Stock Futures Edging Lower Amid China and Delta Risks
The U.S. stock futures were ticking lower on Monday morning. The moves in the morning session came after a mostly positive trading week filled with closely watched economic data and corporate earnings. Amongst them are the weaker-than-expected Chinese data pointing to slower economic activity. Not to mention, fresh virus outbreaks are creating new challenges for a smooth recovery. Also, Beijing’s regulatory crackdown on private industries continues to unnerve markets.
“Shares remain vulnerable to a short-term correction with possible triggers being the upswing in global coronavirus cases, the inflation scare, and U.S. taper talk,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.
Amongst other things, a lot of the attention will also be on the monthly retail sales report. With the rapid spread of the Delta variant, it should not come as a surprise that the underlying trend in consumer spending has been decelerating. Nevertheless, the stock market managed to push higher last week. But, the deterioration in consumer confidence appears to be the most concerning issue as we start the week. The Dow, S&P 500, and Nasdaq futures are all trading in the negative territory, moving 0.49%, 0.46%, and 0.41% lower respectively as of 6:27 a.m. ET.
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Roblox Earnings On Tap After The Closing Bell
Roblox (NYSE: RBLX) is set to release its second-quarter earnings report after the stock market closes today. But before we dive right in, it’s helpful to also know what the analysts are projecting for the latest quarter. Wall Street is expecting Roblox to report revenue of $690 million and earnings per share (EPS) of $0.23. Should the company hit that revenue estimate, it would be a year-over-year increase of 245%. From this projection, it is apparent that many are expecting the company to continue growing.
Recall back in June, the company provided an update that showed a decrease in daily active users (DAUs). That said, all eyes will be on the DAUs this evening to see if the trend is continuing or if it was a one-off event back in May. Should the numbers continue to drop, it could spook investors by creating uncertainty about how long this trend could persist.
Just to be clear, Roblox isn’t just a gaming company. It’s arguably the future of education. And that’s because the company has an exciting teaching and learning tool. And it can potentially equip our younger generation with strong technical skills to succeed in the increasingly tech-centric world. For those unfamiliar, Roblox Education is a unique platform that combines gaming and coding experiences. This could be a very unique way to get students to engage with the learning experience while they are studying from home. With the rapid spread of the Delta variant, it seems to me that the company’s growth is far from being over. Thus, even if user numbers disappoint, one should not ignore the long-term potential of Roblox.
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Walmart Earnings In Focus In The Stock Market This Week
One of the biggest earnings this week will be none other than Walmart (NYSE: WMT). Apart from Walmart, Target (NYSE: TGT) will also be reporting but a day later. The earnings from these two retailers would provide more details on trends in consumer spending. The biggest retailer is expected to see overall revenue decline by 1% to $136.6 billion for its July quarter. This would mark its first year-over-year sales decline since fiscal 2016.
“The second quarter started off a bit better than originally anticipated as stimulus spending [continued] to benefit certain general merchandise categories, and we expect grocery market share gains to continue,” said Walmart Chief Financial Officer Brett Biggs during the company’s last earnings call.
It’s no secret that investors haven’t seen bullish action from Walmart stock in recent months. While sales have gone up during the pandemic, the company is still lagging behind its competitors. Heading into the report, it’s interesting to see if Walmart could close the sales gap with other retailers. With the company making elevated capital investments recently, don’t be surprised if these initiatives will put extra pressure on earnings this quarter. But many believe these capital investments will pay off eventually. Should Walmart indeed post weak earnings, would there be an opportunity for investors to scoop up WMT stock?
Oil Extend Losses As Demand In China Slows
Oil prices continued to slide on Monday, dropping for a third session. This came after the IEA warned that demand growth for crude and its products had slowed sharply. The official data showed that refining throughout and economic activity slowed in China. That indicates that the rapid spread of the Delta variant is an obstacle for a smooth recovery of the world’s second-largest economy
“Oil futures weakness … is likely triggered by weaker-than-expected growth data from China, which is a major consumer of oil,” said Kelvin Wong, market analyst at CMC Markets in Singapore. “All in all, the global peak growth narrative has been intensified.“
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Retailer Earnings In Focus This Week
Retail earnings will be in focus this week as the country’s largest retailers will be reporting. Apart from Walmart and Target, some of the major retailers reporting this week include Home Depot (NYSE: HD), TJX Companies (NYSE: TJX), and Kohl’s (NYSE: KSS). It’s noteworthy that most of the earnings reported so far have topped estimates. While that’s positive news for the stock market, it’s worth noting that shares remain vulnerable to volatility as the Delta variant stirs growth concern. Some of the notable names reporting this morning include Paysafe (NYSE: PSFE), Douyu (NASDAQ: DOYU), and Niu Technologies (NASDAQ: NIU).
There are also major companies reporting earnings after the closing bell today. They include Roblox, Ideanomics (NASDAQ: IDEX), and Danimer Scientific (NYSE: DNMR). So, whether it is anticipating the retail sales data, keeping up with the downturn in oil prices, or simply following the earnings reports, there should be enough to keep you busy as we kick start the week.
