Wallets, piggy banks, and credit cards: Retailers on earnings watch

Among the big box retailers due to report this week, Walmart is seen posting a 9.1% year-over-year earnings growth, with smaller rival Target expected to notch a 13.7% annual EPS increase.

Home improvement company Home Depot is predicted to show 1.3% yearly EPS growth, while Lowe's EPS is expected to show a 2.4% year-on-year decline.

The saving rate has dipped to 2.7% of disposable income, the lowest since June 2022. Consumer expectations continue to wallow near levels seen in the aftermath of the COVID shutdown shock.

Credit card balances are growing, and real wage growth—average hourly wage growth minus year-on-year core CPI—is losing steam, at 0.7%.

Add to that the uncertainties surrounding the Middle East quagmire (and its effect on prices at the gasoline pump) and the volatility to be expected from the midterm elections, investors—not to mention the U.S. Federal Reserve—have their ears to the ground for signs of weakness on the part of the consumer, who is responsible for about 70% of U.S. economic growth.

Retail stocks are currently up about 9% so far this year, compared with the broader S&P 500's near 14% YTD increase.

This week, investors are bracing for a plethora of high-profile retail earnings and the ensuing conference calls will be scrutinized for clues regarding consumer health.

This follows a fairly grim July retail sales report from the Commerce Department, which showed receipts at U.S. retailers declined for the first time in nine months.