NEW YORK ( TheStreet) -- The consumer has been the center of conversation for months, and the coming week will finally see more light shed on exactly how difficult the recession has been on buyers. Some of the biggest U.S. retailers -- Target ( TGT - Get Report), Sears Holdings ( SHLD) and Home Depot ( HD - Get Report) -- are scheduled to report quarterly results over the next few sessions and their sales tallies should give a clear indication of how much the consumer spent in the second quarter. In fact, next week's earnings schedule revolves almost completely around retailers, and while bottom-line results may not compare to Wal-Mart ( WMT), the world's largest retailer, market analysts suspect that other stores will run into the same problems of weaker-than-expected quarterly sales and narrowing margins. On Thursday, Wal-Mart posted better-than-expected second-quarter earnings, beating the Thomson Reuters average estimate by 3 cents, although the shoppers who flooded Wal-Mart stores for lower prices failed to push sales above the $102.9 billion consensus. Art Hogan, chief market strategist with Jefferies, says that Wal-Mart accounts for 20% of retail sales data by itself, making it a pretty good barometer for other retailers. However, Hogan says it is worrisome that Wal-Mart missed top-line estimates especially considering it is the beneficiary of the trade-down effect, meaning that consumers are migrating to Wal-Mart because of its low prices.
"It's safe to say that unless you have a consumer working their way upstream again, you're going to see everyone missing or coming close to top-line estimates," Hogan said, adding that companies will meet profit expectations only through cost-cutting. "While we view Wal-Mart as a victory in that respect, we're not sure these other names can do the same thing."
Quincy Krosby, chief market strategist for Prudential Financial, agrees that investors likely will see top-line misses by retailers this week, although she argues there's nothing wrong with weak revenue numbers across the board as long as cost-cutting and consolidation help earnings on a per-share basis. "This is what companies do in a recession," Krosby said. "There's nothing wrong with saying this is how they are surviving. Plus, once we see a turn in the economy and we see some traction, any top-line growth goes right directly to the bottom line." Listen to Paul Nolte, director of investments with Hinsdale Associates, discuss which of the coming week's earnings and economic data will be key to showing the health of the consumer, and his expectations for the market's movement over the next five sessions. In addition, there will be plenty of economic data that should give investors a better handle on how the consumer is faring. Reports on housing starts, building permits, existing home sales, weekly jobless claim numbers and separate reports on manufacturing data will be in focus as the coming week rolls along. Earnings, though, look to be the major driver of trading next week. Monday's docket is slim, with home improvement chain Lowe's ( LOW - Get Report) among those set to report quarterly results. Rival and Dow component Home Depot will follow on Tuesday, along with Target, Saks ( SKS) and TJX Companies ( TJX). Wednesday's earnings schedule is highlighted by second-tier retailers, including BJ's Wholesale ( BJ), Limited ( LTD), PetSmart ( PETM) and Hot Topic ( HOTT). The heavyweight retail earnings return Thursday, with Sears Holdings, Gap ( GPS) and Gamestop ( GME) set to report. Friday's schedule is light, with AnnTaylor ( ANN) the most notable name due to report. Both Jefferies' Hogan and Prudential's Krosby note that looking ahead, investors may ignore or overlook a shift in the back-to-school shopping season. "Back-to-school shopping has historically been in August, but Labor Day comes a week later in September," Hogan said. "The assessment of back-to-school shopping needs to be shifted forward. That's going to be difficult because people always forget about calendar shifts, whether it be for Labor Day or Easter."
Of course, important earnings reports won't be limited to only retailers. Dow member Hewlett-Packard ( HPQ - Get Report) reports late Tuesday, while Deere ( DE - Get Report) and JDS Uniphase ( JDSU) will release quarterly results Wednesday. On Thursday, HJ Heinz ( HNZ) and Tech Data ( TECD) will post results, and J.M. Smucker ( SJM) will issue its quarterly report early Friday. Economic data focused on the consumer had a big influence on the market this week. For instance, a worse-than-expected reading on consumer sentiment Friday sank the major U.S. averages, dropping them into negative territory for the week. Although data scheduled for next week won't directly be tied to consumer confidence or spending, there will be several reports that will show the general health of consumers. Most importantly, analysts say, will be the weekly read on initial jobless claims. Last week, initial jobless claims rose by 4,000 last week to 558,000. On the positive side, continuing claims fell to 6.2 million from 6.34 million the previous week. Traders are hopeful that the continuing claims number will continue to slide. "There is an entire basket of reports that can shine light on the consumer, but the only one that has ever correlated to consumer spending in the last 50 years is initial jobless claims," said Jefferies' Hogan. "It all depends on how the consumer views the job market. The American consumer spends his income statement, not his balance sheet." Prudential's Krosby said that the initial claims and continuing claims numbers give investors a real-time picture of employment. "You want to see the numbers go down and contract, as they have historically been a very important indicator for a turn in economic activity," she said.
On Monday, the New York Federal Reserve will release the Empire manufacturing index for August at 8:30 a.m. EDT, with economists expecting a reading of 2.2, indicating growth, after a -0.55 reading in July. At 9 a.m. EDT, the Treasury will issue its net long-term capital flows report for June. A negative number from the Treasury will pressure the dollar as it indicates poor capital flow for the U.S., meaning there is weaker demand for assets. Later Monday, the National Association of Home Builders will post its housing market index reading for August at 1 p.m. EDT. Tuesday will bring the latest read on the producer price index, housing starts and building permits for July. Economists expect the headline PPI number PPI to dip 0.2% and the core number, which excludes food and energy, to rise 0.1%. Housing starts should rise to 598,000 from 582,000 in June, and building permits should increase to 576,000 from 570,000 the month before. While the economic docket is bare Wednesday, investors will get the latest Energy Information Administration weekly inventory report at 10:30 a.m. EDT. Crude oil prices have fluctuated wildly over the last few weeks following the release of the inventory report. In addition to the weekly jobless claims number, Thursday's economic release schedule will feature the Philadelphia Fed's manufacturing index for August and July's read on leading economic indicators. The lone economic report scheduled for release Friday will be existing-home sales for July. Economists believe sales will climb to a seasonally adjusted annual rate of 5 million from 4.89 million in June. -- Written by Robert Holmes in New York.