Tuesday, February 21, 2017

Dow Set To Hold At Record Highs; Home Depot, Wal-Mart Earnings Due

U.S. investors took a break for Presidents Day, but bears have been napping for weeks.

February 21, 2017

With U.S. markets closed Monday for Presidents Day, futures for the Dow Jones industrial average and other indexes pointed to little change Tuesday from last week's all-time levels.

Dow components Home Depot (HD) and Wal-Mart (WMT) are among the notable earnings before the opening bell. Unilever (UN) is likely to give up much of Friday's big gains after Kraft Heinz (KHC) dropped its $143 billion takeover bid.

Futures for the Dow industrials fell a fraction vs. fair value early Tuesday, with the S&P 500 index roughly flat. Nasdaq 100 futures pointed to a 0.2% gain. The major averages closed at session highs on Friday, with the Dow and Nasdaq composite at all-time bests and the S&P 500 less than a point away from record levels set earlier in the week.

Unilever likely will give up much of Friday's 15.3% spike to a record high. Unilever fell 6.6% in London trading Monday after Kraft Heinz dropped its takeover offer Sunday. Kraft, which leapt 10.7% Friday, also seems ripe for a pullback. Unilever's only-partial retreat suggests investors still see deal-making possible. Will takeover speculation turn to consumer products firms that rallied Friday.

Meanwhile, mining giant BHP Billiton reported six-month earnings rose 687% vs. a year earlier early Tuesday. Mining stocks have generally rallied in recent weeks on strong Chinese demand, hopes for stronger U.S. growth and various supply woes that have supported prices. BHP recently declared force majeure on shipments from Chile's Escondida mine, the world's largest copper mine, due to a worker strike there.

Home Depot, Wal-Mart and Macy's (M) also report before the opening bell.

Home Depot should deliver earnings climbed 14% to $1.33 a share, with sales rising 4% to $21.793 billion. Home Depot shares broke out of a cup-with-handle base on Jan. 23. The stock has hit all-time highs but is still in range from the 137.42 buy point.

Wal-Mart and Macy's will report fourth-quarter results after a holiday season dominated by Amazon (AMZN) and e-commerce. Investors will be looking for guidance on future results, and how these retail giants plan to respond to Amazon's gains and brick-and-mortar pains.

Wal-Mart EPS likely fell 13% to $1.29 with revenue up 1.2% to $131.27 billion. Wal-Mart recently dropped its Amazon Prime membership rival and began offering free two-day shipping with minimum online orders of $35. Wal-Mart shares have retaken their 50-day line within a six-month consolidation, but are still below their 200-day line.

Macy's sales likely fell 3% to $8.62 billion with EPS down 6% to $1.96. Macy's shares remain in a deep downtrend that started in July 2015. The stock has risen lately on Macy's takeover buzz.

Papa John's (PZZA) reports earnings after the closing bell. Papa John's should report a 6% EPS gain to 66 cents, which would be the smallest yearly gain in 10 quarters. Papa John's is in a two-month flat-base pattern with a buy point of 90.59. Shares closed Friday at 86.01, just above its 50-day moving average.

Most Asian stock markets rallied modest in Tuesday trading intraday after Hong Kong's Hang Seng closed Monday at its best level since August 2015. In European trading Monday, Germany's Dax rose 0.6%, while the U.K.'s FTSE was flat and France's CAC index edged lower.

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