operating income to reach the high end of their initial guidance for Q2 and FY25. Key metrics to watch include the performance of Walmart's international segment and Sam's Club, as well as the sustained growth in digital advertising revenue, which are expected to be crucial drivers of Walmart's future growth and valuation. Shares of WMT have been on a tear, rising 33% in 2024. The stock has seen some cracks in the armor though as the stock has pulled back 6% ahead of this report. The stock has significant support at the $65 level. Peers: TGT (Reports August 21), COST Other notables: Thursday, August 15 Deere (DE)- Deere & Company's earnings are crucial to market participants as they serve as a barometer for the health of the agricultural, construction, and industrial sectors, reflecting broader economic conditions. As a global leader in heavy machinery, Deere's performance offers insights into demand trends, global trade dynamics, and the impact of factors like commodity prices and supply chain disruptions. Additionally, Deere's guidance on future capital expenditures and technological advancements in areas like precision agriculture is closely watched, providing valuable information about the future direction of key industries and broader market conditions. Peers: CAT, TSCO, CF, MOS Tapestry (TPR)- Tapestry's earnings are important to the broader market as they provide insights into consumer spending trends, particularly in the luxury and discretionary sectors. As the parent company of well-known brands like Coach, Kate Spade, and Stuart Weitzman, Tapestry's performance reflects the health of higher-end retail markets both in the U.S. and internationally. Strong or weak earnings can indicate broader consumer confidence and spending power, which are key indicators of economic health. Additionally, Tapestry's results may influence investor sentiment towards other retail and luxury goods companies, impacting market dynamics in the consumer discretionary sector. Peers: RL, EL Alibaba (BABA)- Alibaba's earnings are crucial to the market because they provide a snapshot of the health of China's consumer economy and the broader tech sector. As one of the largest e-commerce and cloud computing companies globally, Alibaba's performance reflects trends in consumer spending, online retail, and digital services in China, which is a significant driver of global economic growth. Moreover, Alibaba's earnings can influence investor sentiment towards other Chinese tech companies and emerging markets, given its size and influence. Strong or weak results from Alibaba can have ripple effects across global markets, especially in sectors tied to technology, e-commerce, and consumer goods. Applied Materials' (AMAT) earnings are vital for the markets because the company is a leading supplier of equipment and services to the semiconductor industry, which is foundational to nearly all modern technology. AMAT's performance offers insights into the health of the semiconductor supply chain, capital expenditures by chipmakers, and overall demand in the tech sector. Given that semiconductors are critical components in everything from smartphones to cars, strong or weak earnings from AMAT can signal broader trends in global technology spending and innovation, impacting investor sentiment across tech stocks and the broader market. Peers: KLAC, TER, LRCX Dillards (DDS) earnings are important to the market because they provide valuable insights into the health of the retail sector, particularly in the context of consumer spending and discretionary income. As a department store chain, Dillard's performance reflects broader trends in consumer behavior, including how much people are willing to spend on apparel, home goods, and luxury items. Strong earnings could indicate robust consumer confidence and spending, while weak results might suggest economic pressures on consumers. Additionally, Dillard's results can influence investor sentiment towards other retail stocks and the broader consumer discretionary sector. Peers: TJX (Reports August 21), ROST (Reports August 22) Notable Reports Next Week: Monday, August 19- Estee lauder (EL), Palo Alto Networks (PANW) Tuesday- August 20- Lowe's (LOW), Toll Brothers (TOL). Wednesday, August 21- Macy's (M), Target (TGT), TJX (TJX), Synopsys (SNPS), Urban Outfitters (URBN), Snowflake (SNOW). Thursday, August 22- Baidu (BIDU), BJ Wholesale (BJ), CAVA Group (CAVA), Ross Stores (ROST), Workday (WDAY), Dollar Tree (DLTR).