Once again, it’s a mixed market with the Dow lagging and in the red, while the S&P 500 and Nasdaq march higher. The tone is more defensive today, which continues to help the safe haven sectors and mega cap stocks.  Consumer Discretionary is outperforming.  Walmart (WMT) and Home Depot (HD) are both hitting new highs ahead of their earnings this week.

Speaking of earnings, the season continues to beat consensus by a wide margin.

Guidance also continues to provide the biggest positive surprises.

For those companies providing guidance in the S&P 500, 56.6% have been positive, while 35.8% have been negative - which is a complete reversal of the norm.

Several retailers are scheduled to report earnings this week. The names I think that have the best chance of beating and seeing their shares rise are the following:

• BJ’s Wholesale (BJ) looks very intriguing, having met many of the key criteria in our three-pillar system.
• Target (TGT) has some recent inconsistencies, but overall, I like the risk-reward proposition.
• Advance Auto Parts (AAP) has missed two times in the past four quarters but looks compelling.
• Home Depot (HD) should be performing better, but the stock has such an amazing ability to snap back - that it’s always attractive into earnings releases.

Empire State Manufacturing

The New York Fed’s Empire State business conditions index had a slower pace of growth in August declining 13.5 points to 3.7, while economists projected a reading of 15-17. Growth was moderate, and manufacturing, while not back to pre-pandemic levels, has showed strong growth in the recent months.

• New-orders index decreased 15.6 points to -1.7 from 13.9
• Shipments dropped 11.8 points to 6.7 from 18.5
• Unfilled orders fell to -14 from -0.6
• Inventories slipped to -10.7 from -9.7
• Employee index increased slightly to 2.4 points from 0.4
• Input prices were relatively flat month over month to 16 vs 14.9
• Selling prices were above zero for the first time since March to 4.7 from -4.5
• While firms are optimistic things will improve over the next six months, optimism was down for the second month to 34.3 from 38